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…

No Comments

Leave a Reply

Your email is never shared.Required fields are marked *