2009年-世界发展银行全球_Smoke_in_the_Water___The_Use_of_Tariff_Policy_Flexibility_in_Crises_24页_715kb

Smoke in the Water: The Use of Tariff Policy Flexibility in Crises

Core Content

This working paper by Liliana Foletti, Marco Fugazza, Alessandro Nicita, and Marcelo Olarreaga explores the potential for countries to increase tariffs during economic crises while adhering to World Trade Organization (WTO) obligations. The study compares the legal and economic limits of tariff increases and evaluates the protectionist responses observed in past crises.

Main Objectives

1. To assess the extent to which applied tariffs can legally be raised without violating WTO-bound tariff obligations.
2. To examine the protectionist responses of countries during previous economic crises.
3. To predict the magnitude of tariff hikes in the current crisis.

Key Concepts

• Bound Tariffs: The legally agreed-upon maximum tariffs that WTO members can apply.
• MFN Applied Tariffs: The Most Favored Nation tariffs currently applied.
• Tariff Water: The difference between bound tariffs and MFN applied tariffs, representing the legal flexibility available for tariff increases.
• Useless Water: The portion of tariff water that lies above the prohibitive tariff level, making it economically irrelevant.
• Deeper Water: The portion of tariff water that is subject to preferential trade agreements, which are not bound by WTO rules.
• Smoke: The sum of useless water and deeper water, indicating the economically irrelevant portion of tariff water.
• Policy Space: The remaining tariff flexibility after accounting for smoke.

Key Findings

• Global Tariff Water: The global average tariff water is 11 percent, but it is close to zero in the US and China and exceeds 70 percent in many least developed countries and small island states.
• Sectoral Differences: Tariff water is significantly higher in agriculture (around 27 percent) compared to manufacturing (around 9 percent).
• Economic Irrelevance of Tariff Water: Around 28 percent of global tariff water is classified as smoke, which is economically irrelevant. Of this, 75 percent is due to useless water (tariffs above prohibitive levels), and 25 percent is due to deeper water (preferential trade).
• Low Income Countries: In low income countries, smoke represents nearly 90% of tariff water, while in middle income countries, deeper water accounts for more than 60% of smoke.
• Protectionist Response in Crises: The study estimates that during economic crises, MFN tariffs increase on average by 2.0 percent. This effect is more pronounced in certain countries when controlling for GDP size and neighboring countries in crisis.
• Predictions for Current Crisis: The paper predicts modest tariff hikes of around 8 percent during the current crisis, suggesting that while there is significant legal flexibility, it is not fully utilized.

Protectionist Responses in Previous Crises

• The paper analyzes data from 1995 to 2008 and identifies countries experiencing economic crises based on annual real GDP decline.
• On average, 18 countries experienced an economic crisis each year, with the worst year being 1999, where 36 out of 97 countries faced a crisis.
• The regression analysis (Equation 6) shows that the impact of economic crises on MFN tariffs varies across countries, with some experiencing significant increases and others minimal.
• The results indicate that the interaction between crisis and country size plays a role in tariff responses, with larger countries showing a different pattern of behavior.

Conclusion

Despite the availability of significant legal flexibility in the form of tariff water, the economic impact of protectionist measures is constrained by the presence of smoke, which includes both useless and deeper water. The study suggests that while there is potential for higher tariff increases, the actual protectionist response during the current crisis is expected to be modest, around 8 percent, due to the economic constraints and the presence of preferential trade agreements.