Presentation on theme: "Non-Agricultural Market Access Pakistan Institute of Development Economics."— Presentation transcript:
Non-Agricultural Market Access Pakistan Institute of Development Economics
Background Reduction in tariffs and non-tariff barriers on industrial goods was at the core of multilateral trade negotiations under the GATT. Over the past decades, multilateral trade negotiations have achieved significant reductions in tariffs. The process of liberalization has led to: –A substantial reduction in overall tariff barriers –A commitment to keep tariffs below a given level (binding tariff lines) –Greater transparency of trade impediments through conversion of quantitative restriction to tariff barriers. –A legal framework to minimize the use of policies and measures to unfairly distort trade, and –A set of measures and safeguards to provide flexibility to developing countries and least developed countries.
Background (cont.) Given the current extent of protectionism still prevalent in both developed and developing countries, there is still a great deal of room for further trade liberalization. Therefore, the issue continues to remain central to the negotiations agreed in Doha. Most countries support this mandate, though many LDCs are concerned about –Loss of government revenue –Potential weakening of their competitiveness –Expected erosion of preferential access margins.
Background (cont.) From Doha to the July Package Modalities –Formula approach based on bound tariffs Binding –Unbound tariffs to be bound at twice the average rate in each country Sectoral Elimination –Complete elimination of tariffs in seven sectors Electronics and electrical goods; fish and fish products; footwear; leather goods; motor vehicle parts and components; stones, gems and precious metals. Special and Differential Treatment –Longer implementation periods. Non-tariff Barriers –Proposals to identify, categorize and select NTBs that fall within the NAMA negotiating mandate. Credit for autonomous liberalization
NAMA Negotiations The objectives of NAMA negotiations include: –Reduction or elimination of: Tariff peaks and high tariffs Tariff escalation Non-tariff barriers Increased market access on products of export interest for developing countries.
Major Issues of NAMA Tariff Peaks Tariff Escalation Non-Tariff Barriers Binding Coverage
Figure: Trade Weighted Bound and Applied Average Industrial Tariffs Source: UNCTAD and WTO database.
Figure: Simple Bound and Applied Average Industrial Tariffs Source: UNCTAD and WTO database.
Tariff Peaks Tariff peaks are high tariffs usually defined as tariffs that are three times the national weighted average. The Problem of tariff peaks occurs largely in the following sectors –Food industry –Textiles and clothing –Footwear, leather and travel goods –Automotive sector and a few other transport and high technology goods.
Tariff Peaks (cont.) Food Industry The food industry is a major area where tariff peaks are widespread and high in major developed countries even after the implementation of Uruguay Round concessions. Tariff peaks and a range of additional measures extend far beyond the initial processing stages in a large variety of industries. –The EUs food industry accounts for 30% of all tariff peaks ranging (with some exceptions) from 12% to 100%. –In the US, the food industry accounts for one-sixth of all tariff peaks and these also fall mainly into 12%-100% range.
Tariff Peaks (cont.) Textiles and Clothing In the major textile importing countries like the US, EU and Canada, large proportions of clothing and textiles imports are subject to high tariffs. Most tariff peaks are in 12-32% range. These high tariffs are also combined with quantitative restrictions.
Tariff Peaks (cont.) Footwear, Leather, and Travel Goods. Footwear of various types is still protected by high tariffs in most developed countries. Post Uruguay Round MFN rates are close to 160% in Japan, 37.5-58% in the US and 18% in Canada. MFN duties remain relevant, as General System of Preferences (GSP) benefits are limited in this sector.
Tariff Peaks (cont.) Automotive, Transport and Electronics With the exception of Japan and the Republic of South Korea, level of protection for one or the other branch of the transport industry is rather high. In the developed countries, MFN tariff protection is more selectively applied in the automotive and transport sector. In addition, various developed countries apply high tariffs on TV receivers, TV picture tubes and some other high technology products. It is important for developing countries to ensure that a tariff reduction approach addresses not only average tariff rates but also tariff peaks on key sectors of export interest to them.
Figure: Distribution of Tariff Peaks in Applied Tariff Rates Source: UNCTAD and WTO database.
Tariff Escalation Tariff escalation occurs when tariff levels increase with the degree of processing Tariff escalation is clearly observed in all groups of countries as tariffs are higher for intermediate and final products Among developing countries there is an escalation between raw materials/low technology products and intermediate technology goods, tariff rates diminish between intermediate goods and final products. Tariff escalation in developed countries may prevent the development of value-added industries in developing countries where they might more suitably be located.
Figure: Tariff Escalation of Weighted Applied Tariff on Industrial Products Source: UNCTAD database.
Non-Tariff Barriers Non-tariff barriers are the set of trade distorting measures and policies other than tariffs. These include: –Quantitative restrictions –Administrative procedures and unpublished government regulations and policies –Market structure and –Political, social, and cultural institutions There are committees in WTO on technical barriers to trade, sanitary and phyto-sanitary measures and trade facilitation, whose objective is to ensure that the various non-tariff barriers are reduced.
Non-Tariff Barriers (cont.) The Doha Ministerial Conference rightly calls for removal of all the non-tariff barriers on industrial products as they are least transparent and have major distortionary impact. Important non-tariff barriers on the export interest to developing countries are: –Use of licensing procedures particularly automatic licensing procedures –Technical regulations applicable to such products as electric machinery, chemicals, and pharmaceutical products –Contingency protection measures such as safeguards and anti- dumping countervailing measures, and –Quantitative restrictions on imports particularly those which apply to Textiles and Clothing sector.
Binding Coverage Bound tariff lines are lines on which there is a commitment not to increase tariffs above a specified level. Tariff bindings make trade more predictable The binding coverage (% of tariff lines that are bound) among developed countries is almost complete However it is much lower in developing countries, and for some LDCS it is as low as 10%. Proposals within multilateral trade negotiations have called for increased binding coverage, especially among developing and least developed members. LDCs are concerned that increasing binding coverage can lead to less flexibility and higher level of obligations in future rounds of tariff reductions.
Guidelines for NAMA Negotiations Tariff reduction modalities in NAMA negotiations should at least have the following features: –Effectiveness –Equity –Flexibility –Simplicity –Transparency
Table: Measures of Dispersion of Weighted Averages of Applied Tariffs on Industrial Products Group of Countries Weighted Average Applied Tariffs Standard Deviation Coefficient of Variation Developed3.0 1.00 Developing8.05.60.70 LDCs18.104.22.168 Source: UNCTAD and WTO database.