Update: EC’s market access claims

In his letter to Member States[⇒ related story], Pascal Lamy justifies the Commission’s call for a ‘blended formula’ for market access reforms in this way: bq. The average applied farm tariff in the EU is 10.5%, while Brazil’s tariff is 30% and the tariff among developing countries is 60%. Approaches on how to improve access to agricultural markets differ widely, often reflecting the fact that tariff structures are so different among members. This is why a compromise between extreme positions is inevitable. On the surface, this sounds reasonable and practical. But it ain’t so. That “10.5%” average tariff on EU farm imports is a number calculated by averaging the weighted import tariff on thousands of tariff lines. The weighting increases or decreases the contribution of each tariff line to the overall average in proportion to the volume of imports under that tariff line. It’s a standard trade statistical tool that attempts to ensure that the average reflects the level of tariff where imports are actually taking place. But weighted averages have the unfortunate characteristic of downplaying the presence of highly protective tariffs. In a tariff schedule such as that of the EU where there are a number of very high ‘peak’ tariff rates dispersed among a larger number of lower rates, the ‘peaks’ tend to disappear in the calculation of the weighted average. The highest tariffs reduce the volume of imports in the markets that they protect and therefore reduce the contribution that tariff line makes to the calculation of the average.

Wheat 77 ne
Barley 97 ne
Beef 45 77
Sugar 24 38
Butter 130 19

ne = not estimated

There are a large number of these ‘peaks’ in the EU’s agricultural tariff that offer protection that is far greater than the level needed to completely prevent imports. This is, in part, a result of the way that non-tariff barriers were turned in to tariffs in the last round of WTO negotiations. The use of a ‘blended formula’ could allow the EU (and others) to avoid real reform of their agricultural protection, which is much higher in practice than the somewhat phoney average of 10.5% suggests. The table at left shows a more realistic picutre of agricultural protection. It shows estimates of the minimum cuts to bound tariff rates (in %) that would have to be made before any additional imports would occur in major food markets in the EU and USA. It is taken from “Agriculture Negotiations: the way forward from CancZn(PDF file about 100k)”:http://abareonlineshop.com/product.asp?prodid=12610, a publication of the Australian Bureau of Agricultural and Resource Economics (ABARE) that is available for free download.

No Comments

Leave a Reply

Your email is never shared.Required fields are marked *