The 2005 episodes of the "banana war" serial. An empirical assessment of the introduction by the European Union of a tariff-only import regime for bananas

The EU Common Market Organization for bananas has been generating international controversies since its introduction in 1992. Many thought the 'banana war' had come to an end when, at the 2001 WTO Ministerial Conference in Doha, a Decision was taken for the EU to introduce, no later than 1 January 2006, a 'tariff-only regime' which ' would result in at least maintaining total market access for MFN banana suppliers'. However, proposals by the EU for a tariff-only regime have been rejected in a two-step WTO arbitration in 2005 because they were found not to satisfy this requirement. On 1 January 2006 the EU unilaterally introduced a tariff-only regime. The paper presents the main results of a modelling effort aimed at analyzing this policy issue. The results obtained suggest that: contrary to the decision by the arbitrators, the import regime proposed by the EU in the second step of the arbitration would have satisfied the requirement stated in the WTO November 2001 Decision; moreover, even the higher MFN tariff proposed by the EU in the first step of the arbitration, had it been coupled with a duty-free quota for ACP countries, would have done so. The regime introduced on 1 January 2006 is expected to yield in 2007 MFN banana exports to the EU 400,000 t above those which would have occurred under the previous regime. If a longer time frame is considered, under a tariff-only regime MFN countries will see their exports expand, while the contrary is forecasted under the previous EU import regime.