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21-6The UnappreciatedTrend TowardUnilateral TradeLiberalization INTRODUCTIONA frequentlyvoiced complaintfrom the trade specialistsin the Trump administrationwas thatUS firms have faceda competitivedisadvantage inexports because the USmarket isopen andUS tariffs are lowbut UStrading partnersprotect theirmarkets withhigh tariffs.One examplecited oftenwas that the United States appliesQ
2.5percent tariff on automobileimports,whereas Canadacharges10percent,China15percent,and India125percent.1The Trumpadministration usedthis concernto justifyraising US tariffs wheneverit could.2345This Policy Brief arguesthat theseclaims needto bemore nuancedand shouldtake account of theextensive unilateral liberalization thatmany countries have undertakenover the past30years and that thegrievances thatmotivated the Trump trade policies are increasingly misplaced.The normof loweringtariffs hasspread notbecause ofexternally imposedconstraints butbecausetheopportunities ofparticipating inglobal value chains have convinced many countries thattrade liberalization is beneficial.Many developing countries havereduced their tariffs unilaterallyto ratesthat are far lower than theyapplied three decades agoand farless thanthe bound rates reflectedin theirWorld TradeOrganization WTOobligations.Their attachmentto their applied ratescould beseen whenon average global tariffs were not raised during the globalfinancial crisisin2008一and continuedto declinethrough atleast
2018.Even whenshocks from imports resultedin seriousinjury todomestic industries,several developing countries temporarilyprovided safeguard protection butat levelsthat werelower than their WTObound rates.more self-sufficient Ropoza
2020.6And itis commonto seepredictions that the worldhas nowpassed thehigh pointof globalization.But itis toosoon totell whetherthese developmentswill leadto areversal of the policytrends discussedin thisPolicy Brief.The recentshocks certainlypoint to the desirabilityof diversificationof supply1See Aringing defenseof Trumpon trade,Harvard Gazette,April26,
2019.2Actually,the Trumpadministration tendedto cherry-pick theirexamples.For instance,President Trumppointed toCanadas250percent tariff on dairyproducts butnot the UStariff of187percent onsour cream.1750Massachusetts Avenue,NW|Washington,DC20036-1903USA|+
1.
202.
328.9000|www.piie.com6However;see Subramanian2020for anargument thatdeveloping countries should notrespond torecent eventsby turninginward.chains and the needfor adequatedomestic strategicreserves ofessential products.Pinelopi Goldberg2020makes thecase that they havealso underscoredthe extentto whichcountries areinterdependent.And they have shownthe abilityof anopen globalsystem toenable moreresilient responsesthan thosebased onself-reliance—the WTO has documentedthat,in response to thepandemic,trade-facilitating measuresundertaken by the G20have faroutweighed trade-restricting measures.7Indeed,despite thetalk ofdeglobalization,many countries have recentlyincreased theircommitments tofurther trade liberalization,albeit at the regionallevel.Since2018,for example,11Asia-Pacific countries have implementedthe Comprehensiveand ProgressiveAgreement forTrans-Pacific Partnership,more than50countries agreed to theAfrican ContinentalFree TradeArea,and15countries in the Asia-Pacific concludedthe RegionalComprehensive EconomicPartnership inlate
2020.As MorkTwain saidabout hisdeath,reports of the end of globalizationmay begreatly exaggerated.REFERENCES Amiti,Mary,Mi Dai,Robert C.Feenstra,and JohnRomalis.
2020.How DidChinas WTOEntry AffectU.S.Prices Journalof InternationalEconomics
126.Auboin,Marc,and FlorianaBorino.
2017.The FallingElasticity ofGlobal Tradeto EconomicActiv什y:Testing theDemand Channel,Improving Global Trade Forecasts.VoxEU/CEPR,June26accessed onFebruary27,
2021.Bown,Chad,ed.
2011.The GreatRecession andImport Protection:The Roleof TemporaryTrade Barriers.London andWashington:Centre forEconomic PolicyResearch andWorld Bank.Bown,Chad P.z EuijinJung,and EvaYiwen Zhang.
2019.Trump HasGotten Chinato LowerIts Tariffs.Just TowardEveryone Else.PIIE Trade and InvestmentPolicy Watchblog,June19accessed onFebruary27,
2021.Bown,Chad P.f andMelina Kolb.
2021.Trump*s TradeWar Timeline:An Up-to-Date Guide.PIIE Trade and InvestmentPolicy Watchblog,February2021accessed onFebruary27,
2021.Eichengreen,Barry,and KevinORourke.
2010.What Dothe NewData TellUs VoxEU/CEPR,March8accessed onFebruary27,
2021.Evenett,Simon J.z and Richard Baldwin.
2020.Revitalising Multilateralism:Pragmatic Ideas for theNew WTODirector-General.London:Centre forEconomic PolicyResearch.Evene甘,Simon J.,and JohannesFritz.
2019.Going ItAlone TradePolicy afterThree Yearsof Populism.25th Global Trade AlertReport.London:Centre forEconomic PolicyResearch.Fletcher,Ian.
2020.Uncle SamzGlobalTradeSucker.HuffPost,June14accessed onFebruary27,
2021.Goldberg,Pinelopi Koujianou.
2020.The NewEmpty ArgumentAgainst Trade.Project Syndicate,May12accessed onFebruary27z
2021.Henn,Christian,and BradMcDonald.
2014.Crisis Protectionism:The ObservedTrade Impact.IMF EconomicReview62,no.1:77-
118.Kee,Hiao LooizCristina Neagu,and AlessandroNicita.
2013.Is Protectionismon theRise AssessingNational Trade Policies during the Crisisof
2008.Review ofEconomics andStatistics95,no.1:7COVID-19related trade-facilitating measures on goodsimplemented sinceJanuary
[2020]covered tradeworth anestimated USD155billion,while pandemic-related trade-restrictive measures—most ofwhich wereexport controls—covered tradeworth USD111billion.Of the133COVID-19trade and trade-related measuresrecorded forG20economies since the outbreakof thepandemic,63per centwere ofa trade-facilitating natureand37per centwere traderestrictive/7WTO TradeMonitoring newsitem,November18,2020accessed onFebruary28,
2021.342-
46.Laborde,David.
2014.Implications of the DraftMarket AccessModalities onBound andApplied Tariffs.In TacklingAgriculture in the Post-Bali Context:A Collectionof ShortEssays,ed RicardoMelendez-Ortiz,Christophe Bellmann,and JonathanHepburn.Geneva:International Centrefor Tradeand SustainableDevelopment.Lamyz Pascal.
2013.Global ValueChains,Interdependence,and theFuture ofTrade.VoxEU/CEPR,December18accessed onFebruary27,
2021.Lovely,Mary E.,and JeffreyJ.Schott.
2019.The USMCA:New,Modestly Improved,but StillCostly.PIIE Tradeand InvestmentPolicy Watchblog,December17accessed onFebruary27,
2021.Navarro,Peter.
2019.Ricardo IsDead.Long LiveFair,Balanced,and Reciprocal Trade.Presentation toHarvard KennedySchools Instituteof Politics,April25accessed onFebruary28,
2021.Rapoza,Kenneth.
2020.The Post-Coronavirus WorldMay Bethe Endof Globalization.Forbes,April
3.Rodrik,Dani.
2017.Straight Talkon Trade:Ideasfor a SaneWorld Economy.Princeton UniversityPress.Subramanian,Arvind.
2020.Developing CountriesMust NotSuccumb toExport Pessimism.Financial Times,October
15.Toheri,Homo.
2020.Can aReformed SafeguardSystem Savethe TradingSystem Unpublishedmanuscript,Harvard KennedySchool.APPENDIX EXAMPLESOF SAFEGUARDMEASURES UNDERTAKENBY INDIAAND INDONESIA,2015-2017India In November2016India implementeda definitive safeguard measure on imports of hot-rolled flatsheets andplates with HS codes72254013,72254019,72254020,72254030,and
72259900.While the bound tariff rate on these products is set at40percent,the applied tariff rate was aslow as10percent in
2016.With thismeasurez India applied a safeguard surchargetariff of10percent for the firstyear8percent for the secondyear and6percent forthe thirdyear.18J9In2018the applied tariff rate on these products wasincreased to15percent.In March2016a definitive safeguard measurewas appliedto anotherHS codeof the same family,
72253090.While thisproduct,like theothers,had abound tariff of40percent and applied tariffof10percent,India implementeda surchargead valoremtariffof20percent forthe firstyear,18percent forthe secondyear,and15percent forthe thirdyear17181920and in2018increased the applied tariff rate to15percent.In March2015India imposeda definitivesafeguard measure on imports of saturatedfatty alcohol.The bound tariffonproducts with HS codes38237010,38237020,38237040,and38237090group1is50percent,while HScode29051700group2has abound tariffof40percent.All theseproducts hadapplied tariffs of
7.5percent atthe time.India applieda d㊀fin什ivesafeguardduty of20percent advalorem forthe firstyear,18percent advalorem forthe secondyear and12percent advalorem forthe thirdyear on imports of theseproducts.21In2018the applied tariff rateof groups1and2increased to50and10percent,respectively.With thischange,India usedup itsfull marginfor groupi productsno tariffoverhang,while maintaininga tariffoverhang of30percent forthe group2products.Indonesia InSeptember2015Indonesia applieda safeguard measure on imports ofcoated paperand paperboard,not includingbanknotes paper,w什hHScodes4810131100,4810131900,4810139190,4810139990,4810141100,4810141900,4810149190,4810149990,4810191100,4810191990,4810199190,and
4810199990.The boundtariff rate for theseproductsisset at40percent and the appliedtariff rateat5percent.The countryapplied safeguardduties of9percent in the firstyear,7percent in the secondyear,and5percent in the thirdyear.22In January2015Indonesia applieddefinitivesafeguard measuresonimports ofI andH Sectionsof otheralloy steelwith HScodes7228701000and
7228709000.The boundtariff ratefor theseproducts was40percent,and the appliedtariff ratewasset5percent forthe firstproduct and
12.5percent forthe second.Under thissafeguardmeasure,a surchargeof26percent during the firstyear22percent duringthe secondyear,and18percent duringthe thirdyear has been imposedon theseproducts.2317This appendixwas writtenby Homalaheri.All boundtariff rates are fromhttp:#tariffdata.wto.org/andappliedtariff ratesare fromhttps:^tao.wto.org/welcome.aspxReturnUrl=%2f.18All theseare advalorem ratesminus antidumpingduty,if any,payable onimports ofthis classof products.19WTO documentnumber G/SG/N/8/IND/30/Suppl.l-G/SG/N/10/IND/21/Suppl.l-G/SG/N/11/IND/16/Suppl.l.20WTO documentnumber G/SG/N/8/IND/28/Suppl.l-G/SG/N/10/IND/19/Suppl.l-G/SG/N/ll/IND/14/Suppl.
3.21WTO documentnumber G/SG/N/8/IND/26/Suppl.2-G/SG/N/10/IND/lZ/Suppl.2-G/SG/N/ll/IND/12/Suppl.
2.22WTO documentnumber G/SG/N/8/IDN/19/Suppl.l-G/SG/N/10/IDN/19/Suppl.l.23WTO documentnumber G/SG/N/8/IDN/l^Suppl.l-G/SG/N/10/IDN/lZ/Suppl.l-G/SG/N/ll/IDN/
15.Starting in2016,Indonesia setthe appliedtariffof both productsat
7.5percent.In October2018Indonesia imposeda safeguardmeasureonimports ofceramic flagsand paving,hearth orwall tileswith HScodes69072191,69072192,69072193,69072194,69072291,69072292,69072293,69072294,69072391,69072392,69072393,and
69072394.The boundtariff ratefor theseproducts was40percent and theappliedtariffrate20percent.A safeguardduty of23percent,21percent,and19percent has been imposedforthe first,second,and thirdyears,respectively.InNovember2019Indonesia initiated a safeguardmeasureonimports ofaluminum foilwith HScode
76071100.The boundtariffratefor thisproduct atthe6-digit levelvaries between30and40percent,with anaverage valueof35percent;theappliedtariffratewas20percent in
2018.With the2019measure,Indonesia applieda safeguardduty of6percent forthe firstyear and4percent forthe secondyear.24In January2020Indonesia applieda safeguardonimports of evaporatorswithHScode
84189910.The countrysboundtariffrateonimportsofevaporators issetat40percent,and theMFN appliedtariff hasbeen atthe5percent levelas of
2018.With the2020measure,asafeguardduty of17percent wasapplied forthe firstyear
15.5percent forthe secondyear,and14percent forthe thirdyear.25This evidence of importliberalization alsosuggests thatrising protectionismwas notresponsible forthe slowgrowth inworld tradethat hasbeen evidentsince
2011.It remainsuncertain whethercountries willnow respond to disruptionsto global supply chainssince2018caused byTrumps tradepolicies and the COVID-19pandemic byreversing thesepolicies,but thesustained enthusiasmfor newmegaregional trade agreements suggestsmanycountrieswill not.Why TrumpsTradePoliciesWere MisplacedFor overeight decodes,in theaftermath of its disastrousSmoot-Hawley tariffs,the United States triedto persuadeother countries to lowertheirtariffbarriers on a reciprocal basis.26But sinceaverage UStariffsarestill belowthose in most other countries,many Americansbelieve theseefforts havenot beensuccessful.They complainthat theplaying fieldof internationalcompetition isnot leveland thatUncle Samhas becomeUncle SuckerFletcher
2020.The Trumpadministration not only complainedabout themuch higher tariffs inmany developing countries butalso singledout thetariffsof the European Union asegregiously violatingreciprocity with the United States.The statementsandtradepolicies of the Trumpadministration reflecteda profoundsense ofgrievance overthese disparities.As observedby PeterNavarro2019,former WhiteHouse advisoron trade,4Whether yourea purefree traderorafair reciprocaland balancedtrader like the president,if youlive ina relativelylow-tariff countryliketheU.S.you shouldoppose aninternational tradingsystem thathelps institutionalizenonreciprocal tariffs/27Trumps tradepolicies weredesigned toredress thissituation.Regardless ofwhether they were compatiblewiththerules agreedto byhis predecessorsorthenorms theyhad adheredto,Trump usedevery pretextavailable to raise UStariffs.28He brokethe24WTO documentnumber G/SG/N/10/IDN/21/Suppl.l-G/SG/N/U/IDN/
21.25WTO documentnumber G/SG/N/10/IDN/22/Suppl.l-G/SG/N/U/IDN/
22.26This approachwas embodiedin theReciprocalTradeAgreement Actof1934,which transferredthe powerto settariffs fromCongress and instead authorizedthe presidentto negotiatetariff reductionsonareciprocalbasis.27Ironically,given complaintsthat the WTOhasbeen insufficientlyconstraining withrespect onational tradepolicies,Dani Rodrik2017has raisedthe oppositeconcern:that,sincethe1990s,the WTOhasbeenexcessively limitingthe policyspace availableto itsmembers.28Robert Lighthizer,theUSTrade Representative,has claimedthattheyears oftalking about these problemshas notworked,and...we mustuse allinstruments wehave tomake itexpensive toengage unwrittenWTO understandingagainst usingnational securityexceptions byraising UStariffs onimportsofsteel andaluminum oneven hisclosest allies.He usedhis legaldiscretion toinvoke thesafeguard rulesto raise tariffs onimportsofwashing machinesand solarpanels.He usedthe unfairtreatment of US firmsand thefailure toprotect intellectualproperty inChina asreasons toraisetariffsunilaterally onUS importsfrom China,and heeven threatenedtariffs onTurkey when it arresteda USpriest and on Mexicowhenitfailed toprevent immigrantscrossing theircountry fromentering the United States.Although itwas neverimplemented,Trump alsoinitiatedanational securityinvestigation on automobiles,motivated by the desireto imposehigher tariffs onautomobilesproduced by the United Statess Europeanallies in the NorthAtlantic TreatyOrganization NATO.29It istrue thatUS exportsface manytrade barriersandon average USbarriers arestill lower than those of mostof itstrading partners.It is also truethat tariffsare onlythe mostvisible ofthe constraintson trade;the manybehind-the-border policiesthat impacttrade and investment havebecome thecentral focusof tradenegotiations.Nonetheless,unilateral changes in applied tariffs remain the bestindicator ofthe directionin whichcountries believetheir tradepolicies shouldmove.This PolicyBrief demonstratesthe growingrevealed preference for freertrade evidencedby tariffs applied overthepastthreedecades.While notyet atUS levels,there isclear convergencetoward thoselevels.Raising UStariffs inthe nameof compellingother countriesto reducetheirs orachieving reciprocitywould becounterproductive becausetariffs inthe restoftheworld havealready beenmoving stronglyinthedirection soughtbythe UnitedSt!■㊀s.Indeed,计is noteworthy that whileChina hasbeen raisingits tariffsagainst USproducers in response toUS bullying,it hasbeen loweringits tariffsonimportsfrom other countries.30Changing mindsis themost potentweapon forchanging behavior.And the reason formore openmarkets hasnot beenthe persuasionofUSpower but the powerof persuasion.Ultimately,effective andsustainable tradeliberalization isachieved notwhen othercountries arebludgeoned with tariffs butwhen theydecide forthemselves that they benefitfrom freertrade.Broadly,certainly untilrecently,tradeliberalizationintheform oflower tariffshas becomemore widelyaccepted as an importantaspect ofeconomic reform.As internationaltransportation andcommunication costshave declined,both domesticand foreignfirmshavefound that access to imported componentsand assemblycan bethe keyto improvingcompetitive performance.And ascountrieshaveturned awayfromimportsubst什ution policiestoward exportpromotion,they havediscovered thatthey becomemore competitivewhen theycan joinglobal supplychains byreducing importedinput costsAmiti etal.
2020.Given thepreferences of global supplychain operators,more intensecompetition toattract foreigninvestors haspromoted liberalization.Former WTODirector-General PascalLamy2013observed that,globally,the import content ofexports hassteadily increasedandthat^enacting protectionist1measures inthe modernworld toprotect jobs—such asraising import barriers—can havean inversereaction ineconomies that areincreasinglyreliant onimports tocomplete theirexports.11He added,uln effectwe areseeing theendofthe centuries-old doctrineof Mercantilism/which proclaimedthatacountrys economicstrength dependedon itbeing ableto exportmore thanit imported.in non-economic behavior;and toconvince ourtrading partnersto treatour workers,farmers,and ranchersfairly.We mustdemand reciprocityin homeandininternational markets//29For a more detaileddescription ofthe policies,see Bownand Kolb
2021.30China beganthetradewar withthe UnitedStates withaverage tariffsof
8.0percent.But asshown by Bown,Jung,and Zhang2019,in2018China reducedits importtariffsonothercountriesto
6.7percent whileraising themto
20.7percent onUS goods.PERVASIVE LIBERALIZATIONTRENDS Theevidenceofinternational trendsin supportof tradeliberalizationissustained andsubstantial.The followingsections presentillustrative datain averagetrade-weighted global tariffs,lower appliedthan boundtariff rates,use of safeguards,and thelack ofraised tariffsduringthe2008financial crisis.Average Trade-Weighted GlobalTariffs AreDeclining Thegrowing commitmentto reducingtrade barriersin America^trading partnerscan beseen in table1,which showsthe World Bonks dataon trade-weighted averagemost-favored-nation MFN tariffsappliedby majorcountries andregions since
1990.31Although theseare imperfectmeasures becausetariff structuresare complexand high tariffs mayimpact the volume of trade usedas weights,trade-weighted measuresare usefulto illustratetrends.And whatthey revealis remarkable.As lateas2000,theTrumpview hadsome merit.Average trade-weighted globaltariffs were
2.5times higher than those inthe United Stateszandinlarge emergingmarkets suchas Brazil,China,and Indiatheywerefive ormore timesgreater thanthoseoftheUnitedStates.And theseratios had been even higher in
1990.Some ofthe declines,especially inthe1990s,reflected the impact ofthe WTO negotiations;and someofthedeclines inthe Chineserates reflectedtheimpact ofitsWTO accessionagreement in
2001.But mostofthedeclines reflectedunilateralliberalization.By2018,applied tariffswere stillhigher indeveloping thandeveloped countriesbut,clearly,despite thefailure ofmarket accessnegotiations inthe WTOsDoha Round,the trendtoward tariffconvergence wasstrong.Moreover,these dataunderstate theliberalization thatoccurred inthe tradingsystem asa wholebecause they do nottake account of reductionsachieved throughthe manyfree tradeagreements negotiatedsince
2000.32Some tariff rates inthe European Union arehigher thanthose intheUnitedStates forthesameproducts;in particular,theTrumpadministration complainedabout thedifference betweenthe
2.5percent UStariffonauto importsandthe
10.0percent EUtariff.However asis shown in tableb since2000the EU-US differencesin averagetrade-weighted tariffshave beensmall,with USrates lower than EUrates byjust
0.2percentage pointsin2000and
0.1percentage pointsin
2018.31I haveused trade-weighted averagetariffs tomeasure protection,but simpleaverages failto takeaccountofthe valueof trade in eachtariff heading,and ifhightariffsdiscourage imports,import-weighted measuresmay bebiased tounderstate protection.In addition,the responsivenessoftrade volumes tradeelasticities totariffs maydiffer byindustry.For anexample ofamoresophisticated traderestrictiveness index“that combinestariff rates,tradevolumes,and elasticities,see Kee,Neagu,and Nicita
2013.For abroader discussionof tariffmeasures seeTariff AggregationMethods:What Arethe ImplicationsWTO TariffProfiles2006accessed onFebruary28,
2021.32See theWTO Databaseon PreferentialTrade Arrangements.Table1Trade-weighted averageapplied most-favored-nation tariffsall products,percent Changepercentage pointsCountry/region199002000201720181990-2000-1990-200020172017UnitedStates
3.
92.
11.
71.6-
1.8-
0.4-
2.3European Union
4.
82.
31.
81.7-
2.5—
0.5-
3.0EuropeCentral Asia
11.
93.
93.1n.a.-
8.0-
0.7-
8.7excluding high-income LatinAmericaCaribbean
19.
013.
03.5n.a.-
6.0-
9.4-
15.4East AsiaPacific excluding
14.
910.
33.4n.a.-
4.7-
6.8-
11.5high-income MiddleEastNorth Africa
25.
914.
34.9n.a.-
11.5一
9.5-
21.0Sub-Saharan Africa
14.
19.
75.7n.a.-
4.4-
4.1-
8.4Brazil
19.
012.
78.
68.0-
6.3-
4.1-
10.4China
32.
214.
73.
83.4-
17.5-
10.8-
28.3India
56.
423.
45.
84.9-
33.0-
17.6—
50.6World
6.
85.
02.6n.a.-
1.9-
2.4-
4.2n.a.=not availablea.1991data forEurope andCentral Asiaand1992data forChina.Source:World Bankstoff estimatesusing the World IntegctedTrode Solutionsystem,based ondata fromUnited NationsConference onTradeandDevelopments TradeAnalysis andInformation SystemTRAINS database andtheWorld TradeOrganization^WTO IntegratedData BaseIDB andConsolidated TariffSchedules CTSdatabase.Applied Rates Are Much Lower thanBound RatesIn theWTO,many developingcountrieshaveagreed not to exceedmaximum orso-called boundtariff rotesthat areoften veryhigh.But theserates givea falseimpression ofthe ratesthattheybelieve servetheir interests—i.e.,those thatthey applyattheborder.As shownintable2,according toWTO dataon simpleaverages rather than trade-weighted averages,applied ratesarefarlower thanbound rates,suggesting thatthe resistantWTOnegotiationstances ofdevelopingcountriesover bound ratesaremore aboutexercising politicalpushback thanavoiding reductionsthat reallymatter.3333The negotiationsover agriculturaltariffs inthe DohaRound werehighly contentious.Yet DavidLaborde2014calculated averageappliedtariff rates foragricultural importprotection byboth highand low middle-income countriesin2012and found that applied rates onimports includingthoseinpreferential regimesaveraged
13.3percent inlowmiddle-income countries-less thanthe
15.5percent averagerateforagriculture appliedby high-income countries!By contrast,thebound rates inthe poorcountries were20percentage pointshigherthaninthehigh-income countries.Table2Simple averagebound andapplied most-favored-nation MFNtariffrates,selected developedand developingeconomies,2019,percent EconomyBound rateApplied MFNrate Australia
9.
72.4Brazil
31.
413.4Chile
25.
26.0China
10.
07.5Costa Rica
43.
15.6Egypt
36.
619.0EuropeanUnion
5.
15.1India
50.
817.6Indonesia
37.
18.1Israel
23.
13.6Japan
4.
74.3Korea
16.
513.6Malaysia
21.
05.6Mexico
36.
27.1New Zealand
9.
72.0Nigeria
120.
912.1Norway
20.
26.0Peru
29.
52.4Philippines
25.
76.1Singapore
9.50South Africa
19.
27.7Switzerland
8.
06.0Tanzania
120.
013.1Turkey
28.
910.0UnitedStates
3.
43.3Average
29.
87.5Source:World TradeOrqanization,World TariffProfiles
2020.Safeguards AreUsed EvenWhen AppliedRatesAreMuchLowerThan BoundRates TheWTO rulesfor safeguardsallow countriesto implementtemporary protectionand raise their tariffsevenhigherthan their boundratesif importcauses significantinjury.But evenwhen freetoraisetariffs forany reasonbecause theirapplied ratesare muchlower thantheir boundrates,many developingcountries stilluse formalsafeguard disciplineswhen theirfirms seekhighertariffsonthegrounds of injury fromimports.As theagreement on safeguards formallyrequires,industries mustdemonstrate seriousinjury fromimports dueto unforeseencircumstances inorder toqualify.And governmentsrespondto these findings ofinjurywithtariffs that arerequired to be reducedover time.Homa Taheri2020has undertakenpainstaking researchassembling dataonsafeguardactions thatshows that countries suchas India,Indonesia,and Turkeyhove providedsafeguardprotection.Given thatinmostcases theirappliedrates were farlowerthantheir boundrates,one mighthave expectedthattheresponse tofindingsofinjury wouldhave resultedin thesecountries raisingtheir levelsof protectionto theirboundrates;indeed,maintaining theleeway todo thisis oftengiven asthe reasonwhy countriesmaintain theirboundratesat highlevels inthe firstplace.But asshowninthe appendixfor Indiaand Indonesia,which unlikeTurkey arenot partof anEU customsunion,theyhavenot.This suggeststhat thesecountries generallyset theirappliedtariff schedules atrates theydetermine asbeing in their interestand thenprovide additionalprotection onlyto industriesthat canmeet thedemanding requirementsofsafeguardprovisions.This revealedpreferencefordisciplining theirtariff-granting processunderscores theircommitments to theirappliedtariffschedules.,Tariffs WereNot RaisedGlobally Duringthe FinancialCrisis Duringthe2008financial crisis,the volumeof world trade initiallyplummeted bymore thanit hadduringthe Great Depressioninthe1930s Eichengreenand O*Rourke
2010.Since manydevelopingcountriescould legallyraisetheirappliedtariffswithout violatingtheir WTOcommitments,there werewidespread fearsthattheprotectionist responsesthat hadoccurred duringthe GreatDepression werelikely tobe repeated.Yet thesystem displayedremarkable resilience.Undoubtedly thedisastrous experienceofthe1930s servedasanimportant considerationmotivating theG20countriestoissue statementspledging theiropposition toprotectionism.3435But theiractions spokeeven louderthantheirwords.As shownin figureL the crisis issimply notevident inthe overageglobaltariffdata for2008and2009:The averageapplied MFNtariffratesintheimmediate aftermathofthecrisis wereno higherthan theywere beforeit.This isnottosay thatno countriesraised their tariffs,buttheincreases wereoffset by othercountries5reductions.36In addition,as chronicledbythe GlobalTrade Alert anetwork oftrade analyststhat monitortrade policyactions,some countriesdid usetemporary tariffmeasures suchas safeguardsantidumping andcountervailing duties.Figure1Globally,tariffswerenotraisedduringthe2008financial crisis34When itcomes tosafeguards,high boundrates servean additionalpurpose.WTO safeguard measures haveproven extremelyvulnerable tolegal challengesunder theWTO disputesettlement process;indeed,virtually all the safeguardsimplemented bytheUnitedStates andEuropeanUnionhave beenfound toviolate thesafeguards agreement.However,by implementingsafeguard tariffsthat arelowerthantheirboundrates,countries caninhibit challengesbyotherWTO members.For example,according toTaheri2020,in1995-2020Indiaapplied20safeguardmeasuresbut thesetriggered onlyone WTOdispute;Turkey implemented23safeguardmeasuresand Indonesia23,but onlyone ofthese waschallenged attheWTO.35See thecommunique from theG20summit in2010accessed onFebruary28,
2021.36For anextensive examinationof measuresin responseto thecrisis seethevolumebyBown
2011.Henn andMcDonald2014similarly finda declineequal toonly
0.2percent of world tradeon accountof crisisprotectionism.Source:WorldBonkstaff estimatesusing theWorld IntegrotedTrade Solutionsystem,based ondata fromUnited NationsConference onTradeandDevelopments TradeAnalysis andInformation SystemTRAINSdatabaseandtheWorldTrade OrganizationsWTO IntegratedData BaseIDB andConsolidated TariffSchedules CTSdatabase.But studiesthat takesuch actionsinto accountstill concludethat there was remarkablerestraint withrespect to importbarriers.For example,using anoverall TradeRestrictiveness Indexthat includesnotonlyMFNtariffsbut thoseapplied infree tradeagreements andother preferentialarrangements,Hiao LooiKee,Cristina Neagu,and AlessandroNicita2013found thattogether theimpacts oftariffs andantidumping measuresaccounted forless than2percent ofthe collapseofworld tradein responsetothecrisis.Among theirexplanations isthatcountriesare likelyto takeaccountofthe diverseimpactoftariffs inraising inputcosts forproducts usedintheirexports”p.
343.Looking backfromthevantage pointof2019,theGlobalTradeAlertfoundthatinresponsetothecrisis,transparent importrestrictions wereplaced onjust
1.4percent ofworldtrade,with another
6.9and
20.8percent ofworldtradebeing subjectto subsidiestoimportcompeting firmsand statelargess toexporters respectively/However almostallthetemporary importrestrictions andhalf ofthe subsidiestoimport-competing firmswere unwoundby
2013.Simon EvenettandRichardBaldwin2020note thatpatterns oftrade haveremained moreheavily distortedby export subsidies sincethe financial crisis;but whiletheydodistort trade,in principleexportsubsidiesshould increaseratherthanreduce trade.While thedeclining growthin tradevolumes relativeto GDPsince2011hasbeenthe focusof muchdiscussion,increased trade protection doesnot appeartobethereason.As shownin figure1therewasa smallincrease inaverageglobaltariffs in2009-11,but itwas morethan fullyreversed by2012,and by2017global trade-weighted averageapplied MFNrateswereconsiderably lowerthan theyhadbeenin
2008.Marc Auboinand FlorianaBorino2017studied thefalling elasticityof globaltrade toeconomic activityand foundthat whilethe slowdowninthegrowth ofglobal valuechains andchanges inthe compositionof demandwere importantparts ofthe explanationfor slowertrade responsesto growthafter2011,“protectionism doesnot comeup asstatistically significant.H CONCLUDINGCOMMENTS ThisPolicyBriefhas providedevidence thateven settingaside participationin regionaland multilateraltradeagreements,developingcountrieshave steadilynarrowed thedifferences betweentheirtariffsand thoseoftheUnitedStates.They havealso revealeda preferencefor lowertariffs byconsistently applyingtariffsthatare muchlowerthanthose obligatedbytheWTO.Their commitmentto lowertariffs wasshown bytheir disciplinein not,onaverage,raising tariffsinresponsetothefinancialcrisisin2008and theircontinued reductionsin appliedtariffs between2011and
2017.The availabledata atthe countrylevel showadditional reductionsin
2018.The commitmentto theselower ratesisalsoevident inthe regimesfor administeredprotection institutedby severalcountries,requiring proofof seriousinjury andother conditionsbefore safeguardprotection isprovided.All thisliberalizing behaviorreflects widespreadchangesinviews oftradeprotection.The spreadofglobalvaluechains,which haveincreased theimportcontentofbothexports anddomestic production,haveconvincedmany thatincreased protectioncan reducedomestic outputand employment.In manyindustries supplychains consistof productionfacilities thatproduce highlycustomized goodsand servicesthatarenot easyfor firmsto producein othercountries orto shiftback totheir homecountry.It isnoteworthythat,for alltheir talkabouttheNorth AmericanFree TradeAgreement NAFTAbeing adisastrous tradeagreement,both PresidentTrump andmany Democratsagreedtoa US-Mexico-Canada AgreementUSMCA thatmade farfewer modificationstotheoriginal agreementthan mighthave beenexpected fromtheir rhetoric.37Since2018,however,globalsupplychains havebeen subjectedto twomajor shocks:thefirstfrom UStradepoliciesandthecountermeasures othercountrieshavetaken inresponse,andthesecond fromthe COVID-19pandemic,which initiallyset offa globalscramble formedical equipment.Some commentatorshave respondedto thesedisruptions byarguing thatcountriesshouldnow be37For anappraisal ofthe USMCA,see Lovelyand Schott
2019.。