Implications of the EU Banana Trade Regime for Selected Import Markets: Economic Analysis and Political Dimension

On July 1st 1993, the EU implemented the Common Organization for the Market of Bananas (COMB) to replace the different national banana policies that previously existed in its member countries. As it turned out, the adopted regime became one of the most bitterly internally disputed outcomes of the completion of the EU single common market, and is an on-going source of dispute at the WTO level between the EU on the one side, and the US and Latin American countries on the other side. The most controversial aspects of the COMB relate to the management of banana trade with non-EU countries, and in particular, to the tariff-rate quota (TRQ) imposed on non-traditional ACP and dollar bananas. These issues are at the center of this work which focuses on the German and French banana markets, the two largest single importers of bananas in the EU, characterized by opposed pre-COMB banana regimes. In addition, the US banana market, the single largest banana importer worldwide, characterized by a free trade policy, is also analyzed. The analysis of market performance revolves around pricing efficiency and market integration, as measured by the extent and speed of horizontal and vertical price transmission. A quantitative assessment of the distribution of quota rents among operators on the one hand, and between Germany and France on the other hand, is carried out. A brief analysis of the economic impact on dollar banana operators of a COMB reform towards a tariff-only system, concludes the empirical work.