The impact of trade liberalization on the world sweetener industry
Abstract
This paper uses a structural model to predict the impact of a move to free trade on the world sweetener market for five years, 1991-95. Noncompetitive pricing rules have been incorporated to model the impact of less than perfect competition resulting from concentrated market structure. There are four regions: the United States, European Community, Canada, and the rest of the world. Sweeteners included are beet sugar, cane sugar, 42HFCS, and 55HFCS. An agreement on free trade in sweeteners would result in little change in world sweetener production and consumption. Lower prices in the United States, European Community, and Canada discourage production growth, but even though world prices rise, production growth in the rest of the world does not make up for these losses. Removal of the U.S. quota enlarges the world market and improves world prices, but for U.S. foreign suppliers, increased exports to the United States do not make up for the loss of the quota premium. Removal of the EC Common Agricultural Policy for sweeteners does not significantly reduce EC exports to the rest of the world despite the loss of large EC export subsidies. World sweetener imports must equal exports, but as reported, sweetener exports always exceed imports. The model assumes that world imports match world exports net of changes in stocks. With this requirement, the EC remains a large net exporter of sugar, first by using up large stocks, and then by resuming imports.
Degree
Ph.D.
Advisors
Connor, Purdue University.
Subject Area
Agricultural economics
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