20230112-IMF-Trade_Policy_Implications_of_a_Changing_World_Tariffs_and_Import_Market_Power_20页_1mb

Summary

• Title: Trade Policy Implications of a Changing World: Tariffs and Import Market Power
• Authors: Adam Jakubik, Alexander Keck, and Roberta Piermartini
• Key Findings:
  • Tariff commitments in trade agreements reflect countries' import market power at the time of negotiations.
  • As countries develop, changes in import market power necessitate updates to these commitments to address terms-of-trade externalities.
  • Analysis shows potential reductions in global tariff costs of up to $26.4 billion (equivalent to nearly 10% of global tariff costs) through updating commitments.
  • Sectors with the largest potential tariff cost reductions include vehicles (HS 87) and machinery and appliances (HS 84-85), with reductions ranging from 0 to 18.5 percentage points in product-level tariffs.
  • The bulk of the reduction potential is concentrated in certain acceded members, with China showing the largest average reductions.
• Policy Implications:
  • WTO should revive its negotiation function to periodically adjust tariff commitments based on current market power.
  • A sector-specific approach could facilitate more targeted and timely negotiations, addressing trade tensions arising from market shifts.
  • Policy uncertainty may increase if commitments are not updated, leading to potential trade conflicts.
• Conclusions:
  • Changes in import market power highlight the need for ongoing trade negotiations to maintain stable commitments and foster economic growth, despite the absence of major new negotiations since 1995.
  • Tailored tariff adjustments can mitigate trade tensions and improve terms-of-trade outcomes.