territories and in general terns to ACP<sup>producers. The way quotas are allocated helps to</sup> maintain existing preferences in broad<sup>terms in the immediate future. The method of allocation</sup> determines how _quota rents_ (from<sup>consumers) are allocated to producers and others in the</sup> marketing chain. Quotas are allocated<sup>through the use of a licensing system, although how the</sup> _quota rents_ are allocated depends<sup>on the nature of supply and demand as well.</sup> Separate quotas apply either implicitly<sup>or explicitly to bananas from EU</sup> tetories, ACP producers and other suppliers<sup>-mainly</sup> the -efficient Latin American exporters. Quotzs on EU territory and ACP bananas<sup>are set at levels equal to or higher than the highest</sup> level of shipment over the past five years<sup>(1.7 million) and are non-transferable. The quota on</sup> Lain American supplies (2 million<sup>tons) is the residual quota and it is transferable. It is</sup> determined in order to fix the end price;<sup>it has been set at about 6 per cent below Latin American</sup> supplies to the EU in 1992 according<sup>to World Bank data, but could be further below 1992</sup> levels based on adjusted Eurostat data.<sup>Moreover, one third of the Latin American quota is</sup> allocated to marketers of territorial<sup>and ACP bananas. As well as helping to guarantee</sup><sup>_quota_</sup> _rents_ to traditionally protected EU marketers<sup>of bananas, this provision directly transfers market</sup> shares from traditional marketers of<sup>Latin American fruit to marketers of territorial and ACP</sup> fruit.

ACP and Latin American quotas are<sup>explicit and quantitative. EU territorial</sup> quotas are implicit Provision<sup>exists for deficiency payments or compensation for loss of</sup> producers' incomes which might<sup>arise as a result of the change to a single market. Because</sup> compensation applies to a maximum<sup>quantity of bananas produced (0.854 million tons), in effect</sup> EU territorial producers are guaranteed<sup>prices similar to what they received previously for a</sup> fixed amount of fiuit Certainy there is no<sup>upper limit to EU territorial supply to the EU market</sup> and no penalty above the limt, however<sup>wihout compensation under fte new single policy U</sup> entails that territorial suppliers' prices<sup>could decline compared to before the single policy came</sup> into force. Previously, EU territorial<sup>suppliers received prices higher than the average. And so,</sup> EU territorial producers' guaranteed<sup>price is limited to a maximum quantity. They, may face</sup> lower effective prices above the quota. This<sup>amounts to an implicit quota.</sup> Allocation of import quotas and<sup>licenses discriminates strongly against those</sup> involved in the production and marketing<sup>of Latin American- fruit and any non-traditional</sup> quantities of ACP fruit. At the<sup>same time the arrangements distinctly favor those involved in the</sup> marketing of traditional ACP and<sup>EU territorial fruit. As well as some of the traditional market</sup> share of firms marketing Latin American<sup>fnrit being directly transferred, by EU sanction, to</sup> firms who tradionally market ACP<sup>and EU territorial fruit, the access for Latin American fnrit</sup> has been reduced compared to what<sup>it had been. No similar reciprocal arrangement has been</sup> enacted affecting ACP and EU territorial<sup>frit</sup> One explanation of these arrangements<sup>is that</sup> they are designed to force the margins<sup>earned on the imports of Latin American frait to be used</sup> to cross-subsidize the imports of expensive<sup>ACP and EU territorial fruit.</sup> Just how the market wil operatz in the<sup>long term remains unclear. The system</sup> provides room for considerable administrative<sup>discretion. A management committee on bananas</sup> has been established consisting of<sup>representatives of the member states whose votes wil be</sup> weighted. The quota on Lati Amencan<sup>bananas is subiect to annual review and wil be</sup> adjusted based on the opinion of the committee<sup>and, more importantly, the approval of the</sup> 9