The Economics of Sugar Trade Between the USA and Brazil

 On average, 120.1 million tons of sugar are produced each year, while 118.1 million tons are consumed. From 1994 to 1996, world trade made up 28% of supply (USDA, 1997). Sugar is grown in about 120 different countries with a wide range of climates. It is one of the most traded farm goods. International trade of sugar and other major farm goods is marked by a number of unique features, such as heavy government involvement, big price changes, production in many parts of the world, and a growing market for sugar substitutes. These things about the world sugar market make it an important place to study policy, but they also make it hard to model. Sugar is made from sugarbeets and plants. In warm and subtropical areas, sugarcane is grown most often, while sugarbeet is grown most often in temperate areas. In many parts of the world, sugar is made this way. On the other hand, about 60% of all centrifugal sugar production comes from sugarcane. This is what makes foreign trade possible. Besides the US and Australia, most of the countries that grow sugar are developing ones, and the cost of production seems to be lower in low-income countries than in high-income countries (Devadoss and Kropf, 1996). Even more important, these emerging countries sell sugar to the rest of the world and compete directly with it. Because of this, developed countries like the US, Japan, Canada, and the European Union (EU) heavily subsidized sugar crop producers, which often came at the cost of consumers in those countries. Previous studies (Borrell and Duncan 1993, Roberts and Whish-Wilson 1991, and Sturgiss, Tobler, and Connell 1988) 

Total costs to customers in those countries were more than two billion dollars a year.

Sugar policies, like when developed countries got involved in the sugar industry, caused low-income sugar exporting countries to lose a lot of money because world prices went down, production probably went down, and job chances went down (Devadoss and Kropf, 1996). A number of earlier research works also came to the same conclusion: the sugar policies of developed countries have tainted the sugar market more than any other agricultural commodity market, leading to big losses in global economic welfare (Marks and Maskus, 1993). But the Uruguay Round (UR) of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) calls for trade reform. This should lead to a better distribution of resources around the world by moving sugar production to areas that use them more efficiently. Other trade deals being talked about between APEC and ASEAN member countries—many of which are big sugar traders—will also have a big effect on sugar production, trade, and consumption around the world. As the UR policy and APEC and ASEAN trade liberalization policies are put into action, it is important for countries that export and buy sugar to look at how these trade changes will affect their sugar markets. The goal of this study is to use a Computable General Equilibrium (CGE) framework that includes most of the countries that produce and trade sugar to figure out how the trade agreements made under the UR have changed the prices, production, and trade of sugar in the major countries that export and import sugar. This study also looks at what would happen to world sugar production, trade, and usage if only APEC or ASEAN member countries liberalized their sugar policies, or even if the whole world's trade were opened up. The CGE approach used in this study makes it different from others because it lets us look at effects not only between countries, but also within sectors, such as between non-agricultural and industrial sectors or between service and industrial sectors. 

The trade deregulation studies' findings will help people who grow sugar.

Making things --The climate and geography of an area affect how much sugarcane and sugarbeet can be grown. The ROW, the EU, India, and Brazil all grow a lot of sugarcane and sugarbeet. 68 percent of the world's sugarcane and sugarbeet comes from these four countries and areas. The amounts of sugar crops and sugar processing that they produce in their area are pretty much the same. The ROW, the EU, India, Brazil, and the ESU are also big makers of items used to process sugar. Business -- In the sugar processing industry, it is clear that MYS/SGP is the typical outward economy and India is the typical inward economy. Thailand, Australia/New Zealand, and the EU depend a lot on the world sugar market for their sugar supplies. Japan, the ESU, North America, and the EU are more focused on exports. Thailand, the EU, Brazil, and Australia/New Zealand are the top net producers of sugar on the world market. On the other hand, China, Indonesia, Malaysia, the Philippines, and the United States are the top net importers. Another country that is a net producer is the Philippines. Another is India. And the ROW. When it comes to buying sugar on the world market, ROW and ESU are the two biggest exporters. They each buy 34% and 21% of all sugar bought in the world. The EU and North America also buy a lot of goods from other countries. ROW, on the other hand, is the biggest producer, making up 38% of all sugar processing goods sent around the world. Thailand sends 9.2 percent of the world's sugar, even though it only makes 2.4% of the goods used to process sugar. 

Brazil and the EU are also very important to the world market for sugar exports.

EU, ESU, and North America are the main places where ROW sugar is exported. EU, Brazil, China, and India are where ROW and ESU get most of their sugar from. AUS/NZL and the Philippines sell a lot of sugar in the APEC area. Around 95% of the sugar that is brought into the EU and 60% of the sugar that is brought into North America comes from ROW. The EU and ROW send the most sugar to the ESU market, while Indonesia and MYS/SGP get their sugar from the APEC area. The government getting involved -- There is a lot of government involvement in the sugar markets around the world. Almost all developed and emerging countries protect the sugar they grow in their own countries. Japan's import protection rate, which is the same thing as a tax, is usually 372%. In developing countries, the rate of security against imports is about 100%. In some places, the government also helps pay for the production and sale of sugar. All of these rules have a big effect on the world sugar market. A lot of the structural information we talked about above will help us figure out how regional trade agreements affect the world sugar market and Asian countries. Changes in trade policies and levels of security in any of the regions and sectors will have an effect on other regions and sectors, so this information can't be looked at by itself. At this point, using a CGE model that covers all the world's major regions can help us learn a lot about how trade agreements between regions might affect the world sugar market and Asian economies. The above SAM-based analysis is meant to help you understand the simulation results that are talked about later in this work.


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