Preferential sugar imports of the EU

We use a spatial price equilibrium model to simulate preferential imports of the EU in 2019/20. A number of investment projects in beneficiary countries of the preferential schemes are underway. We analyze the effects of the increased production level of LDC (Least Developed Countries) and ACP (Africa, Caribbean and Pacific) countries induced by these projects on total imports of the EU and on imports from individual countries. We find that aggregate imports do not change significantly, but individual trade flows do. Due to the abolition of quota restriction for LDC and ACP countries, the internal price of the EU is showing a strong co-movement with the world market price in the simulations. The world market price is also found to have a crucial effect on the level of preferential imports and production in the EU. Above a world market price of €300 (London), all EU countries fill their production quota and total imports are about 3.1 million t. Below €300, it becomes increasingly interesting for preferential trading partners to export to the EU, where their exports displace inefficient EU producers. At a world market price below €200, the EU would have to apply additional policies in order to keep the internal price above the reference price.