Bananas, the GATT, the WTO and US and EU domestic politics

The purpose of this paper is to revisit the celebrated conflict that lasted close to two decades and pitted the EU against the USA and against MFN suppliers of bananas. It starts by recalling the major turning points in the dispute and argues that the EU-USA conflict could largely be explained by the changing landscape on trade-policy making on both sides of the Atlantic. As to the EU-MFN grower dispute, it can be largely explained by uncertainty on the distribution of quota rents and on the reluctance to use economic analysis in the panel decisions. Econometric and simulation estimates are given in support of this argument.

Analytical interpretation of the conflict supported by graphical analysis. Econometric and simulation estimates to support the arguments.

The paper shows that the EU-MFN grower dispute is largely explained by uncertainty on the distribution of quota rents as result of the move away from region-specific quotas to tarification.

Lack of better data on transport costs and unreliable price data discussed in the paper is an important caveat only partly remedied through simulation analysis.

The use of the simple and transparent models here would have helped the panel reach an informed decisions on what tariff would have preserved the same market shares for MFN growers of bananas.

This is the first thorough political-economy review of the dispute since the often cited paper: Cadot and Webber, (2002) “Banana splits: policy process, particularistic interests, political capture, and money in transatlantic trade politics.”