Industrial tariffs and non-tariff barriers (NTBs)
What is a tariff?
A tariff is a tax on imported products. Tariffs
are considered a protectionist measure, as they increase
the price of imported goods in a domestic market.
Lowering tariff barriers
The lowering of tariff barriers has been a central
element of successive rounds of GATT - now WTO - negotiations
but they remain in place across all industries in both developed
and developing countries.
The Community is a customs union. All Member States are legally
obliged to apply a common external tariff to goods imported
from outside the EU. The rates in the common customs tariff
represent WTO bindings and were agreed by the EU in multilateral
trade negotiations.
Despite enormous progress towards reducing industrial
tariffs since 1945, there is significant scope for further
reductions and for increasing the certainty of trade through
increased bindings and simplified tariff structures.
Tariff escalation
Tariff escalation remains prevalent in the tariff
schedules of many countries. Tariffs escalate when they
are imposed at increasingly higher levels on semi-processed
and processed products. This escalation impedes developing
countries which export unprocessed products and raw materials
from diversifying
into downstream stages of processing.
Tariff peaks
Tariff peaks (tariffs in excess of 15%) in developed
countries can be particularly restrictive. Even after full
implementation of the Uruguay Round, bound tariffs still
exhibit wide variations both between countries and between
sectors. Average bound industrial tariffs are under 4% in
Quad countries (EU, US, Canada, Japan), 14% in other OECD
countries, and 39% in a representative sample of non-OECD
countries. In OECD countries, tariff peaks remain in a number
of sectors such as clothing and textiles, footwear and motor
vehicles. In non-OECD countries tariffs in excess of 15%
typically cover as much as three-quarters of tariff lines.
A number of countries still have relatively few tariff bindings. Some others maintain bound rates substantially
above applied rates, creating considerable uncertainty for traders. As a result, even quite significant cuts in
such bound rates will have little impact on market access.
Many countries continue to levy higher tariffs
on consumer goods than on capital goods, transferring income
from consumers to producers. In the EU, for example, tariffs
on consumer goods are more than five times higher than on
capital goods.
WTO Doha Development Agenda
Following the launch of the WTO Doha Development
Agenda, these issues are being addressed in the multilateral
negotiation on market access for non-agricultural products.
Paragraph 16 of the Doha Ministerial Declaration states
that:
"We agree to negotiations which shall aim,
by modalities to be agreed, to reduce or as appropriate
eliminate tariffs, including the reduction or elimination
of tariff peaks, high tariffs, and tariff escalation, as
well as non-tariff barriers, in particular on products of
export interest to developing countries. Product coverage
shall be comprehensive and without a priori exclusions.
The negotiations shall take fully into account the special
needs and interests of developing and least-developed country
participants, including through less than full reciprocity
in reduction commitments, in accordance with the relevant
provisions of Article XXVIII bis of GATT 1994 and
the provisions cited in paragraph 50 below. To this end,
the modalities to be agreed will include appropriate studies
and capacity-building measures to assist least-developed
countries to participate effectively in the negotiations."
The European Commission considers that:
"The negotiating mandate reflects the essential
objective of reducing and where possible eliminating tariffs.
It meets the aim of no a priori exclusions from the
exercise, while focussing also on the reduction of peak
tariffs and high tariffs, in both of which areas we have
clear export interests, as do many other WTO members. The
mandate also specifically recognises the need to take in
account the interests of developing countries, in a number
of ways, notably through targeting for reduction those products
of export interest to developing countries, and the notion
of ‘common but differentiated responsibility’ - the concept
that the contribution of developing countries to the reduction
exercise should be commensurate with their abilities and
needs. In sum the mandate for tariff negotiations holds
the prospect of bringing significant trade and growth gains
for all WTO members."
For the purposes of the Doha Round the WTO General
Council has set up a Trade Negotiations Committee (TNC)
to which the chairmen of various negotiating groups report.
The Group handling the negotiations on non-agricultural
tariffs is the Negotiating Group on Market Access (NGMA).
The fifth WTO Ministerial meeting in Cancun, Mexico on 10-14
September 2003 decided that the NGMA should agree the modalities
(i.e. a road map) for a multilateral agreement leading to
tariff reductions by December 2005 – the date of the WTO
Ministerial meeting in Hong Kong.
A representative cross-section of proposals on
tariffs have been submitted by WTO members. All the texts
contain a range of ideas in which a formula-approach has
emerged as a common thread. The submissions can be viewed
on the WTO website
(key search prompt, enter TN/MA in the document symbol box,
press search button).
It is estimated by the Tinbergen Institute that
a fifty percent cut in applied industrial tariffs by all
WTO countries could yield approximately
$200 billion global income gain per year.
UK aims remain unchanged. Our overarching objective
in the negotiations is substantial reduction and where possible
elimination of industrial tariffs to give significantly
improved access to third-country markets, and to provide
a stimulus to trade between developing countries.
Non-tariff barriers (NTB's)
At Doha in November 2001 WTO members also agreed
inter alia to negotiations aimed at the reduction or elimination
of non-tariff barriers. As with tariffs a representative
number of proposals, including one from the EC, have been
submitted. A basic difficulty in approaching NTBs is that
they are defined by what they are not since they consist
of all barriers to trade, other than tariffs, that alter
the prices of goods and levels of trade. Also NTBs cannot
be exhaustively defined. In his "Elements" Paper
the NGMS Chairman has proposed that all NTBs identified
will be considered categorising them into those a) to be
dealt with in the negotiating group; b) to be dealt with
under other DDA issues; c) relate to but are not covered
by other DDA issues and fall to other WTO bodies; and, d)
not covered by DDA issues but fall to other WTO bodies.;
and, d) not covered by DDA issues but fall to other WTO
bodies. In all cases there should be at least a report back
to the group on progress made.
Benefits of trade liberalisation
Trade liberalisation has the potential to enhance
prosperity across the world. Barriers to trade are costly.
Trade barriers in the form of tariffs distort domestic markets,
pushing up the prices faced by consumers and insulating
inefficient sectors from competition. They penalise foreign
producers and encourage the inefficient allocation of resources
both domestically and globally. Reducing tariffs will help
overcome these problems.
The UK has as much to gain from further liberalisation
as others. Reductions in tariffs will help us build on the
strong trading base we have already developed. It is in
our interests to see that the achievements of the post-war
era are not reversed, and that the process of liberalisation
continues.
UK interested parties who wish to be kept informed
of significant developments as the negotiations progress
over the next three years are invited to send an e-mail
to phil.walker@dti.gsi.gov.uk giving an electronic address.
Contact:
Bob Box
Tel: 020 7215 5057
Fax: 020 7215 2234
Email: robert.box@dti.gsi.gov.uk
Colin Wray
Tel: 020 7215 5059
Fax: 020 7215 2234
Email: colin.wray@dti.gsi.gov.uk
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