5.6 Trade policies See Table 5.6 here

Commentary
About the data
Definitions
Data sources

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Economies regulate their imports through a combination of tariff and nontariff measures. The most common form of tariff is an ad valorem duty, but tariffs may also be levied on a specific, or per unit, basis. Tariffs may be used to raise fiscal revenues or to protect domestic industries from foreign competition—or both. Nontariff barriers, which limit the quantity of imports of a particular good, take many forms. Some common ones are licensing schemes, quotas, prohibitions, and export restraint arrangements.

Some countries set fairly uniform tariff rates across all imports. Others are more selective, setting high tariffs to protect favored domestic industries and setting low tariffs on goods that have few domestic suppliers or that are necessary inputs for domestic industry.

The standard deviation of tariffs is a measure of the dispersion of tariff rates around their mean value. Highly dispersed rates are evidence of discriminatory tariffs that may distort production and consumption decisions. But this tells only part of the story. The effective rate of protection—the degree to which the value added in an industry is protected—may exceed the nominal rate if the tariff system systematically differentiates among imports of raw materials, intermediate products, and finished goods.

Nontariff barriers are generally considered more detrimental to economic efficiency than tariffs because efficient foreign producers cannot undercut the barrier by reducing their costs and thus their prices. A high percentage of products subject to nontariff barriers indicates a protectionist trade regime, but the frequency of nontariff barriers does not measure their restrictiveness. Moreover, a wide range of domestic policies and regulations (such as health regulations) may act as nontariff barriers but are not measured by this indicator. A full evaluation would require careful analysis of the individual measures.

One of the goals of the Uruguay Round negotiations was the "tariffication" of agricultural nontariff barriers. Many others, such as the Multifibre Arrangement, will be phased out over a period of years. Although many nontariff barriers were replaced by ad valorem tariffs, the reduction of nontariff barriers on the imports of high-income countries should offer new opportunities for competitive exporters in developing countries (table 5.6a).

Note: Post-Uruguay Round nontariff barriers are based on World Bank staff estimates.

Source: Low and Yeats 1994.

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The data show the average applied tariff rates before the conclusion of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994. Tariff and nontariff measures may be applied generally, against imports from all sources, or selectively, against imports from specific trading partners. Countries typically maintain a hierarchy of trade preferences applicable to different trading partners. The applied rates in the table are ad valorem equivalents of the most-favored-nation duties charged on imports not covered by preferential trade arrangements such as the North American Free Trade Agreement or the European Union. The mean tariff is the simple average across all tariff lines. Simple averages are a better indicator of tariff protection than averages weighted by import values, which are biased downward, especially when tariffs are set so high as to discourage trade.

The tariffs bound under the Uruguay Round will be phased in over five years beginning in 1995. So, the rates shown here are generally representative of current levels of protection. Nontariff barriers are being phased out slowly; in some cases their conversion to tariffs may result in higher rates of tariff protection. See table 6.4 for estimates of the tariff concessions made during the Uruguay Round.

For some developing countries data on mean tariffs and nontariff barriers are for years before 1987; many of these countries maintain their tariff data in the old Customs Cooperation Council Nomenclature (CCCN) classification system, which is no longer compatible with the six-digit Harmonized System codes used to maintain the UNCTAD Database on Trade Control Measures. The CCCN had fewer tariff lines, and the definitions of these lines were not uniform across countries. For other countries data on tariffs and nontariff barriers are for 1990–93. Data on nontariff barriers for high-income OECD members are for 1993.

The commodity groupings are based on the Standard International Trade Classification (SITC). To construct aggregates based on tariff lines, the SITC classification was mapped into equivalent tariff lines of the Harmonized System.

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• Primary products are commodities classified in SITC sections 0, 1, 2, 3, and 4 plus division 68 (nonferrous metals). l Manufactured products are commodities classified in SITC sections 5, 6, 7, 8, and 9, excluding division 68. l Mean tariff is the simple average of the applied rates for all products subject to tariffs.

• Standard deviation of tariff rates measures the average dispersion of tariff rates around the mean; it is also calculated using unweighted tariff data.

• Products covered by nontariff barriers is the percentage of tariff lines to which nontariff barriers are applied. No attempt is made to estimate their tariff equivalent.

Mean tariff rates and their standard deviations were calculated by World Bank staff using the Trade Analysis and Information System (TRAINS) database maintained by UNCTAD. Estimates from TRAINS were supplemented by data from UNCTAD's Directory of Import Regimes, Part I and A Statistical Analysis of Trade Control Measures of Developing Countries. Data on nontariff barriers of developing countries come from the UNCTAD Database on Trade Control Measures, published in these same UNCTAD sources. Data on nontariff barriers of high-income countries come from special compilations by World Bank staff using data provided by UNCTAD.

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