Eliminating Excessive Tariffs on Exports of Least Developed Countries

Posted: 31 Jul 2008

See all articles by Bernard Hoekman

Bernard Hoekman

Robert Schuman Centre for Advanced Studies; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Centre for Economic Policy Research (CEPR)

Marcelo Olarreaga

University of Geneva; Centre for Economic Policy Research (CEPR)

Francis Ng

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2002

Abstract

Although average OECD tariffs on imports from the least developed countries are very low; tariffs above 15 percent (peaks) have a disproportional effect on their exports. Products subject to tariff peaks tend to be heavily concentrated in agriculture and food products and labor-intensive sectors, such as apparel and footwear. Although the least developed countries benefit from preferential access, preferences tend to be smallest for tariff peak products. A major exception is the European Union, so that the recent European initiative to grant full duty-free and quota-free access for the least developed countries (the so-called Everything But Arms initiative) will result in only a small increase in their exports of tariff peak items (less than 1 percent of total exports). However, as preferences are less significant in other major OECD countries, a more general emulation of the European Union initiative would increase the least developed countries' total exports of peak products by US $2.5 billion (11 percent of total exports). Although almost half of this increase is at the expense of other developing country exports, this represents less than 0.05 percent of their total exports. This trade diversion can be avoided by reducing tariff peaks to a uniform 5 percent applied on a nondiscriminatory basis. However, such a reform would imply no gains for the least developed countries, suggesting that the globally welfare-superior policy of nondiscriminatory elimination of tariff peaks should be complemented by greater direct assistance to poor countries.

Keywords: Trade Policy, tariffs, tariff peaks, exports, least developed countries

JEL Classification: F13, F14

Suggested Citation

Hoekman, Bernard and Olarreaga, Marcelo and Ng, Francis, Eliminating Excessive Tariffs on Exports of Least Developed Countries (March 2002). World Bank Economic Review, Vol. 16, No. 1. Available at SSRN: https://ssrn.com/abstract=1175321

Bernard Hoekman

Robert Schuman Centre for Advanced Studies ( email )

Fiesole, Tuscany
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Marcelo Olarreaga

University of Geneva ( email )

40 Boulevard du Pont-d'Arve
Genève, CH - 1205
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Francis Ng (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-8088 (Phone)
202-522-1159 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/fng

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