Bridging Micro- and Macro-Analyses of the EU Sugar Program: Methods and Insights

present version, the GE model is still calibrated for the year 1995 and we construct this baseline
scenario as a pre-experiment simulation, updating the relevant data, but using the original structure of
the matrix (input-output, etc.). Because the SAM does not include detailed information on the 10 new
members of the EU, we present only the results for the EU15. The EU10 are treated as foreign
countries within a free trade area. Some variables describing the macroeconomic environment are set
exogenously, using data from different institutions, including the Food and Agricultural Policy
Research Institute. Assumptions are also made about technical change in different sectors. We
assume, for example that Hicks neutral technical change results in a 1% reduction in unit costs in the
sugar sector, based on estimates for France (Sourie et al, 2005). Table 2 presents the baseline, given
the calibration of the cross-subsidization presented above. In brief, in the "baseline" column of
Table 2, the 2005 sugar reform is not implemented, export refunds are only limited by the Uruguay
Round agreement framework, and we assume that the EU does not face any additional constraint due
to the WTO dispute on export subsidies or to the Doha Round.

Table 2. EU15 sugar markets under the baseline, after the reform proposal and a ban of
export subsidies

* outside EU10.. Source: simulations by the authors.

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