Barriers To Trade: Introduction and Tariff Measures P. 139 - 155

Barriers to Trade: Introduction and
Tariff Measures
The World Trading System
p. 139 - 155
Professor Thomas Cottier
Summer Course 2010
Day 2 Session 2
Typology and Instruments of

Trade Barriers
• Tariffs (Customs • Monopolies
• Technical barriers to
Duties) trade
• Internal duties and • Other regulatory
differences
levies • Rule of law deficits
• Quantitative • Cartels and abuse of
dominant position
restrictions (OMAs)
• Other informal
• Quotas barriers to trade
(consumer
• Subsidies preferences)
7/11/2010 worldtradeinstitute.ch 2
Generations of Trade rules

addressing Barriers
• 1. Tariffs and QRs (Border measures)
• 2. Product and process requirements
(technical and health standards)
• 3. Domestic Market Regulation
• production subsidies and other payments
• 4. Regulation of Competition (Services,
IPRs, Government procurement)
1
A General Approach to Border
Measures
• Two categories of trade policies must be clearly
distinguished in international trade regulation:
– Border measures (Arts. II and XI of the GATT)
– Internal restrictions (Arts. III of the GATT)
• General and common goal for all border
measures?
– A prima facie answer: to enhance domestic
production in respect of foreign competition.
– What about other aims that might also be
pursued through these instruments?
Policy Purposes
– Fiscal revenues through tariffs ?
– Food security and macroeconomic goals
through quantitative restrictions?
– Absolute restrictions by reasons of health,
morals, exhaustible resources, etc?
– Taking advantage of market power through
VER’s? (Export cartels)?
⇒border measures may respond to different
policy purposes
Common Effect of Border Measures
• A common effect of Border Measures is

that:
– a) they reduce the impact of foreign
competition in the domestic market (on the
importing side) and raise costs for consumers
– b) they reduce the participation of domestic
production in the international market (on the
exporting side)
2
Classification
– Border measures may consist in:
• Tariffs: tax imposed due to import/export of a
product
• Non – tariff barriers
– Tariffs are price-based restrictions that may be:
• Ad valorem (a ratio on the value of the merchandise)
• Specific (specific amount per unit, irrespective of
the price)
• Mixed
• Tariff quotas
Types of non-tariff border measures

– Non-tariff barriers may
• prohibit imports or exports (no volume at all is
allowed to enter or leave the market– i.e. by reasons
of health, security, morals, exhaustible resources,
etc)
• establish quantitative restrictions on imports
(quotas) and exports (VERs)
• Consist of authorization and monitoring procedures
(e.g. PIC in the Basle Convention)
Tariffs and Customs Valuation
3
Tariffs and domestic policies (I)
• Tariffs as fiscal revenues:
– as taxes, they are a source of financing public budget.
• When fiscal income primarily relies on others sources than
tariffs (i.e. sales or income taxes), the government has
more margin to reduce tariffs or to use them as trade policy
tools.
• Developed countries ( 4% for industrial products –
weighted average tariffs)
• Developing countries (higher government
dependence on tariffs and more difficulties to give
up tariff levels)
A tariff for domestic policies (II)

– Tariffs as industrial policy instruments
• A tariff as a tax equivalent is useful to create
positive or negative incentives, penalizing or
rewarding private behavior.
• Therefore, a tariff might be used to
discourage consumption of imports, and
consequently, to enhance domestic
production.
Tariff classification and the

Harmonized System (I)
• Tariffs are administered in every country through
their own Tariff Schedule
• Tariff schedules ought to be standard in order to
facilitate the international exchange of goods and
standard custom procedures
• The Convention on the Harmonized Commodity
Description and Coding System of 1983
constitutes the most important international
endeavor to harmonize national tariff
nomenclatures
4
The WTO commitments with respect
to tariffs
• Tariffs are the prime legitimate trade policy
instrument in WTO (not CU/ FTA!),
subject to following obligations:
• GATT Article II and the schedule of
concessions:
“…treatment no less favorable than that provided
for in the appropriate Part of the appropriate
Schedule annexed to this Agreement.”
– Incorporation of the Schedule as integral part
7/11/2010
of the GATT worldtradeinstitute.ch 13
Tariff Bindings (I)

• Bound and unbound tariff lines in the
schedule of concessions
• Developed countries (i.e. Switzerland: 99% of all its
tariff lines; Canada: all its tariff lines with some
exception on petroleum, electricity, boats and ships)
• Developing and least developed countries (i.e.
Kenya: 15.1% of all tariff lines; Mauritius: 14.6% of
all its tariffs lines)
• Conditions
• Implications of bound/unbound lines
Applied and bound rates in developed

and developing countries
(manufactured goods)
Weighted average of rates
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
European
Argentina
Philippines
Australia
United
States
India
Brazil
Japan
Union
applied bound
Source: Developing Countries, J. Francoise.
5
Tariff reductions in the industrial
sector (developed countries)
Weighted Average Tariffs
45%
40% Foundation of GATT

40%
Geneva 1947 (23 GATT
35%
Annecy 1994 (13) TARIFFS
30% 30%
Average Tariff
Torquay 1950-51
25% 25% (38)
Geneva 1956 (26)
23%
20%
Kennedy-Round
15% Dillon-Round
15% 1964-67 (62) Uruguay-Round
1960-62 (26) Tokyo-Round
10% 1973-79 (99) 1986-93 (117)
10%
5% 6.4%
4%
0%
1940 1950 1960 1970 1980 1990 2000
Year Source: GATT
Tariff Bindings (II)

• Exemption from tariff rates exceeding
scheduled rate (Art. II:1:b, c)
• Deconsolidation and compensation for
bound tariffs (negotiations)
• Withdrawal of concessions of unbound
tariffs
• Taxes and fees untouched (Art. II:2)
Border Tax Adjustments

Article II: 2 states: “ Nothing in this Article shall
prevent any contracting party from imposing at
any time on the importation of any product:
a) a charge equivalent to an internal tax
imposed consistently with the provisions of
paragraph 2 of Article III in respect of the like
product or in respect of an article from which
the imported product has been manufactured or
produced in whole or in part;”
What is the logic of this provision?
6
Applied Rates and Tariff Quotas
• Members are free to operate and fluctuate
tariff rates within the bound rate → applied
rates
• Applied rates often much lower than bound
rates
• Applied rates often combined with tariff
quotas based upon quantities imported in a
given period of time
Tariff Negotiations (I)

– Aimed at:
• the reduction of duties and tariff quotas and
conditions
• the binding of duties at then existing levels
or,
• obtaining undertakings that individual duties
or the average duties on specific categories
of products shall not exceed specified levels.
• Bindings against low duties or duty-free treatment
shall, in principle, be recognized as a concession
equivalent in value to the reduction of high duties
Tariff Negotiations (II)

Sectoral negotiations by group of countries (Uruguay Round)
– Unilateral reductions (“all but arms” proposals EC for
LLCDs)
GATT Article XXVIII:
– Bilateral approach: requests/offers
• product by product approach
– Formula: linear cut method
Z= AX /(A+X) ; where X = starting tariff
Z= resulting tariff
A= a coefficient
– Doha Round: Four band of tariff cuts in agriculture
7
Modification of Schedules (I)
• GATT Article XXVIII – Modification of

Schedules of Concessions
• A contracting party may periodically modify or
withdraw a concession included in the schedule of
concessions, subject to negotiating with any
contracting parties that have:
– a) an initial negotiator right
– b) a principal supplying interest
– c) a substantial interest
Modification of Schedules (II)

• Under Article XXVIII: 2 these negotiations must
pursue the maintenance of the equilibrium of
concessions among the concerned contracting
parties (Principle of Reciprocity?)
• The Understanding on the Interpretation of Article
XXVIII regulates the procedures for determining
the right of preeminence to negotiate...
• ... and establishes an additional criteria to Article
XXVIII as to determine the principle supplying
interest and the initial negotiating right
Issue: New Carbon Tariffs?

• Would it be possible to increase tariffs on
products, the production of which is highly
CO2 intense? (cement, carbon generated
electricity, aluminum, steel?) and to
compensate on products produced by
renewable energies?
• What are the pertinent issues?
8
The Agreement on Customs
Valuation (I)
• Basis: Art VII GATT, as amended
• The Agreement on Customs Valuations states the
current rules to determine the custom value of
imported goods, in order to subsequently
determine the duty to be paid on an imported
good.
• It is applicable in the case of ad valorem duties
⇒obligation to operate ad valorem duties
under GATT?
The Agreement on Customs

Valuation (II)
• The rules on Customs Valuation are essential to
preserve the effect of tariffs as trade policy
instruments, otherwise by imposing arbitrary
rules, determining fictitious value, the effect of
tariff reductions and bindings may be unilaterally
nullified or impaired
• The Agreement contemplates the actual value of
the merchandise – the transaction value - as the
primary criterion as to determine the value of
imported goods (Art. VII, Art. 1)
• It excludes officially defined indicative, normal or
official prices for valuation (schemes)
Thank you for your attention!

Barriers To Trade: Introduction and Tariff Measures P. 139 - 155

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Barriers To Trade: Introduction and Tariff Measures P. 139 - 155

Uploaded by

Copyright:

Available Formats

Barriers to Trade: Introduction and

Typology and Instruments of

Generations of Trade rules

Common Effect of Border Measures

• A common effect of Border Measures is

Types of non-tariff border measures

Tariffs and Customs Valuation

A tariff for domestic policies (II)

Tariff classification and the

Tariff Bindings (I)

Applied and bound rates in developed

40% Foundation of GATT

Tariff Bindings (II)

Border Tax Adjustments

Tariff Negotiations (I)

Tariff Negotiations (II)

• GATT Article XXVIII – Modification of

Modification of Schedules (II)

Issue: New Carbon Tariffs?

The Agreement on Customs

Thank you for your attention!

You might also like