MEASURES AFFECTING THE
MOVEMENT OF GOODS
The most traditional focus of a trade ministry is on
those policy instruments that regulate the movement
of goods at the border. Tariffs are the most obvious of
these tools, but they are of diminishing importance in
many markets. Other matters affecting the movement
of goods, such as customs procedures and basic
infrastructure, are increasingly critical determinants of
countries’ export competitiveness.
1. Tariffs
Apart from exceptional cases such as Hong Kong
(China), virtually all countries impose tariffs on imports.
Some also employ export taxes, but these tend to be
applied only to raw commodities that are exported by
certain developing countries. Countries sometimes
impose additional taxes, fees and other charges on
imports, such as those associated with the processing
of merchandise by customs officials. For the sake
of simplicity, only traditional tariffs on goods will be
examined here.
Tariffs have been the most important tool of trade
policy for centuries, and in many countries they remain
a significant source of government revenue.
The legal
commitments that some developing countries now
make to reduce or even eliminate tariffs, whether
on a bilateral or multilateral basis, are a relatively
recent development. During most of the GATT period
(1947–1994) few of these countries were contracting
parties to the agreement, and most of those that were
in GATT made minimal commitments. Most of their
tariffs were unbound (i.e. there were no upper limits
placed on the levels of their tariffs), their bound tariffs
typically had a great deal of “water” in them (i.e. the
bound level was well above the actual level at which
tariffs were applied), and they rarely signed on to the
non-tariff agreements emerging from a GATT round.
That all changed in the Uruguay Round (1986–1994),
in which most developing countries made significant
commitments. Those negotiations, which coincided
with the pro-market Washington Consensus and
transformed GATT into WTO, also introduced the
“single undertaking” as the basis for multilateral
negotiations. That rule requires that all WTO members
sign on to all of the agreements that emerge from a
negotiating round. Commitments have been even
deeper for those countries that acceded to WTO after
1995. Beyond their multilateral commitments, many
developing countries have negotiated RTAs with one
or more of the major economies. These agreements
generally provide for the phase-out of most tariffs
imposed on qualifying imports from partners to the
agreement.
The net result is that average tariff rates today are
much lower than they were in past generations, both
for developed and developing countries, but those
averages mask significant variations among countries.
This can be appreciated from the data in tables 10
and 11, which show the average most favoured nation
Table 10. Relationship between non-agricultural tariffs and income, 2014 (Average GDP per capita for non-oil developing
countries)
Sources: Average tariffs from WTO (2015); GDP per capita calculated from World Bank data at http://data.worldbank.org/
indicator/NY.GDP.PCAP.CD.
Notes: Tariffs are simple averages for applied MFN rates. Data for some countries refer to 2013.
Low MFN tariffs
5.0% or less
Medium MFN tariffs
5.1–10.0%
High MFN tariffs
10.1% or more
Africa Income: $9 117
Number: 1
Income: $3 453
Countries: 9
Income: $1 230
Countries: 32
Americas Income: $4 588
Countries: 7
Income: $9 185
Countries: 16
Income: $11 170
Countries: 6
Asia and the Pacific Income: $31 126
Countries: 7
Income: $5 979
Countries: 13
Income: $2 385
Countries: 8
Total Income: $17 274
Countries: 15
Income: $6 731
Countries: 38
Income: $2 727
Countries: 46
III. INSTRUMENTS OF TRADE POLICY 25
(MFN) tariffs imposed by non-oil developing countries
on non-agricultural and agricultural products. As a
general rule, the data confirm an inverse relationship
between duty rate and income: Tariff barriers tend
to be higher in the poorer countries and lower in the
richer countries. Incomes are more than six times
greater in the countries where average tariffs on nonagricultural tariffs are 5 per cent or less, as compared
to those where these tariffs are greater than 10; the
income multiple is larger still (7.7 times) when it comes
to tariffs on agricultural products.
These observations speak to important issues in the
debate over trade and development. The data tend
to follow the sequence whereby countries appear to
calibrate their market-opening initiatives to the pace
of their development. A proponent of free trade might
go on to argue a more direct causation: The countries
that open their markets the most are the ones that
reap the greatest benefits. That may be too great a
leap to make on the basis of a small amount of data,
however, especially when considering the spottiness
of the apparent pattern. The correlation between
wealth and openness is not supported, for example,
by the observations for developing countries in the
Americas. Incomes in that region show a positive
relationship with tariffs; this is especially true for nonagricultural tariffs, where incomes in the high-tariff
countries are more than twice as high as they are in the
low-tariff countries. A few outliers account for some,
but certainly not all, of the difference. While GDP per
capita in the Bahamas is an impressive $22,897, the
average applied MFN tariffs in that country are 37.3
per cent for non-agricultural goods and 21.8 per cent
Table 11. Relationship between agricultural tariffs and income, 2014 (Average GDP per capita for non-oil developing
countries)
Source: Average tariffs from WTO (2015); GDP per capita calculated from World Bank data at http://data.worldbank.org/
indicator/NY.GDP.PCAP.CD.
Notes: Tariffs are simple averages for applied MFN rates. Data for some countries refer to 2013.
Low MFN tariffs
5.0% or less
Medium MFN tariffs
5.1–10.0%
High MFN tariffs
10.1% or more
Africa Income: $9 117
Number: 1
Income: $4 187
Countries: 5
Income: $969
Countries: 36
Americas Income: $6 122
Countries: 1
Income: $7 570
Countries: 5
Income: $8 749
Countries: 24
Asia and the Pacific Income: $42 328
Countries: 5
Income: $2 402
Countries: 5
Income: $4 775
Countries: 17
Total Income: $32 411
Countries: 7
Income: $4 720
Countries: 15
Income: $4 234
Countries: 77
for agricultural products. By contrast, in Haiti ($829
per capita income) these average tariffs were 4.2 per
cent and 8.2 per cent , respectively.
Beyond reviewing a country’s own tariff profile, and
considering whether changes should be made to
it, a TPF should examine in depth the tariff barriers
that the country faces in its exports to actual and
potential partners. To start with, what kind of access
does the country enjoy to these markets? Is that
access on a simple MFN basis, or is it preferential?
Are those preferences autonomous on the part of
the partner country (e.g. through a programme such
as the Generalized System of Preferences), or are
they reciprocal (i.e. in an RTA)?7
Are the preferences
comprehensive, or are important products and sectors
excluded?
[T]he constraints and problems that inhibit export growth
… arise in production, in moving goods and services
across the border, and in export markets. A trade
policy framework must therefore identify and tackle the
constraints and problems faced by exporters at every
stage of this process of production and distribution of
goods and services for export.
Trade Policy Framework: Zambia (2016)
TPFs that review the market access enjoyed by
developing countries, and especially the least
developed countries, typically find that tariff barriers
in the markets of developed partners are low or even
non-existent for many products. This has long been
true for raw materials, and today many manufactured
exports of developing countries are eligible for reduced26 TRADE POLICY FRAMEWORKS FOR DEVELOPING COUNTRIES: A MANUAL OF BEST PRACTICES
duty or duty-free entry through either preferential
programmes or RTAs. There may nonetheless remain
some important exceptions to that general rule, either
for products that the country now exports or that it
might export in the future. These exceptions need to
be identified, quantified and analysed. A TPF should
also review the costs and benefits of seeking to reduce
or eliminate these remaining tariff barriers, whether
through the negotiation of new trade agreements or
through improvements to a partner’s preferential trade
programmes. Those improvements might also entail
reforms to a programme’s rules of origin, which are
often written in ways that are difficult for developing
countries to meet.
A TPF will sometimes find that it is in a country’s
interest to undertake its own tariff reforms on an
autonomous basis. That can be based on assessment
of whether the existing tariffs act as an impediment to
the establishment or operation of national industries,
typically by raising the costs of the capital equipment
or inputs that they need to import. The TPF for
Zambia, for example, proposed that applied MFN
tariffs on most goods should be maintained at the
current rates (ranging from zero to 25 per cent ), but
that consideration should be given to binding tariffs on
capital goods at zero so as “to allow firms to invest in
new plants and equipment” (p.53)
.
If a TPF proposes that a country seek to reduce
or eliminate a tariff imposed by a partner country,
it should do so in the context of a larger plan. It is
generally not practical to ask that a specific partner
eliminate a tariff on a single product, unless there are
special mechanisms in place that provide for just such
a move.8
If the country concerned aims to negotiate
for the elimination of certain tariff barriers, it will
typically need to do so either in WTO negotiations or
in an RTA. If the TPF goes in that direction, it ought to
be comprehensive in identifying the country’s offensive
and defensive interests in a negotiation. Offensive
interests are those commitments that a country seeks
from its negotiating partners, while its defensive
interests are shown in the country’s reluctance to
make concessions in sensitive areas. The offensive
interests of a country will typically be concentrated
in those sectors for which it is more competitive than
its partner, but that partner’s barriers are relatively
high. Conversely, these may be the very same areas
in which the partner’s defensive interests are highest.
To find some arrangement that satisfies both sides,
negotiators must exercise the art of compromise.
Before these negotiators can even begin, however,
they must first know their own interests — as well as
those of their partner — in detail. That requires, as
a first step, that they be armed with the necessary
data on trade and the tariffs that each side imposes.
A TPF should not only conduct such a review for any
negotiations that it may contemplate, but also make
recommendations designed to ensure that the country
can perform similar calculations in any negotiations in
which it may be engaged in the future.
