“Tariffication” of a quota: EU bananas Quota rents: estimation from independent cost data Notes CPT: costs per ton (sum of a, b and c) IQT: « in-quota.

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Presentation transcript:

“Tariffication” of a quota: EU bananas

Quota rents: estimation from independent cost data Notes CPT: costs per ton (sum of a, b and c) IQT: « in-quota » tariff at €75 per ton for MFN producers, zero for ACP EUPRTN: CIF price per ton on the EU market RENTPT: quota rent per ton, without the IQT

The gravity model of international trade Large country Small country Close by Distant

“Tariffication” of a quota: EU bananas Gravity estimation

Calculating the tariff equivalent of a quota Rewrite the gravity equation in condensed form: Difference between quota-constrained and unconstrained market (effect of quota) Difference between a market with tariff t and no tariff at all (effect of tariff) Equate the last two expressions (effect of quota and effect of tariff) or

p EU S ACP + S EU S ACP S$S$ t PG (b) (tariff only at rate t PG ) p EU S EU S ACP S$S$ t PG Q $ < 2.65Q ACP > 0.8 (b) (tariff only at rate t PG ) S ACP + S EU + S $ (t PG ) S $ (t PG ) Q EU D EU Million tons €/ton €75/t in-quota tariff S EU S ACP S$S$ Q $ = 2.65 t PG p* + t p EU p* Million tons €/ton Q ACP = 0.85 (a) (tariff-quota) Q EU D EU S $ (t)

€75/t in-quota tariff S EU S ACP S$S$ Q $ = 2.65 t PG p* + t p EU p* Million tons €/ton Q ACP = 0.85 (a) (tariff-quota) p EU S ACP + S EU S ACP S$S$ t PG (b) (tariff only at rate t PG ) p EU S EU S ACP S$S$ t PG Q $ < 2.65Q ACP > 0.8 (b) (tariff only at rate t PG ) S ACP + S EU + S $ (t PG ) S $ (t PG ) Q EU D EU Million tons €/ton S $ (t)

Banana production costs compared Source: FAO, 1994 $ per ton

Protecting ACPs: really necessary? Production costs of Africa and most efficient LA, per box Notes: FOB: Free on Board, embarkation port FOR: Free on rail, after disembarkation port Costs per box

“Third-country” tariff-quota 2.2 m 75 ECU/ton ACP quota tariff-free 857,700 tons EU OST quota price support 854,000 tons Dom. Rep. Belize Ivory Coast Cameroon 90,000 tons “F.A. countries”: Costa Rica 23.4% Columbia 21% Nicaragua 3% Venezuela 2% Other countries 50.6% - 90,000 tons Exporting country breakdown Licence allocation breakdown (by type of operator) Category A: 66.5% “Dollar” importers Category B: 30% ACP/OST importers Category C: 3.5% New entrants Regulation 404/93 and the Framework Agreement Primary importers 57% Custom clearers/ ripeners 43%

S EU S ACP S$S$ Q $ = 2.65 p* + t p EU p* Million tons €/ton Q ACP = 0.85 (a) (tariff-quota) Q EU D EU S $ (t) S EU S ACP S$S$ Q $ = 2.65 p* + t p EU p* Million tons €/ton Q ACP = 0.85 (a) (tariff-quota) Q EU D EU S $ (t) Rentes totales Rentes aux sociétés américaines Rentes aux sociétés européennes Rent-sharing