Policy, Research, and External Affairs jU!- t) WORKING PAPERS International Trade International Economics Department The World Bank October 1990 WPS 523 EC Bananarama 1992 Brent Borrell and Maw-Cheng Yang The EC countries' banana import policies are costly mechanisms for aiding preferential supplier countries. European economic integration in 1992 provides an opportunity to reform those policies and find more efficient mechanisms for providing aid. The Policy. Research. and ExternalAffaur Complex distributes PRE Working Papers todisseninatethefindings of work in progress and to encourage the exchange of ideas among Biank saff and aU others interested in development issues. These papers carry the names of the authors, reflect only their views, and should be used and cited accordingly. The findings. interpretations, and conclusions are the authors' own. They should not be autributed to the World Bank, its Board of Directors, its management, or any of its member countries. Policy, Research, and External Affairs internatConal Trade WPS 52'- 'l'his papcr -- a product or tlie Inmeaiional Tradc Division, International Economilics Dcpartmcnt - is part ofa largcrc iflorn in PRF to undcrstand thc implicatiol1s fordevcloping countries of chainges in the industrial counitics' tradc policics Copiesarc available free from the World Bank, 181811 Street NW, Washington, DC 2(0433. Please conitact Sarah Lipscomb, room S7-062, extension 33718 (31 pagcs). Banana imponl and pricirg policies v\ary idely countries $0.29 ior evcrv dollar of "aid" reccived among the memlbers of the Europcan (-'onimu by preferential supplicrs. The inefficiencics nilv. Thc EC Comimillissioni intends to replace involved in this transfer cost thc world economy national_ markets \k ith a sineIle markct in 1992. an estimated $0.92 lor cachl dollar of aid. Al that timc a unifonn policy tov:ard banana imports must be adopted. Imposing a tariff of 16.7'/, oni (the landed cit value of) all EC hanana imports to ftnance a Special import and pricing arrangemcnis deficiency payment schicmc aimed at maintain- prcsently confer large subsidies to spec' itic ing aid to preferciltial suppliers aftcr 1992 would African, Caribbean, and EC territorial dependen- rnake aid more clficicit. Every dollar of aid cies - to the disadvantage of other cxporting would cost EC consumers an estimated $1.27, (mainly Latin American) countrics. A 'conf- nonfavored countrics $0.24, and the world mon" banana reginic and single EC' niar-kct could economi $. .34. substantially alter uorld trade in bananas and die welfare of banana-cxporting regions. e But direct payment of aid would be the most efficieint method for delivering aid. A tariff of Borrell and Yang have simulated policy 16. l',. on all imports would cover the current options open to the EC in forming a sinoec level of aid traisler. Every dollar of aid reccived banana market, to illustrate the impliications of by prefecrintial s ipplying countries would cost chanige for trade and welfare. 'IThey founid that EC conouniers an estimated $1.01, nonfavored exportcrs $0.03, and the world economy $0.02. - EC adoptiorn of frec trade in bananas would lcad to a 9'CH increa;se in EC imports, a declinic of And thc aid-receiving countries would get a 46%, in exports by favored coun.triCe (cqual tO anl larger net bencfit because theyv \ ould not incur annual welfare loss of lUS209 millioni), a 12'', the costs of producing bananas above the free increase in banana exports b)y nonflavored trade level to qualify for aid, as is presentl)y the cxporters (eqtual to an annual wclfarc incrcase of case. Thos- sources could be used in other $60 million), and ati annual increatsc in EC cnterprises, and thc direct aid payments could be welfare of $380 million (in 1987 prics). etFicicnily targeted (to niodenize thc banana industries or perhaps to diversify thcse ccono- Current policics (compared to free trade) mies) - raltlir Ihanii lock resources into ineffi- cost EC consumers about $1.85 and non favored cicnl econiomic seclors, as presently happens. l'he PRE Working Paper Scrics di.erminates the fi5dinis of 'xork un(dcr av in the laie ani' licy, Rescarch, and External AffairsConiplex. An objectiv of tt I.cseries is to iet the t findings out quj( kt .* en i prcseotdtions are less than fultvpolished. The findings, inltrpictations. and coreolnc isoo in these lapers d(o not necessarik represent official Bank policv. tIr'r,tiiel)Kl t;, dc'RI: l)l'12xti'nl ,(Xt.(telr EC Bananarama 1992 by Brent Borrell and Maw-Cheng Yang Table of Contents 1. Introduction 1 2. Background 3 2.1 The Structure of World Banana Trade 3 2.2 The EC Trade Policy 7 3. Representation of the Current Policies 12 4. Measuring the Effects of Current and Alternative Policies 16 4.1 Specification of the Model 17 4.2 Parameters of the Model 17 4.3 Results of the Model Simulations 18 Alternative Policies in '992 21 Direct Payments 27 5. Conclusion 30 References 31 EC BANANARAMA 1992 1. Introduction The disparate banana import policies currently operating in member states of the European Community (EC) are inconsistent with the Community's objective of full economic integration in 1992. Under separate national legislation, widely varying banana prices apply across different member states, varying duties and import quotas apply to the external (world) market, and internal trade is virtually excluded. The inconsistencies are obvious and politically they are highly transparent. Community imports make up about a third of world trade and more than 40 percent of the trade occurs under preferential trade agreements. The special arrangements confer sizable subsidies on some African and Caribbean banana producers and disadvantage other exporting countries -- mainly other Latin American producers. Adoption of a 'common' banana regime in the Community in 1992 could potentially alter: the pattern of world trade, the world price for bananas, and the welfare of exporting and consuming countries. The purpose of this study is to assess the main economic effects of existing policies and of various policy alternatives. A detailed review of recent trends in the banana market and of existing national policies is provided. A comparative-static model of the EC and world banana markets is used to illustrate the broad trade, welfare and price implications of current and alternative policies. And a simulation model is developed to estimate the impact of a range of policies for the Conmnunity after 1992. From the results of the simulation model the relative efficiency of policy options is assessed. The results do not provide a basis on which to predict the policy decision of the EC. Nevertheless, the main policy and trade implications, for the Community and for the various banana exporting countries, can be inferred. Therefore, at very least some assessment of the contingent risks and opportunities of EC market integration is provided. But, perhaps more importantly, the results serve to illustrate and quantify some of the less obvious costs that could arise from bad policy choices. To this extent they may provide intormation which will be influential in the formation of the Community's common banana policy. -3- 2. Background 2.1 The Structure of World Banana Trade The production of bananas for export is clearly distinct from the production of bananas for domestic consumption. Ariong the largest producers -- Brazil, India, Indonesia, Ecuador, the Philippines and Thailand -- only Ecuador and the Philippines are substantial exporters. Bananas are almost exclusively exported by developing countries to industrial countries. About 78% of world banana exports in the 1985-87 period came from Latin America and the Caribbean, about 11% from the Philippines and China, and 3% from Africa. Ecuador is the leading exporter (accounting for 18% of world exports in 1985- 87), followed by Costa Rica (12%), Colombia (12%), Honduras (192), and the Philippines (11%) (see Table 1). World banana exports amounted to 7.3 million tons in 1986, whi generated US$1.8 billion export revenues for exporting countries. For some countries revenues from banana exports are the major source of foreign exchange. For instance, 92% of export earnings of St. Lucia were from banana exports (Table 2). The industrial countries accounted for 93% of world imports in 1985- 87. The United States is the largest single market, accounting for 38%, followed by the EC, accounting for 33% in the same period. Japan has been the most rapidly growing market and ranked third with 10% if world imports (Table 3). World banana trade appears to follow a pattern dictated by the trade policies of importers, perishability of the fruit, and high transportaticn costs. For several EC countr;is trade policy limits market access to a few exporters. The "Comonwealth. - oducers -- Jamaica, Dominica, St. Lucia, - 4 - Table 1: World Banana Exports by Country and Region, 1975-87 Share 1975 1980 1985 1986 1987 1985-87 ----------------('000 tons)…--------- (X) Industrial Countries 338.1 433.7 432.0 438.7 440.5 6.0 Europe 338.1 433.7 432.0 438.7 440.5 6.0 Developing Countries 6,089.7 6,406.9 6,540.4 6,865.1 7,104.3 94.0 Latin America 4,300.1 4,878.8 4,947.2 5,121.6 5,433.8 71.0 Ecuador 1,362.4 1,318.2 1,207.9 1,365.9 1,381.2 18.1 Costa Rica 1,105.1 887.' 803.6 882.3 94.5 12.0 Colombia 390.0 691.6 775.3 857.0 912.5 11.7 Honduras 370.0 866.5 868.4 800.0 884.6 11.7 Caribbean 440.1 230.8 438.8 537.0 521.4 6.9 Africa 346.1 223.9 199.8 198.8 199.2 2.7 Asia 1,003.4 1,073.4 954.6 1,307.7 949.9 13.3 Philippines 822.7 922.7 789.3 855.7 775.0 11.0 World Total 6,427.8 6,840.6 6,972.4 7,303.8 7,544.8 100.0 Sources: FAO, Banana StaLisLics, CCP: BA 89/7, August 1989, FAO, World Banana Economy, Statistical Compendium, Rome, 1983. -5- Table 2: The Share of Bananas in Country Exports, 1986 (in %) Brazil 0.1 Colombia 4.0 Costa Rica 20.0 Ecuador 12.1 Guatemala 6.9 Honduras 29.8 Nicaragua 6.1 Panama 20.0 Belize 6.2 Jamaica 1.5 Dominica 71.6 Crenada 13.4 St. Lucia 91.6 St. Vincent 28.4 Suriname 3.3 Guadelope 47.3 Martinique 49.0 Cameroon 0.2 C6te d'Ivoire 0.9 Somalia 14.6 Philippines 2.7 Sources: UN Trade Tape. IMF, International Financial Statistics, Yearbook 1988. Table 3: World Banana Imports by Country and Region, 1975-87 Share 1975 1Q80 1985 1986 1987 1985-87 ------------------('000 tons)----------------- (Z) Industrial CounLries 5,580.2 6,061.3 6,611.6 6,841.6 7,049.6 93.2 Western Europe 2,646.6 2,637.0 2,604.3 2,795.3 2,947 , 37.9 EC 2,263,5 2,280.6 2,270.5 2,425.3 2,533.3 32.9 France 479.9 446.0 425.7 453.6 445.2 6.0 Germany, F.R. 547.1 530.3 584.4 635.3 668.7 8.6 Italy 304.1 300.7 307.2 339.2 362.8 4.6 U.K. 307.9 328.4 323.6 343.0 359.4 4.7 U.S. 1,793.8 2,147.1 2,772.0 2,815.7 2,780.5 38.0 Japan 884.6 726.1 680.0 764.6 774.8 10.1 Centrally Olanned Economy 266.9 268.8 216.4 127.9 168.3 2.3 Developing Countries 543.3 795.3 493.0 507.4 499.6 6.8 Latin America 176.9 439.6 187.4 217.0 195.8 2.7 Africa 62.1 32.0 13.4 10.8 10.4 0.2 Asia 304.3 323.7 292.2 280.6 293.4 3.9 World Total 6,390.4 6,856.6 7,104.6 7,350.0 7,549.2 100.0 Sources: FAO, Banana Statistics, CCP: BA 89/7, August 1989. FAO, World Banana Economy, Stat'stical Compendium, Rome, 1983. -7- St. Vincent, Belize and Surinaine -- export almo t exclusively to the United Kingdom; the French Caribbean producers -- Martinique and Guadeloupe -- export almost all bananas to France; >;.e Canary Islands expor. exclusively to Spain; some EC-associated countries such as C6te d'lvoire and Cameroon export to France, and Somalia exports to Italy (Table 4). Perishabili;.y and high transportation costs limit access to distant markets. Therefore, the Japanese market is mainly supplied by the Philippineq and China, with Ecuador as a residual supplier. The Central and South American countries export mainly to the United SLates, Canada, developing countries, Eastern Europe, USSR and the Western European countries which do not have special trade arrangements with other countries. 2.2 The EC Trade Policy In the absence of other arrangements, a common external tariff of 20% is charged on banana imports. However, many other arrangements also apply. Banana imports .'-om African, Caribbean and Pacific (ACP) countries are duty- free under the Loihe Convention between the EC and their former colonies. Under a special protocol of the treaty of Rome, the Federal Republic of Germany may import virtually all its bananas without duties. France has always maintained a managed market such that two-thirds of its market is reserved for imports from the French Overseas Departments (Martinique and Guadeloupe) and one-third for African franc zone countries such as Cameroon, C6te d'lvoire and Madagascar. French imports of bananas from these protected producers accounted for more than 94% in 1985-87 (Table 5). Imports from other origins are subject to licensing which is only granted when import prices exceed a certain level. -8- Table 4: Share of Exports to the EC of Total Banana Exports, by Country, 1985-87 Average (percentages) France UK IEaly Germany, P.R. Total EC Dominica 0 95.5 1.5 0 97.0 Grenada 0 98.5 0 0 98.5 St. Lucia 0 95.2 2.9 0 98.1 St. Vincent 0 100.0 0 0 100.0 Jamaica 0 100.0 0 0 100.0 Suriname 0.- S?.9 1.4 0 100.0 Belize 0 95.6 0 0 95.6 Guadeloupe 98.1 0.1 0.1 0 98.2 Martinique 99.6 0.2 0.1 0 99.9 Cameroon 91.4 0.7 4.4 0 97.2 C6te d'Ivoire 94.7 0.6 4.0 0 99.7 Somalia 0.3 0 67.2 0 67.5 Colombia 1.1 3.8 5.9 12.5 30.7 Costa Rica 0.4 0 6.0 14.5 25.6 Ecuador 0.3 0.3 3.7 10.3 19.3 Guatemala 1.2 0.3 10.3 1.3 13.5 Honduras 0.4 0.1 9.3 9.0 22.9 Panama 0.2 0.3 1.9 28.4 39.2 Sources: UN Trade System. FAO, Banana Statistics, CCP: BA 89/7, August 1989. -9- Table 5: Exporters' Shares in the EC Banana Market, 1985-87 Average (percentages) France UK Italy Germany, F.R. Total EC Dominica 0 13.8 0.2 0 2.0 Grenada 0 2.4 0 0 0.3 St. Lucia 0 25.8 0.8 0 3.8 St. Vincent 0 11.1 0 0 1.6 Jamaica 0 6.7 0 0 1.0 Suriname 0.1 9.9 0.1 0 1.4 Belize 0 4.0 0 0 4.0 Cuadeloupe 25.2 0 0 0 4.6 Martinique 39.3 0.1 0.1 0 7.2 Cameroon 10.8 0.1 0.7 0 2.1 Cote d'Ivoire 18.9 0.1 1.0 0 3.7 Somalia 0 0 10.8 0 1.6 Colombia 2.1 9.3 14.5 16.3 10.8 Costa Rica 0.8 0.1 15.0 19.3 9.3 Ecuador 0.8 1.0 14.0 20.8 10.6 Guatemala 0.9 0.3 9.6 0.7 1.8 Honduras 0.7 0.3 22.6 11.8 8.1 Panama 0.) 0.5 3.6 28.4 10.6 World 100.0 100.0 100.0 100.0 100.0 Sources: UN Trade Tape. FAO, Banana Statistics, CCP: BA 89/7, August 1989. - 10 - The United Kingdom has traditionally granted duty-free access to Commonwealth producers such as Jamaica, Dominica, Grenada, St.Lucia, St. Vincent, Suriname and Belize. Imports from dollar area countries -/ are subject to licenses which may be granted if supplies from Commonwealth countries fall short of market requirements. Licenses are issued by the Department of Irade and Industry every month, following recommendations from the Banana lrade Advisory Committee. However, a licensed minimum level of 30,000 tons has been guaranteed since 1989. About three-quarters of the UK banana imports were from the traditional suppliers in 1985-87 (Table 5). Italy grants free access to imports from EC members and associated ACP cointries, but imports from third countries are allowed only within the limits of a global quota. The global quota fluctuated between 205,000 and 265,000 tons in the 1974-77 period and remained at 255,000 tons until 1982. Since 1983 it has been at 270,000 tons. Somalia is a traditional supplier to Italy with a preferential status. However, in 1985-87 it supplied only 11% of Italian market requirements, the rest were supplied by other ACP countries (2.9%) and Latin American countries (Table 5). Spain and Portugal are supplied from domestic sources, Spain from the Canary Islands and Portugal from Madeira. Imports from other sources are virtually excluded. Greece currently bans imports of bananas in order to protect domestic production estimated at about 3,000 tons per year. However, the European Court of Justice has ruled that Greece should relax the ban. / The "dollar area" consists of Bolivia, Canada, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Liberia, Mexico, Nicaragua, Panama, the Phillippines, the United States and Venezuela. - 11 - The discriminatory import restrictions in the protected markets -- France, UK, Italy, Spain, Portugal and Greece -- have led to their traditional suppliers receiving higher prices than they otherwise would. However, the protection also hinders cost reduction and quality improvement in countries enjoying preferential treatment. As a result, the preferential countries cannot compete with other exporting countries in the free markets. The European Community will become a single internal market at the end of 1992 when all internal trade barriers will be removed. The protected markets of France, UK, Italy, Spain, Portugal and Greece, and the free market of Federal Republic of Germany will no longer exist. A new unified regime for banana trade, still under discussion, will replace the current regimes of individual member states. The European Commissiorn has indicated that the interests of ACP banana exporters are likely to be protected under the new trade regime. Nonetheless, existing arrangements will need to be changed and several different means could be used to preserve current interests. - 12 - 3. Representation of the Current Policies The main features of the various policy regimes currently applying in the member states of the European Community are illustrated in figure 1. The representation is an adaption from Noichl (1985). In all cases supply and demand curves represent, respectively, the supply of exports and the demand for imports. Country A represents countries such as Italy, Spain, Portugal, France and Great Britain which provide preferential market access to favored suppliers at a fixed domestic market price and which use quotas to limit other ir.ports. Country B represents countries such as Denmark, Ireland, Netherlands, Belgium and Luxembourg which impose a 20 percent tariff on imports and otherwise allow for the unrestricted access of bananas. Country C represents Germany which for all intents and purposes imposes no trade barriers. The rest of the world sector mainly represents other developed countries' import demand and the export supply of non-favored Latin American countries, the Philippines and China. Trade between these countries is assumed to be totally unrestricted. Favored suppliers are not restricted in their access to A's market and they export quantity Ql at price DP. The domestic market shortfall (Q3- Ql) is made up by imports from other ACP countries (Q2-Ql) and the world market (Q3-Q2). Import quotas are allocated to control the volume of imports to maintain the fixed internal price. The various EC governments involved pocket the difterence between the world price and the domestic market price unless the supplier is another ACP country. In that case ACP countries receive the world price plus the 20 percent tariff and the EC government pockets the difference between the tariff price and the domestic price only. While the supplies from favored suppliers and ACP countries to countries of - 13- type A are upward sloping the supply of quota bananas is virtually perfectly elastic at the world price. ACP suppliers to the countries of type B face the same situation as 'other' ACP suppliers to type A countries. On non-ACP imports (Q5-Q4) type B governments collect a tariff of 20 percent. In the type C country, import supply is virtually perfectly elastic at the world price and at the world price consumers demand Q6. The rest of the world supplies (Q8-Q7) exports to meet import demand in countries of type A, B, and C. The economic effects of current policies can be demonstrated by comparing the situation represented in figure 1 to that which would exist under free trade. In figure 2 type A and type B countries are assumed to have the same free trade policy as the type C country. Facing a lower price for bananas, consumers increase demand in countries of types A and B (from Q3 to Q3' and from Q5 to Q5'). Their increased import demand causes some increase in world price. The lower prices received by previously favored exporting countries, and possibly the 'other' ACP countries, cause a reduction in supply from those countries (they do not produce along portions 0-Ql of SF or Ql-Q2 and 0'-Q4 of SACP -- now shown at far right of the rest of world supply). The opposite effects occur in other countries. Induced by the increase in world price, consumption in country C and the rest of the world declines while supply from the rest of the world increases. A new equilibrium price settles at WP'. Consumer surplus increases by the area a + b + c in type A countries and by area e + f + h in type B countries (Figure 2). Government tariff revenues decline by areas b + d and f + g. In country C and the rest of the world consumer surplus declines by, areas i + j and k + 1, respectively. / 21 314/1 aIo ,,° , ,,o 5m A ,° 0 O _ . g . ~7 5~ ~.w$ 18to iii -; °77_ FAF. g couK)m'L CO&AOW eouvrAf O e I 0' &58t 1" & "tG P6~~~~~~~~~~~~~~k r.s 45 as { &7 . &9 ' .. 4~~~~~~~~,, - 16 - Producer rents in favored supplying countries and in other ACP countries decline by areas greater than p and q (triangular areas defined on the downside where the respective supply curves of these countries intersect the new wprld price WP'). 1 Producer rents in the rest of the world increase by the area k + I + m + n. Economic surplus worldwide changes by the net area c + h + n - j - 1 - p - q. Because n is greater than p + q and c + h is greater than j + 1 the change in economic surplus is positive, representing more efficient resource allocation. The overall effects of current policies of the EC countries can therefore be seen as: a decrease in world price; subsidization of favored country suppliers and of consumers in country C and the rest of the world by producers in non-favored countries and by consumers in EC countries of type A and B; the raising of revenue for governments in EC countries of type A and B; and resource misallocation across several countries. 4. Measuring the Effects of Current and Alternative Policies To estimate the economic effects of current policies and of alternative policies which the European Community may consider adopting in 1992, a (static, partial equilibrium) simulation model was built. The model embodies the features of the theoretical model shown in figure 1 but includes a greater number of regions. France, United Kingdom, Federal Republic of Germany, Italy, Spain and Portugal together, the rest of the European Community, and the rest of the world are represented as separate import- demanding regions. Cuadeloupe and Martinique together, the Windward Islands For the sake of analysis SF and SACP of Figure 1 form part of the supply curve S of Figure 2, which is drawn as discontinous. The loss of welfare to producers in favored countries is therefore the loss of producers surplus, which will be larger than the area indicated by p and q. - 17 - (Dominica, Grenada, St. Lucia and St. Vincent) and Jamaica together, Somalia, Canary Islands and Madeira together, Cameroon and C6te d'Ivoire together, other ACP countries as a group, and the rest of the world are represented as separate export supply regions. 4.1 Specification of the Model: -Export Supply Xi = fi(DPm-TMm) i = favored nation suppliers Xj = fj(WP+T-TMn) j = ACP suppliers Xk = fk(WP-TM ) k = non-favored suppliers -Import Demand Im = fm(DPm) m = quota-protected markets of EC In = fn(WP+T) n = tariff-protected markets of EC Ip = fp(WP) p = free markets of the EC and rest of world -Market Clearing LX = £I ijk mnp where X = exports, I = imports, DP = fixed domestic consumer prices, WP = world consumer price, T = tariff, TM = transportation costs and traders' mark-ups 4.2 Parameters of the Model: The price elasticity of supply was initially set at 1.0 for the favored suppliers and ACP suppliers. For non-favored suppliers the price elasticity of supply was set at 3. Qualitative analysis by the World Bank indicates that exporting countries in general have vast areas of marginal land suitable for banana production. They can easily adjust production to meet greater international demand without major increases in average farm - 18 - costs. Setting the price elasticity of supply from rest of theu o01HA exporters at 3 capLures this characteristic of the market. In the case ol favored suppliers and ACI) exporters the availability of' land is niot so great and competitive alternative uses for the land aL currenlt export prices are limited. 'I'he price elasticity of supply is therefore likely to be less than for the non-favored suppliers. One estimate of the price elasticity of supply tor Jamaica is 0.49 (Pollard and Grahtarii, 198.) Initially, supply elasticities were seL at one-third Lhose of flOn-ti\Voied suppliers t.o account for the dif'ference in supply between the different. types of export suppliers. Estimates of price elasticities of demand (World Bank, 1985) were used to parameterize the import demand equations. Elasticity estimates range from -0.4 for the rest of world sector to --1.0 for Italy. 4.3 Results of the Model Simulations: In Table 6 a baseline and free trade scenario are presented. The baseline scenario is set up to broadly replicate the pattern of tLrade and price differenLials applying in 1u87. Data used for trade and prices are from FAO (1989). 'I'he protected consumer prices vary among countries but in general they are in the order of 10 to 50 percent above the free markeL price in Germany, while retail prices in Germany are considerably higher than in tile large free US market -- largely due to differences in transport costb. (sce Table 6). However, the export prices for Lhe favored exporting countries are also much higher than those for the non-favored exporting countries. As 5'ith the representation in Figurte 2, a comparison between the baseline and free trade scenarios serves to illustrate the economic effects of lthe present policies. The comparison reveals a 9.1% increase in imports antd therefore in - 19 - consumption il the European Community from a move to free trade. Although imports and consumption decline marginally in Germany and in the rest of the world, total imports increase by 2.4%. Exports from favored suppliers are estimated to decline by 46.4% while non-favored suppliers. when allowed to compete in the EC, increase exports by 11.8%. Overall, the world price as represented by the US (FOR) price is estimated to increase by 2.3%. The increased consumption and lower domestic prices bring substantial economic gains to consumers in EC countries, except for Germany. (It is assumed that retail prices in all EC countries would equate with those in Germany, and not fall further since Germany already has a free market). Tariff revenues fall in EC countries. In total, the European Cormnunity is estimated to increase its economic welfare by $386 million annually (all dollars are in 1987 values). Because of the higher world prices, consumer welfare in Germany and in qe rest of the world is reduced by $6 million and $46 million, respectively. Gains to non-favored exporting countries, estimated at $61 million annually, arise from higher world prices and greater access to the EC market. The main losers of a shift to free trade would be producers in favored exporting countries whose welfare declines by an estimated $209 million annually. It can be inferred from the above results that the annual value of current EC policies to favored nations is $209 million. Considering that the annual value ol total exports from favored countries in the baseline case amounts to around $576 million only, the protection afforded by the policies is of obvious importance to these countries -- effectively a major form of aid. However, every dollar of aid thus transferred to favored exporting countries costs the EC $1.85 and imposes a cost of $0.29 on non-favored - 20 - exporting countries. In effect, the policies are causing one group of developing countries to subsidize another. Ironically, it is the rest of the world sector (which is composed principally of industrial countries such as the United StaLes and Japan) which gains as a result of the EC policies. The industrial countries profit to the tu,ne of $0.22 for every dollar of aid transferred to the favored exporting countries. Overall, an estimated $0.92 is lost from the world economy through inefficiencies created by transferring each dollar to tavored exporting countries. By any measure the policy appears to be highly inefficient as an instrument for delivering aid to favored exporting countries. To test the sensitivity of the results to changes in some of the key assumptions two tests were conducted. In the first test the price elasticity of supply for non-favored exporting nations was set equal to the elasticity in other countries. The result are given in Table 6. In this case the effects of free trade on world price are more than double those reported in the previous case. The effects on the EC and the favored exporters are similar but the effecLs on non-favored exporters and rest of the world consumers are over twice those shown in the previous case. Although the elasticity of supply is not known with a high degree of accuracy, the results serve to demonstrate thaL the costs ot EC policies have the potential to be very large. In the second senisitivity test the price elasticity of supply of favored exporting countries was lowered in line with the only available estimated elasticity ot' 0.49 for Jamaica. Although this results in the estimated benetits ot existing policies to favored exporters rising as compared to Lhe first case, the effects are much less dramatic than those for non-favored exporters. - 21 - Retail prices in the European Cofmmunity were assumed to remain well above US retail prices under free trade. If not, the economic gains of a move to free trade may be understated. In the absence of import quotas and licensing arrangements, a larger, more competitive European market may well confer additional benefits on consumers in the form of lower markoting, retailing and possibly transport costs. Were this to occur, EC banana demand could increase more than indicated by the results in Table 6. Ezonomic gains to the EC and non-favored exporters would then exceed those shown in Table 6. Alternative Policies in 1992 It is unlikely that the EC will adopt a policy of free trade in bananas in 1992. Four possible alternative policy scenarios were simulated with the model. In the first it was assumed that the 20% tariff, currently the policy in the Netherlands, Denmark, Belgium, Luxembourg and Ireland, would be extended throughout the Community. Favored exports to the EC were assumed to retain some preference in the form of duty-free access. The simulation results are shown in Table 7. Compared to the free trade scenario, world welfare gains are less because Community consumers do not receive the full benefits of world prices and rationalization of production among suppliers is not maximized. Consumers in F.R. Germany fare particularly badly, (-$85m), since banana prices rise considerably -- although government revenue increases by a similar amount ($81m). Strictly speaking, this revenue would be collected by the EC not by a member state. The second scenario assumes that all preferences would be eliminated and a 20% tariff imposed on EC banana imports from all sources. The simulation results are shown in Table 8. Under this scenario, world welfare is somewhat lower than in the case of free trade but higher than in the case - 22 - where a 20% tariff is imposed only on imports from dollar areas. The non- discriminatory tariff allows further rationalization of production between exporters. Compared with iree trade, EC consumers' welfare is less while government revenue increases. Compared to the case where a discriminatory 20% tariff is imposed, EC consumers' welfare is reduced slightly while welfare of preferential exporters declines substantially. Such declines in the welfare of preferential exporters are likely to make the policy unacceptable to the EC. A policy alternative the Community may consider as a means of continuing protection for tavored exporters is to use a tariff on imports to finance a deficiency payment scheme for preferential exporters. Deficiency payments could be set to cover the difference between the world export price and the current protected export price paid to favored exporters, thus leaving favored exporters' welfare unchanged. In effect, the tariff would be set at a rate sufficient to offset the deficiency payments. The EC has shown a preference for self-financing schemes. Simulation results of such a scheme are given in Table 9. A tariff of 16.7% on all banana imports (i.e., on the landed c.i.f. value) would be required to finance the continued subsidization of favored exporting countries. The effect on the Community as a whole would be for a sizable increase in welfare compared to the current situation -- $120 million annually. Within the Community, F.R. Germany would be a major loser, while consumers in most other countries would obtain sizable benefits -- although to a large extent at the cost of government revenues. The effect on the rest of the world would be relatively neutral; although increased exports from dollar areas and slightly higher world prices for bananas confer some benefits on dollar area exporters ($11.3m). Table 6: Etfects of Qirrent SC Camtry Bwwa Iblicies Free Trade saeli EFWI Welfare ChoW a1w Welfare Chare EFN".5 Welfare hauae 11W3 (milLion US$) EllO (sdllon US$) Elll' (llUon 15$) Prices (US/Tmon) IN tit 393.0 402.1 415.6 408.2 US Retail 805.0 814.1 827.6 820.2 Genwry, F.R. Petail 1,435.0 1,444.1 1,457.6 1,450.2 Ul Retail 1,745.0 1,444.1 1,457.6 1,450.2 Fr Petall 1,788.0 1,444.1 1,457.#. 1,450.2 Italy Retail 2,186.0 1,444.1 1,457.6 1,450.2 Spatn Portigal Retall 1,623.0 1,444.1 1,457.6 1,450.2 Other Bt Retail 1,.56.0 :,444.1 1,457.6 1,450.2 4 latin hm!rica RS 232.0 241.1 254.6 247.2 Jumica & lind l.ls. Rli 553.0 241.1 254.6 247.2 (&zleupe 6 Rertinique RE 533.0 241.1 254.6 247.2 Cmroon & C8te d'lvoire RB 298.0 241.1 254.6 247.2 1 olla FtB 291.0 241.1 254.6 247.2 CG sry & Madeira RB 496. 241.1 254.6 247.2 w UtFer ACPFtI 303.0 241.1 254.6 247.2 1 lqmte (tUIU tosn) tranc 445.2 479.4 159.0 478.1 152.5 478.8 156.1 tai 359.4 390.3 112.8 389.0 107.6 389.8 110.4 Italy 362.8 485.9 314.8 483.7 308.3 484.9 311.9 Spain & PIrtugal 426.6 473.6 80.5 470.1 74.2 472.0 77.6 -rTiny, F.K. 668.7 667.0 -6.1 664.5 -15.0 665.9 -10.I Utler 3X 270.6 278.6 31.8 277.7 28.1 278.2 30.1 Rest of lbrld 5,015.9 4,959.0 -45.6 4,875.3 -111.6 4,921.2 -75.5 Einqrts (-UII tons) (tkidela" 6 &brtinque 296.7 134.2 -62.9 141.7 -61.0 217.2 -73.4 JIaacan & Wiedward Us. 224.7 98.( -50.3 103.4 -49.0 162.6 -59.2 Cmeroon & 43te d'lvolre 133.1 I07.7 6.8 113.7 -5.4 121.8 -6.5 S&aLia 64.0 53.0 -2.9 56.0 -2.2 59.2 -2.7 Canary & fMdelra 440.5 214.2 -83.4 226.1 -eo.5 330.0 -95.9 Other MP 56.0 44.6 -3.1 47.1 -2.5 50.8 -3.0 Reht of WIrld 6,334.2 7,082.3 61.3 6,950.4 149.9 6,749.3 99.5 (koernt Reme: France -12.1 -12.1 -12.1 Lt -25.4 -25.4 -25.4 Italy -236.1 -236.1 -236.1 Other EC -33.4 -33.4 -33.4 Total Welfare 192.0 186.4 152.2 ot.tl(uh: FIN dent.ns price elasticity of smiply for favwrwa exp)rters. F211 devites iorkce elasticity of 6upply f.,r r4 st co tic world. Table 7: lvi.ty Itrcent Tariff nn El: Rea lWorts from tbilar Area Baseline MF+NI Welfare OwC e tJ? I Welfare Cha,e l=0.5 Welfare awRe E1UW3 (tndllton USS) El (t million US$) Eit(Ol (mill1on 165) Prices (US$/Ton): 1i RE 393.0 397.2 403.3 400.3 US Retail 805.0 8)9.2 815.3 812.3 Germmy, F.R. Retail 1.435.0 1.564.9 1.572.2 1,568.6 UK Fetail 1,745.0 1,564.9 1,572.2 1,568.6 F'ramce Retail 1,788.0 1,564.9 1,572.2 1,568.6 Italy Retail 2,186.0 1,564.9 1,572.2 1,568.6 Spain & Fbrttgal Retail 1,623.0 1,564.9 1,572.2 1,568.6 tither FE Retail 1,560.0 1,564.9 1,572.2 1,568.6 Latin Aerica 1UB 232.0 236.2 242.3 239.3 Jarnca d Wintmard Us. FOB 553.0 361.9 369.2 365.6 tkaleloupe & Martiniqtae Ru 533.0 3bl.9 369.2 365.6 (.inrum & (.te d'lvoire HRI 298.0 361.9 369.2 365.6 imalia UHA 291.0 361.9 369.2 365.6 Cuary & K-ode1ra PUB 496.0 361.9 369.2 365.6 ltut R-lId 303.0 361.9 369.2 365.6 mqrort!s t A) Tcnis) Erance 445.2 467.4 101.8 466.7 98.4 467.1 1(11.1 UK 359.4 378.0 66.4 377.2 63.7 377.6 65.0 Italy 362.8 465.9 257.4 464.7 254.0 465.3 255.6 Spaln & PortigaI 426.6 441.9 25.2 440.0 22.0 440.9 23.6 Cernany, F.R. 668.7 644.5 -85.3 643.1 -90.0 643.8 -87.7 (ther FC 270.6 270.3 -1.3 269.8 -3.3 270.0 -2.3 Rest of Werld 5,015.9 4,989.6 -21.1 4,951.7 -51.3 4,970.4 -36.5 Lxpurts ((W Toxs) (tAdeloupe & Martiniqim 296.7 201.4 -42.6 205.5 -41.1 250.1 -45.8 Jamaica 6 W1inward lis. 224.7 147.0 -35.5 150.0 -34.4 186.6 -38.5 Clowroon 6 (te d'lvoire 133.1 161.6 9.4 164.9 10.6 148.2 9.5 Scnalla 64.0 79.6 5.1 81.2 5.7 72.2 5.1 Canary 6 Plidra 441\.5 121.4 -51.1 327.9 -48.7 382.6 -53.7 4Itler ACP 56.0 6h.9 3.6 68.2 4.1 61.8 3.7 Rest of IMrld 6,334.2 6,679.6 27.4 6,615.5 66.7 6,533.6 47.0 t&menuw,it Rlevdam: Pr -lr 1.0 0.1 -3.5 I)K -4.8 -5.3 -9.1 Italy -187.6 -187.5 -186.5 titlar F1 0.6 0.9 0.7 .pain 6 PortztaI 15.1 14.2 7.4 -rmasiry, F.PR. 81.0 81.6 81.3 Total Welfare 164.8 160.3 135.5 tI*tatfiXl: FlN dtwnites price elasticity of suply for favored eoqxrters. fisH deuites price elasticity of supply for rest of the world. Table 8: wenty Hercat Tariff on All E Bws Iqxrts Baseline EFIN- Welfare hiWe EFII kelfare OrWe EFI-0.5 Welfare Qiange ERa-3 (adiirm US$) ElI (million US$) E1l (mtiUM US$) Prices (tS$/Ton) US FR 393.0 4)0.9 412.5 405.0 US Retail E05.0 812.9 824.5 817.0 Gera.ny, F.R. Retail 1,435.0 1,569.3 1,583.2 1,574.3 Et Retail 1,745.0 1,569.3 1,583.2 1,574.3 FrTce Retail 1,788.0 1,569.3 1,583.2 1,574.3 Italy Retail 2,186.0 1,569.3 1,583.2 1,574.3 Spain & Portugal Petail 1,623.0 ,569.3 1,583.2 1,574.3 Other EC Retall 1,560.0 1,569.3 1,457.6 1,450.2 Latin AeL icF OB 232.0 239.9 251.5 244.0 Jamica & Wirdward Us. FOB 553.0 239.9 251.5 244.0 zaeloupe & Martinique FO 533.0 239.9 251.5 244.0 Caeroon & (Ete d lvoire FtB 298.0 239.9 251.5 244.0 Soai FRO 291.0 239.9 251.5 244.0 Canary & Madeira MOB 496.0 239.9 251.5 244.0 Other ACP FM 303.0 239.9 251.5 244.0 Inmprts (ODD tons) France 445.2 467.0 99.8 465.6 93.3 466.5 97.4 Ut 359.4 377.5 64.7 376.1 59.5 377.0 62.9 un Italy 362.8 465.2 255.3 462.8 248.9 464.3 253.0 1 Spain & Portugal 426.6 440.7 23.3 437.1 17.2 439.4 21.1 Getnmiy, F.R. 668.7 643.7 -88.1 641.1 -97.0 642.7 -91.3 Other EC 270.6 270.0 -2.5 269.0 -6.3 269.6 -3.9 Rest of World 5,015.9 4,966.6 -39.5 4,894.4 -96.6 4,940.8 -60.0 ExpDrts ('CO tons) Qmdeloupe & Mabrtinique 296.7 133.5 -63.1 140.0 -61.5 216.3 -74.1 Jamdcan & Windward Us. 224.7 97.5 -50.4 102.2 -49.3 161.9 -59.7 Caeroon & 05te dclvoire 133.1 107.2 -7.0 112.3 -5.7 121.1 -6.9 Somalia 64.0 52.8 -3.0 55.3 -2.4 58.8 -2.9 Canary & Madeira 440.5 213.1 -83.7 223.4 -81.2 328.6 -96.9 Other K:P 56.0 44.3 -3.2 46.5 -2.6 50.6 -3.1 Rest of WIrld 6,334.2 6,982.2 52.7 6,866.4 128.7 6,663.1 78.3 Gaverrmnt RePnue: Frmnce 46.9 47.8 47.2 Ut 22.3 23.0 22.5 Italy -177.3 -176.5 -177.0 Other SC 0.8 1.3 0.9 Spain & Portugal 55.7 56.2 55.9 Gormm3ry, F.R. 81.3 82.5 81.8 Total Welfare 185.0 179.2 145.2 Notation: EFN derotes price elasticity of supply for favored exporters. 1W denotes price elasticity of supply for rest of the world. 9: of n E Basellm EFNI Welfare Che EFN-1 Welfare Coe EROW3 (adn1i0 tS$) E-1i (lldl 'o US$) Prie (WISTan): llS FR 393.0 394.8 397.6 tE Retail 805.0 806.8 89.6 Geriwy, F.R Petail 1,435.0 1,541.3 1,542.9 tK Retail 1,745.0 1,541.3 1,542.9 France Petail 1,788.0 1,541.3 1,542.9 Italy Retail 2,186.0 1,541.3 1,542.9 Spain & Porta1l retail 1,623.0 1,541.3 1,542.9 Otter EC Retail 1,560.0 1,541.3 1,542.9 tatin Amrica FM5 232.0 233.8 236.6 Jamica & Wirdwd UIs. FOB 553.0 553.0 553.0 QelqO e & MRertirdque FM 533.0 533.0 533.0 Cmrm & 0ste d'Ivoire FMi 298.0 298.0 298.0 lia RFB 291.0 291.0 291.0 Caary & Mbaeira FM 496.0 496.0 496.0 Otb1r ACP FOB 303.0 303.0 303.0 Tariff (S) 20 16.7 16.4 hqports ('O00 Tom): Frae 445.2 469.8 112.9 469.6 112.1 UK 359.4 380.4 75.3 380.2 74.7 Italy 362.8 469.8 268.4 469.5 267.6 Spadn & Portugal 426.6 448.1 35.7 447.6 35.0 Germany, F.R. 668.7 6489 -70.0 648.6 -71.7 other EC 2/0.6 271.9 5.1 271.8 4.6 Rest of Wbrld 5,015.9 5,006.9 -6.8 4,987,3 -23.0 Ewrts (C0OM Taom): Oaalelte & 6lrtmdiniAe 296.7 296.7 0 296.7 0 cm 6 tae d'wloire 133.1 133.1 0 133.1 0 Jis a A Windwrd Us. 224.7 224.7 0 224.7 0 SaMlia 64.0 64.0 0 64.0 0 Camny & 1aeira 440.5 440.5 0 440.5 0 Otter ACP 56.0 56.0 0 56.0 0 Rest of World 6,334.2 6,478.7 11.3 6,459.6 29.4 Coarao P : _se Fran -12.1 -12.1 UK -25.4 -25.4 Italy -236.1 -236.1 OtherE -33.4 -33.4 Spain & POrttigl 0 0 Gery, P.R. 0 0 Total Welfare 122.7 122.4 Nttatia: EFN detes price elastirity of zpply for favored eqxprters. ERlW derstes price elasticity of sipply for rest of the wrld. - 27 - The efficiency of a deficiency payments scheme, financed by tariffs, as a mechanism for ensuring a continuation of aid to traditional banana suppliers, while more efficient than current policies, is still costly. It costs the EC an estimated $1.27 to transfer each dollar received by favored exporters and costs non-favored exporters $0.24. Non-European industrial importing countries still profit to the tune of an estimated $0.18 for each dollar transferred, while it costs the world economy an estimated $0.34. A deficiency payment scheme financed from general tax revenue may prove to be slightly more efficient if the tax revenue could be raised for a cost less than $0.27 for each dollar raised. The costs and benefits to other parties would be unaltered. Direct Payments Direct payments made in place of deficiency payments would be more efficient instruments for delivering aid. Aid provided by raising producer prices -- such as deficiency payments -- encourages production in favored exporters. This in turn lowers the world price and imposes costs on dollar area exporters while conferring benefits to non-European industrial importers. If the revenue raised by the self-financing tariff on EC consumers was made as direct payments to favored exporters, rather than to producers of bananas in these countries, distortions to trade and the costs associated with them would be considerably reduced (see Table 10). Costs per dollar of aid to non-favored exporters could be reduced to an estimated $0.025, and the profit to industrial importers would decline to an estimated $0.02 -- i.e., the welfare effects would be almost similar to those achieved under free trade. Residual costs to non-favored exporters and the world economy remain, due to the lower EC import demand caused by the tariff. Table 10: Effects of Self-Finmciig Tariff a- EC Bananma Im>rts - Direct Aid Payent Baaeli i EF'Nl Welfare Change EFN-1 We1fare Change 0Bl-3 (mUllcl US$) E(Rl (cidltcon US$) Prices (S$I/Ton) uS sN 393.0 401.1 413.3 US Retail 8e5.0 813.1 825.3 Getrmny, F.L Petall 1,435.0 1,545.0 1,551.8 tI Retail 1,745.0 1,545.0 1,551.8 France Retail 1,788.0 1,545.0 1,551.8 Italy Retail 2,186.0 1,545.0 1,551.8 Spain & Porttval Retail 1,623.0 1,545.0 1,551.8 Othlr EC Retail 1,560.0 1,545.0 1,551.8 lAtin Aeria FOB 232.0 240.1 252.3 JAmjara & Wih.erd Us. FKB 553.0 240.1 252.3 uadelIWpe & Martnique FOB 533.0 240.1 252.3 Ccnre & (Bte d'Ivrire FOB 298.0 240.1 252.3 Soclia FOB 291.0 240.1 252.3 Crwary & Madeira FOE 496.0 240.1 252.3 i Other AP FO 303.0 240.1 252.3 Tariff (Z) 20 10.1 15.0 lx,rts ( 000 tauS) France 445.2 469.4 111.1 468.7 107.9 1 Ut 359.4 380.0 74.0 379.3 71.4 s. Italy 362.8 469.2 266.7 468.1 263.5 OD Spain & Pbrttgal 426.6 447.1 34.1 445.3 31.0 1 Germany, F.R. 668.7 648.2 -72.4 646.9 -76.8 Other EC 270.6 271.6 4.1 271.2 2.2 Rest of World 5,015.9 4,965.1 -40.7 4,889.7 -100.4 Ezport ('000 tcvs) Qaeloupe & 6 tnique 296.7 133.7 -63.0 140.4 -61.4 Crmon & G;te d'lvorie 133.1 107.3 -7.0 112.7 -5.6 Janica & Winr.zd Uls. 224.7 97.6 -50.4 102.5 -49.2 scu.wIa 64.0 52.8 -3.0 55.5 -2.3 Carnay 6 ?Idelra 440.5 213.3 -83.6 224.0 -'81.0 Other KP 56.0 44.4 -3.2 46.6 -2.6 Direct Ald Payunt 273.3 259.0 Rest of World 6,334.2 7,001.7 54.3 6,887.4 133.9 GoveMnat leve,: Frarme -12.1 -12.1 Ut -25.4 -25.4 Italy -236.1 -236.1 OthetrE -33.4 -33,4 Spain & Pbrtugal 0 0 uereny, F.R. 0 0 Total Welfare 187.3 182.7 tbtation: EFN dewtes price elasticity of smpPly for favored exporters. EWW deaoes price elasticity of supply for rest of the world. - 29 - Direct aid payments would confer other advantages. The self- financing taritL would fall from an estimated 16.7% to 16.1% because of the higher world price, and efficiency losses arising from over-production of bananas in traditional supplying countries would be eliminated. If the revenue raised by the 16.1% tariff were directly transferred, traditional suppliers would not incur costs in producing bananas over and above the optimal free trade levels -- banana production in these countries would fall by around 46.6%, the same as in the free trade case. The resources saved could be use' in other enterprises and would confer additional benefits on these countries compared to what they would receive under deficiency payments. Based on estimates from the model, the resources saved would be worth around $64m annually. That is, compared to the current policies, which provide an estimated welfare benefit of $209m to traditional supplying countries, direct-aid payments would confer a benefit of around $273m (i.e., $64m more) while at the same time the welfare of the EC could be increased by around $110m. Overall, the cost to the world economy of transferring each dollar of aid would be around $0.02 only. It is unlikely that raising the aid payment through general taxation measures or even through specific sales taxes would be more efficient than through the 16.1% tariff. Ballard, Shaven and Whalley (1985), for instance, estimate that the cost to the US economy of raising an extra dollar of general tax revenue in 1973 was in the range $0.17 to $0.56, and using sales taxes alone, it cost $0.03 for every dollar raised. Long-term, direct payments are likely to confer other benefits on favored exporters. Direct aid payments could be efficiently targeted. They could be used to modernize the banana industries of such countries -- to make them more competitive -- or be used to help diversify their economies. Under current arrangements, through deficiency payments, aid tends to lock resources into inefficient, high-cost sectors. - 30 - 5. Conclusion The banana policies of the EC member states are inconsistent with the idea of a single European market to be established in 1992. Currently, favored exporters receive a subsidy equivalent (or a type of aid) from the various import arrangements operated by the EC member states. A single European market will lead to the elimination of those differences in import arrangements. The results of the model simulations shown above indicate that banana exports from favored exporters will decline by about one-half under free trade. Their exports will decline by 28% even under the protection of a 20% tariff on imports from dollar areas. This is mainly due to competition from the low-cost exports from Central and South America. In view of the importance of banana exports to the favored supplying countries and given their traditional relationships with the EC, it is possible that the Community will design common measures to ensure them some form of preferred market access. However, the wiser strategy in the long run for these countries might be to seek direct aid payments from the EC. Such aid could be specifically targetted to improve the long-run efficiency of the banana industries or to diversify their economies. Direct aid payments provide many other advantages over alternative instruments which deliver aid through raising producer prices. Under current arrangements, gross inefficiencies exist in transferring each dollar of aid to favored exporters. Such inefficiencies could be largely eliminated through the use of direct aid payments and a self- financing tariff. Such a policy would create only minimal distortions in the pattern of consumption, production and trade. The elimination of current inefficiencies would place the EC in a position to pro-ide a higher level of aid to traditional suppliers at lower total cost. - 31 - References 1. Ballard, C.L., J.B. Shaven, and J. Whalley (1985), "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States", American Economic Review, 75(1), 128-37. 2. de Vries, J., Forecasting World Banana Trade Flows, World Bank Commodity Note No. 16, May 1979, Washington, D.C. 3. FAO, Review of the World Banana Economy: Major Developments Since 1984, CCP: BA 88/4, July 1988, Rome. 4. FAO, The World Banana Economy 1970-1984, FAO Economic and Social Development Paper No. 57, 1986, Rome. 5. FAO, Banana Statistics, CCP: BA 89/7, August 1989, Rome. 6. Noich, A., "European Community Trade Regulations for Bananas and Imports from Developing Countries," Quarterly Journal of International Agriculture, Vol. 24, No. 1, January-March 1985. 7. Pollard S.K., and D.H. Graham, "Price Policy and Agricultural Export Performance in Jamaica." World Development, Vol. 13, No. 9, 1985. 8. World Bank, Banana Handbook, June 1985, Washington, D.C. PRE Working Paper S_eLLe Contact 19b ALthor D49ef for p2aper WPS496 Issues in Evaluating Tax and Robert Conrad August 1990 A. BhalIa Payment Arrangements for Publicly Zmarak Shalizi 37699 Owned Minerals Janet Syme WPS497 The Measurement of Budgetary Carlos Elbirt August 1990 T. Gean Operations in Highly Distorted 34247 Economies: The Case of Angola WPS498 The Build, Operate, and Transfer Mark Augenblick August 1990 D. Schein ("BOT") Approach to Infrastructure B. Scott Custer, Jr. 70291 Projects in Developing Countries WPS499 Taxing Foreign Income in Capital- Chad Leechor September 1990 A. 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Daruwala Patterns in the Republic of Korea 33713 WPS50, Poverty in Poland, Hungary, and Branko Milanovic September 1990 A. Bretana Yugoslavia in the Years of Crisis, 37176 1978-87 WPS508 A RMSM-X Model for Chile Luis Serven September 1990 S. Jonnakuty 39074 WPS509 The Childbearing Family in Odile Frank September 1990 B. Rosa Sub-Saharan Africa: Structure, 33751 Fertiliy, and the Future ,PRE Working Paper Series Contact AuthoDO for 1Qaper WPS510 Public Expenditure Reviews for Antoine Schwartz October 1990 C. Cristobal Education: The Bank's Experience Gail Stevenson 33640 WPS511 The Macroeconomic Underpinnings Fred Jaspersen October 1990 A. Oropesa of Adjusiment Lending Karim Shariff 39075 WPS512 Social Security Reform: The Capital Patricio Arrau October 1990 S. King-Watson Accumulation and Intergenerational 31047 Distribution Effect WPS513 The Business Cycle Associated with Miguel A. Kiguel October 1990 E. Khine Exchange-Rate-Based Stabilization Nissan Liviatan 39361 WPS514 Restrictive Labor Practices in Alan S. Harding October 1990 A. Joseph Seaports 33743 WPS515 Stock Markets in Developing Mansoor Dailami October 1990 M. Raggambi Countries: Key Issues and a Michael Atkin 37657 Research Agenda WPS516 International Capital Mobility and the Jaime de Melo October 1990 S. Fallon Costs of U.S. Import Restraints David Roland-Holst 37947 WPS517 Do Wage Distortions Justify Jaime de Melo October 1990 S. Fallon Protection in the U.S. Auto and David Tarr 37947 Steel Industries? WPS518 Industrial Organization and Trade Jaimede Melo October 1990 S. Fallon Liberalization: Evidence from Korea David Roland-Holst 37947 WPS519 Taxes, Outward Orientation, and Irene Trela October 1990 A. Bhalla Growth Performance in Korea John Whalley 37699 WPS520 Trade Reform, Policy Uncertainty, Sweder van Wijnbergen October 1990 M. Stroude and the Current Account 38831 WPS521 World Bank Treatment of the Social Helena Ribe October 1990 M. Abiera Impact of Adjustment Programs Soniya Carvalho 31262 WPS522 A Survey of the Costs of World Brent Borrell October 1990 A. Kitson-Walters Sugar Policies Ronald C. Duncan 33712 WPS523 EC Bananarama 1992 Brent Borrell October 1990 S. Lipscomb Maw-Cheng Yang 33718