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Research Report


Joseph Francois
Patrick Messerlin
Copyright Date: Feb. 1, 2005
Pages: 41
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Table of Contents

  1. (pp. 4-5)

    This paper analyzes the proposal of the European Union (EU) for shifting from a tariff-quota to a tariff-only regime on imported bananas. In December 2004, the Commission tabled calculations defining the unique tariff rate to be imposed on bananas imported from of the “most-favored nation” (MFN) WTO Members. All the ACP countries are expected to be exempted from such a tariff, and to benefit from free access to the EU markets. Consultations are ongoing between the Commission and the non-ACP countries that receive WTO “most-favored-nation” status.

    Following the 1997 WTO ruling on the EU trade regime in bananas, and the...

  2. Part I. The WTO Context

    • (pp. 6-7)

      The EU tariffication does not occur in a legal vacuum. Rather, it is constrained by two WTO disciplines. The first one is not specific to the banana case. It consists of the rules to be followed by a WTO Member when it “tariffies” trade barriers which include non-tariff components. In the case of agricultural products, these rules are set in the attachment to Annex 5 of the Uruguay Round Agreement on Agriculture (URAA). The attachment defines the “external” and “internal” prices to be compared—preferably the actual average CIF unit value for the former and the “representative” wholesale price for...

    • (pp. 7-14)

      This section examines the Commission’s calculations in the light of WTO obligations, in particular the precise Doha Decision I condition “at least maintaining total market access for MFN banana suppliers.” In this context, the section does not question the Commission’s methodology. Rather, it takes it as given. Questions about the appropriateness of the approach used by the Commission in relation with the EU motives are raised in the following sections. As a result, the three left columns of Table 1 reproduce exactly the successive steps of the calculations taken by the Commission, and its results. The right column of Table...

    • (pp. 14-18)

      In this section, we have modeled the situation where the EU imposes its proposed duty of 230 €/ton (from Table 1) even though the appropriate duty is 134 €/ton (also from Table 1). In other words, the experiment consists in (i) removing the current regime (where the combination of tariffs and rents accrue to the EU, and where there is a price wedge of 134 €/ton) and (ii) replacing it with the tariff-only regime with a EU’s proposed duty of 230 €/ton.

      Starting with trade data for 2003 and our estimates in Table 1 of the price impact of the...

  3. Part II. Shifting to the EU Context

    • (pp. 19-23)

      A critical step in the analysis of tariff-quota elimination and the move to a tariff-only regime is an understanding of the impact of the tariff-quota regime before and after 2001.

      Before April 2001, the tariff-quota regime imposed by the EC 1994 Regulation defined quotas by exporting country: Eight specific-country quotas were defined within two broad “global” quotas (ACP and non-ACP) with the rest of each global quota not subjected to a country-specific allocation of quantities. This non-attributed portion was particularly large in the non-ACP case. Almost half of the non-ACP global quota was not allocated. In addition, efficient producers, such...

    • (pp. 23-24)

      No preferences do not mean that there have been no beneficiaries from the EU tariff-quota regime. Mapping observed imports against the current tariff-quota regime (see Table 7) shows that the EU tariff-quota regime has been binding—that is, the two allocated global quotas have been exactly filled. In other words, tariff preference margins have been meaningless for market access—what counted were the quotas. That said, who have been these beneficiaries?

      The first beneficiary of the EU tariff-quota regime has been the EU budget to the extent that non-ACP exporters have had to pay a tariff of 75 €/ton. The...

    • (pp. 25-26)

      The Council Regulation 216/2001 which lays down the EU pledge to change its banana import regime states that “the application of a customs duty at an appropriate rate and application of a preferential tariff to imports from ACP countries provides the best guarantees, firstly of achieving the objectives of the common organisation of the market as regards Community production and consumer demand, secondly of complying with the rule on international trade, and thirdly of preventing further disputes” [recital 2, Official Journal L31/2, 2.2.2001]. As shown above, implementing these proclaimed goals cannot be achieved by a “preferential” tariff. Rather, it would...

    • (pp. 27-28)

      Imposing a new tariff regime requires that we re-open a question which has been often deliberately ignored during the last decade of debates on the EU banana trade regime: what is the expected impact of the proposed regime on European consumers, especially the poorest ones? Contrary to the proclaimed objective of the Council Regulation 216/2001, the current tariffication procedure proposed by the Commission totally ignores the interests of the European consumers. As underlined by some Member States, such as Sweden, the interests of the EU-25 consumers require the lowest tariff possible.

      To assess the net impact on the EU as...