Impacts of the EU banana market regulation on international competition, trade and welfare

With the completion of the Single Internal Market, the EU introduced a common market regulation for bananas to replace national banana market policies in member countries. A spatial quadratic programming model is used to quantify the effects of the new regime on production, consumption, the regional structure of international trade, and regional prices and welfare. The results indicate that Latin American exporting countries will lose market share, producers' surplus and export taxes. EU consumers lose US$ 1.14 billion, of which only 22 per cent reaches the beneficiary countries and regions. Roughly 60 per cent of the loss in consumers’ surplus is shifted to import licence holders as a quota rent and less than 15 per cent is to be paid as import duty, the rest being deadweight loss.