Tariffs

Tariffs are taxes that governments collect on commodities that are leaving or arriving at a country’s geoeconomically defined borders. They are also the rates or charges that are imposed either directly or indirectly on imported or exported goods or services. Tariffs invariably raise the cost of imported products relative to domestic products. Usually, the gains from trade are accrued to the government, thereby contributing to increased government revenue, which will be utilized to provide socioeconomic amenities and welfare development programs for the citizenry. Two major types of commodity taxes are tariffs and nontariff measures (NTMs), and this entry discusses both, with a focus on their impact on global trade.

Over time, tariffs have increasingly attained negligible rates in the trade agenda of more countries. However, NTMs have expanded in scope, value, magnitude, and importance, thereby tending toward a significant proportion of the changing multilateral trade landscape. NTMs include measures such as interalia sanitary and phytosanitary standards, technical barriers to trade, conformity certification, health and safety requirements, services regulation, import and export licensing, export restrictions, customs surcharges, as well as antidumping and safeguard measures. These are significant issues in the facilitation of international production value chains.

Generally, tariffs pose real obstacles to the flow of commodities across geographically defined borders. NTMs are less visible and more complex than tariff protection measures. They are particularly burdensome for developing countries that hardly possess the capacity to comply with a complex web of a variety of imposed rules, technical regulations, quotas, rules of origin, product standards, and customs procedures.

Individuals (exporters and importers), firms and enterprises, industries, countries, communities, and regions from the developing world suffer the brunt of complying with market access conditions, among which tariffs and NTMs play very significant roles. Charges, taxes, duties, and paratariff measures, which represent variable costs that increase relative to the export level of a company, account for a significant share of large companies’ reports on obstructive NTMs.

The elimination of tariffs and NTMs at multilateral, regional, and national levels has been of considerable priority in the global trade agenda. There is a need to ensure that information regarding country, regional, and multilateral tariffs; quotas; and regulations is easily accessible to local companies and that these operators are aware of this information. There is also a need to provide advice to governments on how to overcome and reduce them. In fact, a thorough understanding of enterprises’ key NTMs concerns could assist governments to better define national trade strategies, policies, and programs and to take concrete steps in order to alleviate the problems, for example, by building national capacity in complying with technical regulations.

[Page 1352]Existing studies have utilized data at the individual (exporters and importers), firm, industry, country, community, and regional levels to consider the effects of tariffs and NTMs on welfare and other economic outcomes. The 2012 edition of the World Trade Report, the World Trade Organization’s (WTO) flagship research publication, examined the evolving topography of NTMs. One of its findings was that the nature of NTMs has shifted considerably: The traditional protection-motivated quotas and safeguards have increasingly given way to a precaution-oriented emphasis on health, safety, environmental quality, and other social considerations. As a result, policymakers may want to ensure that NTMs do not increase trade costs more than the minimum requirements necessary to achieve the objectives. Furthermore, policymakers may also want to construct NTMs so that they do not unduly favor domestic interests. Considering the political economy of the issue, given the complex sociopolitical dynamics in play, reaching the right balance will require multi-stakeholder consultative cooperation and dialogue.

...