The European Union (EU) Common Agricultural Policy for sugar has evolved since the 1960s and what has evolved is a costly supply management scheme which insulates domestic producers from international competition by means of a system of price supports and prohibitive import tariffs. There is evidence from sugar price data that the policies that were followed by the EU have resulted in domestic prices three times higher than world free market prices. Excess supply has been exported to the world markets using expensive market distorting subsidies. Part of the supply management scheme involved granting duty free access for certain amounts of sugar from the African, Caribbean and Pacific countries (ACP), a block made up of mostly former British and French colonies.;Following a complaint by Australia, Brazil and Thailand in 2002, claiming that the volume of the EU's subsidized exports of sugar exceeded the levels the EU had committed itself under the Uruguay Round Agreements, a World Trade Organization (WTO) panel ruled in favor of the three complainants. The EU was then obliged to bring its domestic market regulation into conformity with its WTO obligations. To be compliant with WTO regulations, in 2005 the European Agricultural Council agreed to a set of reforms that were to result in a 36% price cut.;Given that most ACP countries have agriculturally based economies, any agricultural sector that guarantees the economy a steady influx of foreign exchange is critical and needs to be cultivated. The study is a world sugar trade model to understand the effects of EU sugar policy reform on world production and how it would affect sugar production in the ACP countries and the rest of the world, and what the effects of reforms are on world sugar prices, production and consumption. Results indicate that liberalization might be beneficial to some members of the ACP countries, which is contrary to what other studies have suggested.
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