2 results
14 - Bananas: a policy overripe for change
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- By Brent Borrell, Centre for International Economics, Australia
- Edited by Merlinda D. Ingco, The World Bank, L. Alan Winters, University of Sussex
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- Book:
- Agriculture and the New Trade Agenda
- Published online:
- 27 February 2010
- Print publication:
- 25 March 2004, pp 311-326
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- Chapter
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Summary
Introduction
At the close of the 1990s, the world bananas market was dominated by one large and obvious trade distortion: import restrictions imposed by the European Union (EU). The EU banana policy ostensibly delivered aid to several developing nations by raising the prices these countries received for their bananas in the EU market. However, this policy not only cost EU consumers a whopping $2 billion a year, but only a small portion – about $150 million – reached its target. Banana importers and wholesalers extracted most of the rest.
A wave of articles and editorials lambasted the EU policy on bananas, and over a dozen analytical studies highlighted its enormous costs. The German government and others pursued cases against it in the European Court of Justice (ECJ), and the Hamburg Financial Court attempted to override it. Italy, Sweden, Belgium, Austria, Finland, and Luxembourg, too, publicly opposed the policy. The United States, meanwhile, along with Guatemala, Honduras, Mexico, and Ecuador, filed complaints against the policy through the World Trade Organization (WTO). In every opportunity it had to consider the policy, the GATT or the WTO ruled that EU banana policies were illegal, and eventually awarded the right for the United States to apply punitive tariffs against other EU products in retaliation.
In April 2001, the United States and the EU agreed to phase the EU banana regime into a tariff system by 2006 in exchange for the United States suspending its WTO-authorized punitive tariffs against other EU goods.
13 - Liberalizing sugar: the taste test of the WTO
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- By Brent Borrell, Centre for international economics, Australia, David Pearce, Centre for international economics, Australia
- Edited by Merlinda D. Ingco, The World Bank, L. Alan Winters, University of Sussex
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- Book:
- Agriculture and the New Trade Agenda
- Published online:
- 27 February 2010
- Print publication:
- 25 March 2004, pp 290-310
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- Chapter
- Export citation
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Summary
If ever there was a case for multilateral trade liberalization, and if ever there was a liberalization from which the global economy stood to gain, it is sugar. The world sugar market contains some of the largest and most blatant forms of trade protection. Many of these have a 300-year history. The worst are in developed countries, which greatly distort trade and prices in this commodity.
Although the world economy, consumers, and efficient sugar producers stand to gain substantially from liberalization, some producers, especially those in developed countries, stand to lose. And herein lies a political challenge: large vested interests are likely to oppose efforts to liberalize trade in sugar. In the Uruguay Round these vested interests won hands down. Should they win again during the new round, they are likely to further undermine the credibility of developed countries regarding the WTO, and of the WTO itself.
Countries ultimately liberalize trade unilaterally, but multilateral forums can assist that process. The greatest gains in trade liberalization come from reducing the biggest distortions first. Giving prominence to sugar and other highly protected products during the new WTO round makes economic sense. Such prominence will also help counter the vested interests opposed to reform. To aid in that process, this chapter analyzes the costs and benefits of distortions in the sugar market, and of options for reforming that sector.
A highly protected market
Over 80 percent of world sugar supplies sell at prices above the world price.