Banana Split
How EU Policies Divide Global Producers

David Vanzetti, Santiago Fernandez de Córdoba and Veronica Chau
Trade Analysis Branch, UNCTAD, Geneva

FAO Informal Expert Consultation on Banana Trade Policies
Rome, 28 - 29 October 2004

Abstract

Banana prices within the European Union are almost double world levels. These prices are maintained by restrictive import quotas and tariffs. These policies generate rents that accrue to distributors and producers. The European Union is obliged to remove its quantitative restrictions and replace them with differential tariffs that are likely to give preference to existing quota holders on exports from ACP countries. The removal of binding quotas will remove the quota rents. The impact on export country producers depends on the rents they currently receive. Indications are that a relatively small proportion, perhaps €60/tonne, of the rents are currently accruing to ACP producers.

Quantitative analysis suggests that the loss in rent received by producers from an EU free market in bananas would be more than offset by the expansion of EU imports by 37 per cent. Under these circumstances ACP exports to the EU are estimated to expand 8 per cent and non-ACP exports by 45 per cent. EU consumers and suppliers to the US market would also gain, while distributors would experience a loss in quota rents. A preferential tariff of €75/tonne on imports from non-ACP suppliers would revise these impacts on ACP and non-
ACP export to 26 and 30 per cent respectively. The results confirm that current EU policies are poorly targeted and inefficient, and better means exist to assist producers in the target countries.