THE WTO NEGOTIATIONS ON INDUSTRIAL TARIFFS: WHAT IS AT STAKE FOR DEVELOPING COUNTRIES

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THE WTO NEGOTIATIONS ON INDUSTRIAL TARIFFS
WHAT IS AT STAKE FOR DEVELOPING COUNTRIES?

• Yilmaz Akyüz

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THE NAMA FRAMEWORK

• Full binding coverage means new commitments
  outside LA
• Tariff reduction Translating unilateral
  liberalization to multilateral commitments
• Harmonization across countries neglect of
  differences in levels of industrial development
• Uniform tariffs across product lines neglect of
  different needs of different industries and
  products (basics versus luxuries)

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COSTS AND BENEFITS OF NAMA

• Where do the promised gains to DCs come from?
  CGE Models
• Resource reallocation comparative advantage
• X and M would both increase no BOP problem
• Unchanged levels of employment of resources
• Adjustment costs recognized but assumed away
• Unemployment of resources
• Erosion of skills
• Destruction of equipment
• BOP problems
• Declines in tax revenues
• Beyond adjustment costs industrialization
• Can get stuck at the low-end of technology based
  on static comparative advantage
• Figure

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HISTORY OF INDUSTRIAL PROTECTIONISM

• Protectionism was the rule, free trade the
  exception until maturity
• When US per capita income was the same as average
  income in DCs today, its average tariff was 50
  per cent.
• Tariffs cuts came in Europe and US after 1950
  with industrial maturity (see tables 1-2, pp. 14
  and 18)
• But proliferation of NTMs, VERs and industrial
  subsidies.
• Tariffs do not move down constantly over time in
  the course of industrial development Figure on
  US.

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US Industrial Tariffs 1792-1980
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INDUSTRIAL DEVELOPMENT AND TARIFFS

• Stages of Industrial Development
• Dependence on primary commodities.
• Resource-based and labour-intensive
  manufacturing.
• Technology-intensive, high value-added products
• Sectoral pattern
• Early Stages Concentration/Specialization
• Intermediate Stages Diversification
• Maturity Concentration/Specialization

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Tariffs
MT
HT
LT
RL
Time
RL Resource-based and labour-intensive products.
LT Low-tech MT Medium-tech HT High-tech.
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TARIFF PATTERN

• Coexistence of very low and very high tariffs
• Sectoral tariff dispersion first rising then
  falling
• Tariffs raised on some products lowered on others
• Average tariffs first rising then falling (as in
  US)
• Diversity little harmonization across countries
• Optimum applied tariffs in ICs are lower than in
  middle-income DCs but not LDCs
• But LDCs should raise tariffs over time while ICs
  lower them

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RECONCILING MULTILATERAL DISCIPLINE WITH POLICY
FLEXIBILITY

• Bind average tariffs without line-by-line
  commitment
• Advantages
• It is simple
• it gives lower average bound tariffs than
  line-by-line commitments (see table 3, p. 31)
• encourages countries to view tariffs as temporary
  instruments
• balances tariff rises with reductions
• encourages taking long view.

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CONCLUSIONS

• ICs should stop protecting declining industries
  and cut tariffs unilaterally
• To counter preference erosion allow poor
  countries to subsidies exports and give them aid
  
• Do not try micromanage trade policy and bind 5000
  tariff lines it is conflictual.
• Bind only the average tariff.
• Consider time-bound agreements