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Welfare gains from liberalized banana trade and a new international banana agreement


  • Kox, Henk L.M.

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)


The European Union import policy for bananas grants preferential trade access for ACP bananas and discriminates against bananas from other sources. It is shown that such trade discrimination cannot be defended by development-related motives. As a form of aid transfer to banana-exporting ACP countries, the EU import regime is highly inefficient. The effective value of financial transfers is low, while there are large associated welfare costs to domestic consumers and to non-preferred export countries. Liberalization of banana imports would create huge welfare gains which can easily be used to compensate potential losers. It is proposed that the compensation package is given the form of an International Banana Agreement. The presence of third-party gains from trade liberalization can be used to negotiate non-EU involvement in the international agreement. The agreement makes it possible to reconcile a commitment to free banana trade, promotion of ecological sustainability in banana production and promotion of socio-economic development interests of banana exporting countries.

Suggested Citation

  • Kox, Henk L.M., 1998. "Welfare gains from liberalized banana trade and a new international banana agreement," Serie Research Memoranda 0012, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  • Handle: RePEc:vua:wpaper:1998-12

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    References listed on IDEAS

    1. Guyomard, Herve & Laroche Dupraz, Catherine & Mouel, Chantal Le, 1999. "An economic assessment of the Common Market Organization for bananas in the European Union," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 20(2), March.
    2. Alan V. Deardorff, 1994. "Third-Country Effects of a Discriminatory Tariff," The World Economy, Wiley Blackwell, vol. 17(1), pages 75-86, January.
    3. Satish Y. Deodhar & Ian M. Sheldon, 1995. "Is Foreign Trade (Im)Perfectly Competitive?: An Analysis Of The German Market For Banana Imports," Journal of Agricultural Economics, Wiley Blackwell, vol. 46(3), pages 336-348.
    4. Whittaker, Gerald W. & Lin, Biing-Hwan & Vasavada, Utpal, 1995. "Restricting Pesticide Use: The Impact On Profitability By Farm Size," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 27(02), December.
    5. Augustin Kwasi Fosu, 1996. "Primary Exports and Economic Growth in Developing Countries," The World Economy, Wiley Blackwell, vol. 19(4), pages 465-475, July.
    6. Robert Read, 1994. "The EC Internal Banana Market: The Issues and the Dilemma," The World Economy, Wiley Blackwell, vol. 17(2), pages 219-236, March.
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade


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