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United nations ConferenCe on trade and development
UNITED NATIONS
NON-TARIFF MEASURES TO TRADE: Economic and Policy Issues for Developing Countries
UNCTAD
KEY STATISTICS AND TRENDS
in Trade Policy
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Global Tariff Trends: Developed vs. Developing Countries - Prof. Guerra, Apuntes de Economía
The reduction of tariffs in developed and developing countries from 2002 to 2012. Developed countries maintained low tariffs, while developing countries reduced theirs substantially. Preferential trade agreements (ptas) contributed to further tariff reductions. However, high tariffs remain for interregional south-south trade. Developing countries' policy space to raise tariffs is limited due to pta commitments. Trade defence measures have been used to protect specific sectors against imports. The average tariff for developed countries is less than 1%, while for developing countries it ranges from 4-10%. About 10% of international trade faced tariffs over 10% and 7% in 2012.
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U n i t e d n a t i o n s C o n f e r e n C e o n t r a d e a n d d e v e l o p m e n t
UNITED NATIONS
NON-TARIFF MEASURES TO TRADE: Economic and Policy Issues for Developing Countries
UNCTAD
KEY STATISTICS AND TRENDS
in Trade Policy
KEY STATISTICS AND TRENDS
IN TRADE POLICY
UNITED NATIONS New York and Geneva, 2013
U N I T E D N A T I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T
Introductory note
The purpose of this study is to provide some a snapshot on policies affecting international trade over the recent and medium-term period. It is intended as a regular monitoring exercise so as to provide interested readers with informative data and analysis on a regular basis.
The study is organized in several sections. The first part presents statistics related to tariffs. The second part focuses on preferential margins. The third section presents data related to tariff policy space. The fourth section illustrates selected statistics related to preferential trade agreements. The fifth part presents new data on non-tariff measures, and it is followed by a section on trade defence measures. The final section presents statistics on the exchange rate. All trade policy statistics presented here apply only on goods (merchandise). Trade policies related to services are not included in any of the statistics presented here.
All statistics have been computed by the UNCTAD secretariat and rely on underlining data from various data sources. Raw data on tariffs and non-tariff measures originates from UNCTAD TRAINS database. Trade data to compute weighted averages is from UN COMTRADE. Raw data on bound tariffs is from the WTO tariff data base. Data on trade defence measure is from the World Bank Temporary Trade Barriers database. Data related to preferential trade agreements, is derived from various databases including the WTO regional trade agreement gateway, the World Bank global preferential agreement database, the NSF-Kellogg Institute Database on Economic Integration Agreements and the J. De Sousa database on preferential agreements. Yearly exchange rate data and other macro level data used in the figures originate from UNCTADSTAT. Monthly exchange rate data used to compute volatility indices is sourced from Bloomberg. The underlining tariff data is at the HS-6 digit level. The data has been standardized to assure time and cross country comparison. Data covers more than 150 countries representing more than 95 per cent of world trade. Data on non-tariff measures is available only for about 40 countries and therefore may not be representative of world trade.
For the purpose of this study, countries are categorized by geographic region and distinguished between developed and developing countries. Major developing economies comprise those commonly categorized as such in UNCTAD statistics. Transition Economies, when not treated as a single group, are included in the broad aggregate of developing countries. Following the Broad Economic Categories (BEC) classification, international trade is classified into four major economic categories, depending on the stage of processing and use; namely, primary, intermediate, consumer and capital products. Product sectors are categorized according to the International Standard Industrial Classification (ISIC) augmented by five broad agricultural sectors based on the Harmonized System classification (HS).
CONTENTS
- Overview
- Tariffs
- Average Import and Export Restrictiveness, by Region
- Tariff and Market Access Liberalization for Developing Countries
- International Trade subject to MFN and Preferential Tariffs
- Tariffs Restrictions on Total and Bilateral Trade
- Tariff Restrictiveness, by Stage of Processing
- Tariff Restrictiveness, by Economic Sector
- Tariff Restrictiveness, Matrix by Region
- Specific Duties, by Country and Sector..................................................................................................
- Preferential Margins
- Relative Preferential Margins
- Trade Distortions due to Preferences, by Country and Sector...............................................................
- RPM, Matrix by Region
- Preferential Margins
- Tariff Policy Space
- Policy Space in Tariff Setting, by Region and Country
- Tariff Water and True Tariff Water
- Preferential Trade Agreements
- Preferential Trade, by Type of Agreement and by Region.
- Shallow and Deep PTAs, by Country.....................................................................................................
- Non-Tariff Measures
- Prevalence of Non-Tariff Measures, by Type
- Technical Non-Tariff Measures, by Economic Sector
- Non-Technical Non-Tariff Measures, by Economic Sector
- Trade Defence Measures
- Trade Defence Measures
- Targeting of WTO Investigations on Antidumping and Countervailing Duties
- Trade Defence Measures, by Economic Sector
- Exchange Rates
- Real Effective Exchange Rate
- Exchange Rate Appreciations and Depreciations
- Exchange Rate Volatility………………………………………………………………………………
The proliferation of PTAs reflects in a reduction of developing countries’ policy space. Although
many developing countries maintain substantial policy space within their WTO tariff bindings, their
legal ability to raise tariffs further depends on commitments related to PTAs. When PTAs are
considered, about half of the tariff water present in WTO commitments disappears.
Although tariffs have declined, international trade is regulated and influenced by a wide array of
policies and instruments. These instruments include many forms of non-tariff measures (NTMs)
such as quotas, licensing, pre-shipment inspections, imports and export regulations, as well as
technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS). Although
available data does not permit calculating accurate trends in their use, SPS and TBT are believed to
have become increasingly important. In 2012, technical measures in their various forms regulated
about two-thirds of world trade. TBT are particularly pervasive in the case of energy products,
textiles, but also with regard to many light manufacturing goods. Forms of SPS are applied to
almost the totality of agricultural trade. Technical measures are more often applied by high income
countries, their use generally increasing with countries stage of development. Other, non-technical
forms of NTMs are also widely used, but more so by lower income countries. On average, non-
technical NTMs such as quantity and price measures still affect about 25 per cent of world trade.
Over the past few years there has been an increase in the use of trade defence measures within the
WTO framework (antidumping, countervailing duties and safeguards), especially in relation to the
number of cases initiated by emerging developing countries. Trade defence measures have largely
aimed at protecting specific sectors (in particular, chemicals, basic metals and textiles, but also
agriculture) against imports from selected countries (in particular East Asia).
The economic turbulence of the last few years has been reflected in exchange rate markets, both for
developing and developed countries’ currencies. Exchange rates movements and volatility have
played an important role in shaping international trade in the post crisis period as they influenced
countries’ external competitiveness. External competitiveness as measured by the real effective
exchange rate has deteriorated in the majority of developing countries since 2007. This trend was
also substantiated by the overall appreciation of many developing countries’ currencies versus the
US dollar. With regard to East Asian currencies, the appreciation of their effective exchange rate
was much less pronounced than that vis-à-vis the US dollar.
1. Tariffs
During the last 10 years tariffs on international trade flows have been further reduced. As of 2012, the average tariff applied on imports is less than 1 per cent in developed countries and averages between 4 and 10 per cent in developing countries regions. Lower import tariffs are mirrored by more liberal market access conditions, especially for developing countries. In 2012, the average tariff faced by exports ranged from 1 per cent for Latin America to about 3.5 for South Asia.
Figure 1 – Average Import and Export Restrictiveness, by Region (a) (b)
Figure 1a portrays the tariff trade restrictiveness index (TTRI) which serves as an indicator summarizing the trade policy stance of a country. The TTRI calculates the uniform tariff that will keep a country’s overall imports at the current level when the country in fact has different tariffs for different goods. The market access counterpart (MA-TTRI) summarizes the same concept but for the case of exports (Figure 1b). Both indices are calculated on the basis of applied tariffs, including tariff preferences. During the last decade TTRI and MA-TTRI have on average declined. During the last decade tariffs generally did not create large restrictions on access to developed countries’ markets. Nevertheless, despite a declining trend, developing country tariffs in many cases remain quite trade restrictive. Tariff restrictiveness is relatively higher in West Asia and North Africa ( per cent) as well as in South Asia and in Sub-Saharan Africa (about 8 per cent). Tariff liberalization of the past decade is mirrored by more liberal market access conditions, especially for some developing country regions. Exports from Latin America and Transition Economies face the most liberal market access with a MA-TTRI of about 1 per cent in 2012. This is largely due to membership in preferential trade agreements, and an export composition tilted towards energy products that typically face low tariffs. In contrast, exports from East and South Asia face a higher average level of restrictiveness than other regions. For many of these countries, further negotiations with major trading partners aimed at lowering tariffs can still produce substantial export gains.
0 5 10 15 20 25 Percent
W.Asia & N.Africa
Transition Ec.
Sub Saharan Africa
South Asia
Latin America
East Asia
Developed Countries
Import Restrictiveness (TTRI)
2002 2007 2012 0 1 2 3 4 5 Percent
W.Asia & N.Africa
Transition Ec.
Sub Saharan Africa
South Asia
Latin America
East Asia
Developed Countries
Export Restrictiveness (MA-TTRI)
2002 2007 2012
International trade is largely free from tariffs both as a result of zero MFN duties and of preferential access. By 2012 almost 40 per cent of international trade was fully liberalized under MFN terms, while an additional 35 per cent was free because of preferential access. However, tariffs applied to the remainder of international trade are relatively high. In 2012 about 10 per cent of international trade faced MFN tariffs of over 10 per cent and preferential tariffs of over 7 per cent.
Figure 3 - International Trade subject to MFN and Preferential Tariffs (a) (b)
International trade has been largely liberalized owing to both zero most-favoured-nation (MFN) tariffs as well as preferential duty-free access. In 2012, around 40 per cent of world trade was free under MFN regimes, with an additional 35 per cent exempt from tariffs due to preferential access (Figure 3a). Between 2002 and 2012 the share of global trade covered by zero MFN tariffs rose by around 10 per cent, yet an equivalent fall in the share covered by duty-free preferences left the overall proportion of trade freed under MFN and preferential tariffs constant at three-quarters of total trade. The share of developed country trade that is free under zero MFN rates and preferential access remained high at over 80 per cent in 2012, largely unchanged since 2002. The corresponding share of developing country trade has risen over the past decade to reach almost 60 per cent, primarily driven by a higher coverage of trade coming under MFN rates that have been bound at zero.
Despite a significant portion of international trade being duty-free under MFN and preferential rates, remaining trade flows can be subject to relatively high tariffs. As shown in Figure 3b, around 10 per cent of global trade faced MFN and preferential tariffs in excess of 10 per cent and 7 per cent, respectively, in 2012.
0 .2 .4 .6. Percent of total trade
Developing
Developed
World
2012
2007
2002
2012
2007
2002
2012
2007
2002
Free Trade
MFN Preferential
.
.
.
1
Percent of total trade (cumulative distribution) (^0 10 20) Tariff 2012 (%) 30 40 50
MFN Preferential
Trade under Non-Zero Tariffs
Even though a large fraction of international trade is duty free, this is not the case for a substantial share of imports of many developing countries. About 60 per cent of South Asian and Sub-Saharan African imports face an average tariff rate of over 5 per cent. Even in the case of East Asia, about one-fourth of imports are taxed at a rate of 5 per cent or higher. The degree of tariff restrictions is greater when considering the number of bilateral trade flows rather than the value of total trade. Notably, about 40 per cent of trade flows of Sub-Saharan African countries are subject to import tariffs of 15 per cent or higher.
Figure 4 – Tariffs Restrictions on Total and Bilateral Trade (a) (b)
Despite the fact that a significant part of international trade is free of duties, this is not true for a substantial share of imports of numerous developing countries. As illustrated in Figure 4a, in developed countries, only a small fraction of imports face duties exceeding 5 per cent. However, in all developing country regions, a much higher share of more than 20 per cent of imports faces tariffs surpassing 5 per cent. Indeed, up to 60 per cent of South Asian and Sub-Saharan African imports were subject to tariffs of over 5 per cent in 2012. Around a third of imports in these two regions were subject to even higher tariffs of over 10 per cent.
Tariffs become even more restrictive when calculated as a share of the number of bilateral trade flows as opposed to the value of trade (Figure 4b). For instance, in 2012 about 40 per cent of trade flows of Sub-Saharan African countries faced import tariffs equal to or over 15 per cent. This compares to just over 20 per cent of the trade value of these countries being subject to import tariffs of a similar magnitude.
0 20 40 60
Percent over total trade
W.Asia & N.Africa
Transition Ec.
Sub Saharan Africa
South Asia
Latin America
East Asia
Developed Countries
Tariffs on Trade (2012)
5 % or higher 10 % or higher 15 % or higher
0 20 40 60 80 Percent over number of bilateral trade flows
W.Asia & N.Africa
Transition Ec.
Sub Saharan Africa
South Asia
Latin America
East Asia
Developed Countries
Tariffs on Bilateral Trade Flows
5 % or higher 10 % or higher 15 % or higher
Tariff liberalization over the last decade has occurred in all economic sectors, but to a varying degree. Although declining, tariffs are on average still relatively high for agricultural products, apparel and textiles, and tanning. As of 2012, developing countries’ trade restrictiveness tends to be higher in agricultural sectors and apparel, while developed countries maintain relatively high tariffs on agriculture, textiles, apparel and tanning.
Figure 6 – Tariff Restrictiveness, by Economic Sector (a) (b)
During the past decade tariffs have been liberalized across all economic sectors, although in some cases more than in others (Figure 6a). Tariffs are still relevant in restricting the trade of agricultural products, as well as textiles, apparel and tanning. On the other hand, tariffs do not play a significant role in restricting trade in most energy and raw material sectors, where the already low tariffs of 2002 have been further reduced. Tariff restrictions in the case of office machinery and communication equipment have also been largely eliminated.
Tariff restrictiveness is often associated with protection of economically sensitive sectors and therefore often exhibits a different pattern across countries at different stages of development (Figure 6b). Developing countries’ trade restrictiveness tends to be higher in agricultural sectors and apparel. Developed countries’ trade restrictiveness is relatively higher in agriculture, textiles, apparel and tanning.
0 2 4 6 8 10 Percent
Vegetable Products Apparel TanningTextiles
Tobacco, BeveragesOils and Fats
Animal ProductsFood Products
Non-Metallic MineralMotor Vehicles
Transport EquipmentRubber/Plastics
Machinery VariousMetal Products Wood Prod, FurnituresElectrical Machinery
Petroleum ProductsChemicals
Precision InstrumentsBasic Metals
Paper Prod, PublishingComunication Equip.
Mining and Metal OresOil, Gas, Coal
Office Machineries
Sectoral TTRI
2002 2007 2012 0 5 10 15 Percent
Vegetable ProductsApparel
Tobacco, BeveragesFood Products
Animal ProductsOils and Fats Motor VehiclesTextiles
Non-Metallic MineralMetal Products
Rubber/PlasticsTanning Wood Prod, FurnituresTransport Equipment
Electrical MachineryMachinery Various Precision InstrumentsChemicals
Paper Prod, PublishingBasic Metals
Comunication Equip.Petroleum Products
Mining and Metal OresOffice Machineries Oil, Gas, Coal
Sectoral TTRI 2012
Developing Developed
Trade restrictiveness is very diverse across regional trade flows. With the exception of export flows from Sub-Saharan Africa, intra-regional trade is generally subject to lower TTRI than inter-regional trade. Across regions, tariffs are relatively higher for exports originating in East Asia and for imports into South Asia, Sub-Saharan Africa and West Asia and North Africa. The progressive tariff liberalization of the last 5 years is reflected in most, but not all, regional trade flows.
Table 1: Tariff Restrictiveness, Matrix by Region (changes 2007-2012 in smaller font)
Exporting Region Importing Region
Developed Countries East Asia^
Latin America
South Asia
Sub- Saharan Africa
Transition Economies
W.Asia & N.Africa Developed Countries
1.0 2.1 0.4 3.1 0.1 0.6 0. -0.6 -0.5 -0.9 -0.1 -0.6 0.1 -0. East Asia 5.8^ 3.0^ 2.5^ 2.5^ 1.9^ 1.8^ 1. 0.5 -0.4 -2.4 -0.9 0.4 -1.5 -0. Latin America 3.9^ 7.8^ 1.4^ 7.8^ 1.6^ 1.8^ 3. 0.0 -0.7 -0.5 -2.2 -0.8 -1.7 0. South Asia 9.4 11.2 1.9 3.0 3.3 6.5 3. -4.1 -2.8 -13.8 -5.9 -8.9 -11.8 -7. Sub-Saharan Africa
6.6 11.2 9.0 6.9 4.1 5.4 5. 0.2 0.0 1.2 0.6 -0.9 -0.8 2. Transition Economies
4.8 6.6 4.7 6.5 2.5 0.4 6. -1.3 -2.2 -3.5 -0.7 0.1 -2.2 -1. W.Asia & N.Africa
8.1 13.0 7.9 8.4 8.2 3.5 2. -0.9 0.0 -2.4 0.0 -1.8 -3.6 0.
Table 1 represents a matrix of average levels of tariffs imposed on trade flows between regions. Differences in the rates exhibited in Table 1 arise both from different patterns of market access due to preferential trade agreements as well as trade composition (as some goods are generally taxed more than others). The effect of regional trade agreements is reflected in the relatively lower degree of restrictiveness of intra-regional as opposed to inter-regional trade. However, this has not been the case for Sub-Saharan Africa where market access is still relatively more favourable in inter-regional than in intra-regional markets. This is partly due to preferences granted to least developed countries (LDCs) but also owing to the still high tariff barriers imposed by Sub-Saharan African countries on trade among each other. With regard to tariff restrictions imposed on South-South trade flows, a large number of such regional flows are still burdened by relatively high tariffs. For example, East Asian exports are subject to an average tariff of more than 10 per cent when sold to South Asia, Sub-Saharan Africa as well as West Asia and North Africa. Turning to assess recent changes in market access conditions, during the last 5 years some trade flows have been liberalized much more than others. This is largely a reflection of the diverse geographic patterns of regional trade agreements, but also because of shifting in the composition of trade flows. The latter is the main cause of the increase in tariff restrictiveness observed in the case of certain trade flows, as for example, Sub-Saharan African imports from West Asia and North Africa.
2. Preferential Margins
The system of tariff preferences affects international competitiveness by providing various countries with different market access conditions. On average, countries in Latin America benefit from large preferential margins. On the other hand, East Asian and South Asian exporters often face more restrictive market access conditions than their foreign competitors. Preferential margins tend to be larger for consumer goods than for intermediates. Preferential margins are negligible for primary products.
Figure 8 - Relative Preferential Margins (a) (b)
Figures 8a and 8b report relative preferential margins (RPM) averaged by region. RPMs provide a measure of export competitiveness of a given country by taking into consideration any preference provided by its trading partners to foreign competitors. RPM can be positive or negative, depending on the advantage or disadvantage a country has in terms of preferences with respect to other competing exporters. The RPM is exactly zero when there is no discrimination. As a result of regional trade agreements involving a relatively high external tariff, alongside bilateral agreements with major developed countries, Latin American countries’ RPM is much larger than that of all other regions. By contrast, exporters in East Asia and South Asia often face market access conditions that are generally worse than those of their foreign competitors. RPMs have changed in the last 10 years with developed countries now facing a less favorable system of preferences and developing countries being in a more advantageous position. RPMs tend to be larger for consumer goods and smaller for primary products, indicating that the system of preferences has a more distortionary effect on the former than on the latter group of goods. Within the consumer product sector, East and South Asian exporters face more unfavourable market access conditions of a magnitude of about 1 per cent higher tariffs on average than their foreign competitors. Conversely, exporters of consumer products in other developing country regions benefit from more favourable market access conditions in the form of 1.4 per cent or more lower tariffs.
-.5 0 .5 1 1. Relative Preferential Margin (%)
W.Asia & N.Africa
Transition Ec.
Sub Saharan Africa
South Asia
Latin America
East Asia
Developed Countries
Preferential Margins
2002 2007 2012
-2 -1 0 1 2 Relative Preferential Margin (%)
W.Asia & N.Africa
Transition Ec.
Sub Saharan Africa
South Asia
Latin America
East Asia
Developed Countries
Preferential Margins (2012)
Primary Intermediate Consumer Capital
Although the discriminatory effects of preferences is not large in aggregate terms, it is nonetheless of greater relevance for certain economic sectors. Sectors with the highest degree of preference distortion include agriculture, textiles, apparel, tanning and motor vehicles. Sectors with low levels of distortion include metals, energy and office machinery. Trade distortions caused by preferences also differ by country. On the import side, Latin American countries have the most discriminatory tariff structure. On the export side, Sub-Saharan African countries often face very diverse international market access conditions.
Figure 9 – Trade Distortions due to Preferences, by Country and Sector (a) (b)
The system of preferences influences international trade flows by applying different tariffs to identical products depending on their origin. This affects exporters’ competitiveness, therefore resulting in a distortionary impact on trade. Figure 9a reports the standard deviation of the RPM for each economic sector. Such a measure provides an indication of the level of discrimination in market access conditions (and therefore distortion) at the sectoral level. Across economic sectors, those facing the highest levels of distortion include agriculture, textiles, apparel, tanning and motor vehicles. Moreover, for many sectors the level of distortions has not abated since 2002. Distortions have abated in sectors where tariffs are less discriminatory such as metals, energy and office machinery, largely owing to further MFN liberalization. This implies that preferences, although on average not very discriminatory, still have large discriminatory effects in the case of particular sectors. Figure 9b reports the standard deviation of the RPM at the country level both for imports and exports. On the import side, Latin American countries have the most discriminatory tariff structure. On the export side, Sub-Saharan African countries often face very diverse international market access conditions. In general, countries with tariff structure discriminating against trading partners are also those facing more diverse market access conditions for their exports.
0 2 4 6
Relative Preferential Margin Standard Deviation
Food Products Oils and Fats ApparelTextiles
Motor VehiclesTanning Vegetable ProductsAnimal Products
Tobacco, BeveragesRubber/Plastics Non-Metallic MineralMetal Products
Transport EquipmentElectrical Machinery Wood Prod, FurnituresChemicals
Comunication Equip.Basic Metals
Paper Prod, PublishingMachinery Various Precision InstrumentsPetroleum Products
Office MachineriesOil, Gas, Coal
Mining and Metal Ores
Distortions due to Preferences
2002 2007 2012
CHN
HKG
IDN
KHM
KOR
MMR
MYS PHL
PNG SGP
THA
TWN
VNM BIH ALB^ AZE ARM GEO
HRV MDA KGZ
MKD RUS
TJK UKR
UZB ATG ARG BLZ
BOL
BRA CHL
COL
CRI CUB
ECU GTM DOM GUY HND
MEX JAM NIC
PAN
PRY SLV (^) TTO
VEN URY
BHR
DZA JOR EGY
MAR
OMN
SDN
IND
LKA
PAK^ NPL AGO
BEN
BWA
CIV CMR
GAB
MDG LSO KEN
MOZ
MUS
MWI
NAM
NGA
SEN
TCD TGO
UGA ZAF
ZMB (^0)
5
10
15
as an Importer
0 5 10 15 as an Exporter
East Asia Transition Ec. Latin America W.Asia & N.Africa South Asia Sub Saharan Africa
Standard Deviation RPM
Discriminatory Tariffs (2009)
3. Tariff Policy Space
Differences in WTO obligations on MFN tariffs result in a different degree of policy space across countries. Developed countries and economies in transition tend to have very limited policy space as most tariff lines are bound by WTO obligations with little binding overhang. Policy space is generally larger for developing countries. In the case of Sub-Saharan Africa, WTO obligations bound only about half of tariff lines, with substantial binding overhang typically present.
Figure 10 – Policy Space in Tariff Setting, by Region and Country (a) (b)
The WTO accession process limits acceding country policy space by imposing bounds on MFN tariffs. As WTO accession is a negotiating process, it results in substantial differences across countries both in terms of the number of tariff lines bound as well as the level of the bindings. These differences in obligations render trade policy of some countries more constrained than others. Figure 10a reports regional averages of the share of tariff lines that are bound (at the HS 6 digit level) and of the share of bound lines with no binding overhang (i.e. whereby applied MFN is equal to the MFN bound tariff). A higher percentage of bound lines and of lines with no binding overhang (tariff water) hinders a country’s ability to raise tariffs without infringing WTO obligations, thereby limiting policy space. Figure 10b reports similar statistics at the country level. On average, policy space is limited for developed countries and economies in transition as most tariff lines are bound by WTO obligations with almost no binding overhang. Policy space is relatively larger for developing countries. For example, WTO obligations allow for substantial policy space in Latin American countries as, although most lines are bound, tariff overhang is present in the large majority of lines (90 per cent). Substantial policy space is also available for most Sub-Saharan countries both because WTO obligations bound only a fraction of tariff lines and because most of the bound lines still have some binding overhang. The most tariff policy constrained region is East Asia, where more than 80 per cent of lines are bound and a third of bounded lines have no binding overhang.
0 20 40 60 80 100 Percent over total trade
W.Asia & N.Africa
Transition Ec.
Sub Saharan Africa
South Asia
Latin America
East Asia
Developed Countries
Bounded Tariffs and
Presence of Overhang (2012)
Bounded lines (%) No Binding Overhang (%)
CHN
IDN
KOR MYS PHL
THA
TWN RUS
ARG BRA EGY CHLCOLMEXPERVEN
ISR TUR IND^ PAK NGA
ZAF
0
20
40
60
80
100
No Binding Overhang (%) 20 40 60 80 100 Bounded lines (%)
East Asia Transition Ec. Latin America W.Asia & N.Africa South Asia S.S. Africa Developed Countries
Bounded Tariffs and
Presence of Overhang (2012)
Countries’ ability to raise tariffs within their legal constraints does not depend only on WTO obligations but also on preferential and regional trade agreements' (PTAs) commitments. Once PTAs are considered, the amount of tariff water in many cases is less than half of the WTO binding overhang.
Figure 11 – Tariff Water and “True” Tariff Water (a) (b)
Legal obligations under the WTO agreements are not the only commitments that have an effect on policy space. Participation in preferential and regional trade agreements (PTAs) also restricts countries’ ability to raise tariffs without breaking legal commitments or provoking retaliatory action by trading partners. In practice, the tariff water or binding overhang – namely, the difference between bound and applied MFN tariffs – may not be the most appropriate metric of trade policy space when a substantial part of trade occurs under PTAs. In practice, countries with a larger share of trade under PTAs tend to enjoy lower true policy space. As an example, the use of WTO policy space (i.e. an increase in the applied MFN tariffs) in Mexico would have little implications for its own trade as most of Mexico’s trade occurs under the North American Free Trade Agreement (NAFTA). Figures 11a and 11b report the average tariff water calculated as the difference between bound and MFN tariffs, as well as the “true” tariff water which also takes into account the implicit bindings imposed by PTA commitments. The amount of “true” tariff water in many cases is less than half of the binding overhang. For example, Latin American countries’ applied tariffs could be raised by an average of more than 30 per cent without breaching WTO obligations. However, when PTA commitments are taken into account, this limits the potential tariff increase by about half ( per cent).
0 10 20 30 Percent
W.Asia & N.Africa
Transition Ec.
Sub Saharan Africa
South Asia
Latin America
East Asia
Developed Countries
Tariff Water and
True Tariff Water (2012)
Tariff Water True Tariff Water
CHN
IDN TWNRUS^ KOR^ MYS^ PHL
ARG
BRA
CHL
PER MEX^ COL
VEN
ISR^ TUR^ EGY
IND
PAK
NGA
ZAF 0
10
20
30
40
50
True Tariff Water (%)
0 20 40 60 Tariff Water (%)
East Asia Transition Ec. Latin America W.Asia & N.Africa South Asia S.S. Africa Developed Countries