Simple average MFN applied tariffs in 2017: A CPTPP comparison.



Some empirical studies have made clear the existence of a long-run relationship between tariff liberalization and trade growth, but this substantial and significant association has been gradually losing ground, because of the reduced level of tariffs, on average, over recent decades[1]. This may suggest that there is little room left for tariff liberalization to contribute to welfare gains through trade and income growth, except perhaps for some developing countries that continue to maintain high tariff levels. However, despite of this, evidence exists that when considering a more complex and realistic world-production setting with production linkages, supply chains and multiple sector models, the removal of even small tariffs could deliver significant welfare gains[2].

In the case of the CPTPP bloc, the simple average Most-Favoured-Nation (MFN) applied tariff in 2017 for all goods, according to WTO data[3], fluctuates from 0.0% in Singapore to 9.6% in Vietnam. For agricultural products, there are notorious tariff peaks in Canada, Vietnam, Mexico and Japan, and their simple average MFN tariff levels remain at the two-digit level. Although in the non-agricultural sector, customs duties, on average, are below the two-digit level for all CPTPP member countries, one can still find average tariff levels above 5.0% in Vietnam, Chile, Mexico and Malaysia. Therefore, much room exists in the sectorial and economy-wide spectrum for a comprehensive tariff liberalization process, even in wide-open and almost tariff-free economies such as Singapore, Brunei Darussalam, New Zealand, Peru and Australia where their simple average MFN applied tariffs are below or equal to 2.5%.

Slide1

[1] Nenci, S. (2009) “Tariff liberalization and the growth of world trade: a comparative historical analysis for the evaluation of the multilateral trading system”, University of Roma Tre, accessed 27 April 2017, http://www.stat.unipg.it/aissec2009/Documents/papers/88_Nenci.pdf

[2] Caliendo, L, R C Feenstra, J Romalis and A M Taylor (2017). “Theory and evidence for the last two decades of tariff reductions”, 26 April 2017, VOX CEPR’s Policy Portal, accessed 27 April 2017, http://voxeu.org/article/theory-and-evidence-last-two-decades-tariff-reductions

[3] http://stat.wto.org/TariffProfile/WSDBTariffPFReporter.aspx?Language=E

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