PLAN OF PROTECTIVE MECHANISMS OF TARIFF RULES

BASICS TALKS BENEFITS

Foreign trade policy can Trade policy has been the The benefits derived from
provide powerful incentives subject of intenseincreased international
or disincentives to international negotiationstrade give developing
production, through its for decades. Since the countries an interest in
influence on the prices and disastrous tariff wars of the promoting it and ensuring
quantities of competing 1930s, the purpose of that international trade
products imported into the negotiations has been the rules are fair. However,
country and through its progressive dismantling of since the conclusion of the
effects on the domestic barriers to international Uruguay Round, developed
prices received for exports. trade. There is a consensus countries have increased
Policies that make import that high tariffs not only their exports more than
prices more expensive in stimulate retaliatory
developing countries, and
the domestic market are measures on the part of concerns have been raised
said to provide economic trading partners, but also about the continuation of
protection. The main lead to inefficiencies in the agricultural protection
instruments of trade policy productive structure of the measures in developed
are tariffs and quotas on country itself, by removing countries. Issues of this
the import side, and various the pressure to increase nature figure prominently in
types of incentives when it productivity and reallocating the current round of
comes to exports. In some productive resources to international trade
cases, a combination of branches or morenegotiations.
quotas and tariffs (known competitive products. Tariffs on manufactured
as “tariff quotas”) is used, Many developing countries goods are currently at
under which tariffs are have benefited from the modest levels in most
increased when imports increase in international industrialized countries and
exceed a set amount. trade in recent decades. in a growing number of low-
For example, Eugenio Díaz and middle-income
Bonilla and Lucio Reca countries. Many of these
have pointed out that Latin tariffs are 5 to 10 percent.
America and the Caribbean By contrast, agricultural
have enjoyed for decades a tariffs are above 40 percent
positive net agricultural on average, with tariff
trade balance, which in peaks (mega tariffs) of
1996 had reached US$20.2 more than 300
billion. percent...effectively
blocking trade....
The United States has
mega tariffs on sugar and
dairy products, and Japan
has mega tariffs on grains,
sugar and dairy products.
TARIFFS IN DEVELOPING COUNTRIES
While tariff systems provide Because of the latter, it is now The second basic principle for
economic protection, they can an accepted principle that tariff systems is that their
be a mixed blessing for tariff levels should not be high rates should be relatively
domestic producers. First, in general and, if they are, a uniform between sectors and
exporters generally suffer program should be adopted between products. In order
from tariffs, as they raise the to progressively reduce them. for countries to fully exploit
 costs of their inputs directly
or indirectly, but do not allow
them to increase the price of
their exports to the same
extent. This was well
documented for the case of
Colombia in a classic study by
Jorge García García. Second,
even subsectors that compete
with imports can be harmed
by tariff systems if their rates
are not uniform and are
higher for their inputs than
for the products that compete
with their production.
Free trade agreements
typically include clauses to
achieve these objectives. As
noted, in the case of NAFTA,
up to 15 years have been
granted to eliminate some
agricultural tariffs, but the
agreement for their eventual
elimination has been
compromised in the treaty.
their comparative advantages
and thus maximize their
growth prospects, it is very
important to align domestic
relative prices with
international relative prices as
much as possible. There are
several reasons for
standardizing tariffs as much
as possible and not granting
tariff exemptions on foods.

EXPORT INCENTIVES FOREIGN TRADE RESTRICTIONS FOOD AID POLICIES

WTO rules generally discourage Foreign trade policy often A subset of foreign trade policies concerns
export subsidies, as do tariffs. encompasses tariff systems; When food aid. Such aid has been criticized on
They have been a major topic of treated separately, in addition to the grounds that it weakens incentives for
discussion among major trade agreements, it includes local producers. In the long term, recipient
industrial nations and the goal of measures concerning the degree of countries may benefit more from financial
international negotiations has openness of international trade, that aid than from food aid, using the funds to
been to gradually reduce them. is, the elimination of controls on enable poor families to purchase their food
However, in view of the
aforementioned bias of the WTO
regime against exports and its
importance for developing
countries, it is worth considering
measures that could encourage
them in the context of economic
policies. healthy girls. Many
countries have adopted forms of
export incentives, through tax
exemptions and refunds of duties
paid on imported inputs.
imports and exports. Such restrictions
take various forms, including import
quotas, import and export licenses, in
some cases export prohibitions,
restrictions on the availability of
foreign exchange, and sometimes
freely interpreted phytosanitary
requirements. Other, more subtle
forms of import control are the
requirement to deposit foreign
currency in the banking system well in
advance of imports and increasing the
amount of pre-deposit required.
requirements on the domestic market. Put
bluntly, food aid is a product of an era in
which governments in both industrialized
and developing countries were expected to
intervene on a large scale in the production
and marketing of food.... The most telling
challenge to the notion that food is more
necessary than any other form of aid arises
from the now generally accepted view that
poverty, and not the supply of food or the
poor performance of food markets, is the
root cause. of hunger and malnutrition.... If
the cause of hunger is not a lack of food on
the market, the choice between food aid
and financial aid can be based solely on
efficiency calculations.