IDEAS home Printed from
   My bibliography  Save this paper

EC Bananarama 1992 : the sequel - the EC Commission proposal


  • Borrell, Brent
  • Maw-Cheng Yang


Some European Community (EC) countries give preferred market access and high prices to bananas from selected developing countries or EC regional suppliers. This preferential status is regarded as a form of aid to these countries, most of which are developing small island economies. EC marketers of bananas from these preferred suppliers also benefit because of the high retail prices. Nonpreferred suppliers - mainly developing countries of Latin America - are hurt by the policies because access is denied or restricted and the lower demand depresses the world price for bananas. The Community's commitment to establish a single unified EC banana market on December 31, 1992 provides a timely opportunity to reform existing distortionary trade policies. The recently announced proposal of the Commission of ECs to regulate banana trade within a unified market relies on quotas to control imports. The proposal is extremely complicated. It is designed to severely restrict competition and to maintain the advantages of selected groups. The authors update their earlier analysis of world banana trade to reflect the market in 1993. They evaluate the implications of the Commission's proposal alongside existing and alternative policies. They find that current policies cost EC consumers about $1.6 billion annually to transfer a net benefit of $0.3 billion a year to preferred suppliers. So, it costs EC consumers about $5.30 to transfer $1.00 of aid toselect developing countries or regions. Additionally, every dollar of aid reaching preferred suppliers costs other developing country suppliers $0.32. EC marketers are the main beneficiaries. Of the $5.30 cost to EC consumers, over $3.00 is collected as excessive marketing margins by protected importers and wholesalers. About $1.00 is lost in outright waste. Several plausible versions of the Commission's proposal are modelled. At best they are found to be slightly less costly than existing policies and at worst, considerably more costly. A 3.5 percent reduction in the quota allocation is estimated to lead to a 30 percent increase in the cost of the proposal. The authors conclude that the Commission's proposal for a unified EC banana policy appears to be little more than a way of replacing existing distortionary national policies with an almost equally distortionary single policy and market. The only difference: the costs would be borne by consumers in all EC countries rather than consumers in only some countries. Worse still, costs could increase. Markets that now gain the benefits of mostly open and competitive marketing such as Germany would face closed and uncompetitive conditions. For developing countries exporting bananas, the proposal offers little. At best conditions may be no worse than they are now. At worst the policy could hurt Latin American suppliers even more than current policies and introduce considerable confusion about the level of support to preferred suppliers. Under the proposed quota system aid will not be well targeted. A more efficient way of achieving the EC's aid commitment is through a small tariff of about 17 percent, used to fund a system of well-targeted deficiency payments or direct aid. The only reason for choosing the Commission's proposal over simpler, tariff-based options seems to be to maintain the vested interests of protected EC markteters. But this is contrary to the objectives of unification, which are to seek gains from increased competition and trade.

Suggested Citation

  • Borrell, Brent & Maw-Cheng Yang, 1992. "EC Bananarama 1992 : the sequel - the EC Commission proposal," Policy Research Working Paper Series 958, The World Bank.
  • Handle: RePEc:wbk:wbrwps:958

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. P.J. Romilly, 1991. "Global Warming and the Car," Journal of Interdisciplinary Economics, , vol. 4(1), pages 91-100, January.
    2. Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
    3. Martin Feldstein, 1978. "The Welfare Cost of Capital Income Taxation," NBER Chapters,in: Research in Taxation, pages 29-51 National Bureau of Economic Research, Inc.
    4. Michael Hoel, 1991. "Efficient International Agreements for Reducing Emissions of CO2," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 93-108.
    5. Burgess, Joanne C., 1990. "The contribution of efficient energy pricing to reducing carbon dioxide emissions," Energy Policy, Elsevier, vol. 18(5), pages 449-455, June.
    6. Ballard, Charles L., 1990. "Marginal welfare cost calculations : Differential analysis vs. balanced-budget analysis," Journal of Public Economics, Elsevier, vol. 41(2), pages 263-276, March.
    7. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-597, September.
    8. Summers, Lawrence H., 1991. "The Case for Corrective Taxation," National Tax Journal, National Tax Association, vol. 44(3), pages 289-92, September.
    9. Uri, Noel D., 1979. "Energy demand and interfuel substitution in India," European Economic Review, Elsevier, vol. 12(2), pages 181-190, April.
    10. Green, Jerry R. & Sheshinski, Eytan, 1979. "Approximating the efficiency gain of tax reforms," Journal of Public Economics, Elsevier, vol. 11(2), pages 179-195, March.
    11. James M. Poterba, 1991. "Tax Policy to Combat Global Warming: On Designing a Carbon Tax," NBER Working Papers 3649, National Bureau of Economic Research, Inc.
    12. Bernstein, Jeffrey I., 1994. "Taxes, incentives and production: The case of Turkey," Journal of Development Economics, Elsevier, vol. 45(1), pages 55-79, October.
    13. Thomas Sterner, 1989. "Oil Products in Latin America: The Politics of Energy Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 25-46.
    14. repec:mes:challe:v:33:y:1990:i:5:p:33-38 is not listed on IDEAS
    15. Pindyck, Robert S, 1979. "Interfuel Substitution and the Industrial Demand for Energy: An International Comparison," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 169-179, May.
    16. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-948, July.
    17. Alan S. Manne & Richard G. Richels, 1991. "Global CO2 Emission Reductions - the Impacts of Rising Energy Costs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 87-108.
    18. William D. Nordhaus, 1991. "The Cost of Slowing Climate Change: a Survey," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 37-66.
    19. Summers, Lawrence H., 1991. "The Case for Corrective Taxation," National Tax Journal, National Tax Association, vol. 44(3), pages 289-292, September.
    20. Shah, Anwar & Whalley, John, 1991. "Tax Incidence Analysis of Developing Countries: An Alternative View," World Bank Economic Review, World Bank Group, vol. 5(3), pages 535-552, September.
    21. Goulder Lawrence H., 1995. "Effects of Carbon Taxes in an Economy with Prior Tax Distortions: An Intertemporal General Equilibrium Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 271-297, November.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Hervé Guyomard & Nadine Herrard & Catherine Laroche & Chantai Le Mouël, 1997. "L'Organisation commune de marché dans l'Union européenne : impact de la taille du contingent tarifaire appliqué aux bananes dollar et non traditionnelles ACP," Économie et Prévision, Programme National Persée, vol. 127(1), pages 15-32.
    2. 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.
    3. Maggi, Giovanni & Rodriguez-Clare, Andres, 2000. "Import penetration and the politics of trade protection," Journal of International Economics, Elsevier, vol. 51(2), pages 287-304, August.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:958. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.