Badinger, Harald and Breuss, Fritz and Mahlberg, Bernhard
Welfare implications of the EU's common organization of the market in bananas for EU Member States.
EI Working Papers / Europainstitut, 38.
Forschungsinstitut für Europafragen, WU Vienna University of Economics and Business, Vienna.
The objective of this paper is to analyze the welfare effects of the European Banana Market Policy. Until 1993, EU countries had a wide variety of separate national policies, ranging from free trade (e.g. Germany) to heavily regulated markets (e.g. Spain, France). On 1 July 1993, the EU's common organization of the market in bananas came into force and established a combined quota-tariff regime with preferential access for ACP and EU suppliers. We estimate the resulting changes in the welfare of consumers, traders and the national governments for all member states of the European Union to identify the winners and losers of this change in the external trade policy. Over the period 1993 to 1998, the cumulated aggregate welfare loss of the consumers amounted to ECU 1408 mill, whereas the international banana traders gained ECU 558 mill. on the EU market. The welfare effect on the national budgets of the EU member states was also positive (ECU 783 mill.) due to higher tariff income. The resulting total deadweight loss of the European Union amounted to ECU 68 mill. As regards the distribution of the welfare effects, the former free trade countries lost welfare, whereas the formerly severely regulated countries gained. In absolute terms the biggest loser of the regime shift is Germany, the biggest winner is France. (authors' abstract)