How deep do tariff cuts need to be?

Sup­pose all you want­ed to do was to reduce the aver­age legal rate of duty around the world (the bound rate in WTO-speak) down to the rate actu­al­ly being applied on aver­age for all prod­ucts? How much would you need to cut tar­iffs in order to do that? Such a cut would mean no actu­al change in the lev­el of tax­es col­lect­ed on doing busi­ness across bor­ders. It would leave today’s bar­ri­ers to imports and exports in place, so it would­n’t actu­al­ly change any­thing that mat­ters. But such a change would ensure that gov­ern­ments could not come up with any nasty sur­pris­es in future. The answer for agri­cul­ture is more than 80% — that is three times the cut agreed in the last round of nego­ti­a­tions. Even for man­u­fac­tures, the answer is 40%. The details are in a paper
by Kym Ander­son and oth­ers that is well worth skimming.

Depth of UR cut
Post-UR bound tar­iff rate (%)Post-UR applied tar­iff rate (%)Depth of cut
Pro­por­tion­al cut need­ed
Source: Fin­ger & Schuknecht (World Bank), 1999
(1) in bound tar­iff rate t (as % of 1 + t)
(2) need­ed in bound tar­iff rate t (as % of 1 + t) to bring it down to sector’s post-UR applied rate
(3) in bound tar­iff rate t (as % of t) to bring it down to region’s post-UR aver­age applied rate

On aver­age, then, the EU’s pro­pos­al to ‘go round again’ would not make any dif­fer­ence at all to agri­cul­tur­al pro­tec­tion lev­els. Sur­prise, surprise…

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