Using ESCAP's online TINA for trade negotiations 1 - Tariff & trade data, sources & harmonization

Summary

This module delves into the complexities of tariffs and trade data, explaining various types of tariffs like ad valorem, specific, mixed, and compound tariffs, and how they are applied across different countries. The script also covers the harmonized system (HS) used globally to classify goods and the differences in tariff data reporting. It highlights the importance of WTO agreements and trade preferences in shaping tariff policies. Additionally, the process of harmonizing trade and tariff data from different sources is discussed, focusing on how trade flows and tariff information are reconciled for consistency across economies and time periods.

Takeaways

• 😀 Tariffs are taxes or duties imposed on imported goods and vary in types such as ad valorem, specific, mixed, and compound tariffs.
• 😀 Ad valorem tariffs are calculated as a percentage of the product's value, while specific tariffs are based on physical quantities like units or weight.
• 😀 Mixed tariffs are either specific or ad valorem, depending on which generates more revenue, and compound tariffs combine both ad valorem and specific elements.
• 😀 Tariff rate quotas involve low or zero tariffs on an initial quantity of imports, followed by higher tariffs for any amount exceeding the quota.
• 😀 Most-favored-nation (MFN) tariffs are the standard rates WTO members impose on one another, unless a preferential trade agreement exists.
• 😀 Bound tariffs are maximum tariff rates a country agrees to within the WTO, which can be adjusted but not exceeded without violating commitments.
• 😀 The binding overhang is the difference between a country's bound and applied MFN tariffs, affecting trade policy flexibility and response to import surges.
• 😀 Preferential tariffs are part of trade agreements where one country agrees to lower tariffs in exchange for tariff reductions from the other country.
• 😀 The Harmonized System (HS) is a standardized method for classifying goods for international trade, and most countries use a six-digit HS code.
• 😀 The WTO's tariff data is based on different sources, including the World Bank's WITS and the WTO itself, which can sometimes conflict due to differing methods of classification and reporting.
• 😀 Data harmonization ensures that tariffs and trade flows are comparable across countries and periods, but challenges exist when countries report data in different HS versions, requiring adjustments through concordance and mirror data.

Q & A

What are the different types of tariffs mentioned in the script?

The script mentions several types of tariffs: ad valorem tariffs (based on a percentage of the product's value), specific tariffs (based on the physical quantity of the good), mixed tariffs (a combination of specific or ad valorem depending on which generates more revenue), compound tariffs (a mix of both specific and ad valorem tariffs), and tariff rate quotas (a lower tariff rate for an initial quota and a higher rate beyond that quota).

What is the difference between 'bound tariffs' and 'applied MFN tariffs'?

Bound tariffs are the maximum tariff rates agreed upon by WTO members when joining the organization, or during renegotiations. Applied MFN (Most Favored Nation) tariffs, on the other hand, are the actual tariffs that a country imposes on imports, which can be lower than bound tariffs. However, applied tariffs cannot exceed the bound tariffs.

What is the concept of 'binding overhang' in tariff policies?

Binding overhang refers to the gap between a country's bound tariff rate and the applied MFN rate. A large binding overhang gives a country more flexibility to raise its tariffs in response to challenges like import surges, without violating WTO commitments.

What are preferential tariffs and how are they different from MFN tariffs?

Preferential tariffs are tariffs that countries provide as part of trade agreements. They can be reciprocal, where countries reduce tariffs for each other, or unilateral, as seen in programs like the EU's 'Everything But Arms' (EBA) program. MFN tariffs, however, are the tariffs imposed by a country on all other WTO members unless preferential treatment is granted through a trade agreement.

What is the HS (Harmonized System) and how does it relate to tariffs?

The HS is a standardized international system for classifying products, used by customs authorities to assess tariffs. It is a six-digit coding system, with additional codes for specific countries. The HS system helps harmonize tariff classifications across different economies, making it easier to compare tariffs between countries.

How does the WTO's tariff data system work with respect to data harmonization?

The WTO uses the Harmonized System (HS) to categorize tariff data across countries. However, each country can have its own national tariff lines beyond the six-digit HS classification. To ensure consistency, the data is harmonized to the HS 2012 version, and countries' tariff schedules are adjusted to match this system.

What role does the World Bank’s World Integrated Trade Solution (WITS) play in tariff data?

The World Bank's WITS is a primary source for tariff data, providing data on ad valorem tariffs and offering a broader range of reporters compared to other sources like the WTO. WITS helps harmonize data to the HS 2012 version, ensuring consistent and accurate comparison of tariffs across countries.

What challenges exist when using WTO data for tariff analysis?

One challenge with using WTO data is that some countries report non-ad valorem tariffs, which are harder to convert into ad valorem equivalents. In such cases, the lowest bilateral tariff between partners is used as a backup, and data must be harmonized to the HS 2012 version for consistency.

Why is the trade data between countries sometimes mirrored?

Trade data is mirrored to account for discrepancies when one country reports imports, but the other does not report corresponding exports. In such cases, the import data is reversed, treating it as an export, to fill gaps and provide more complete trade data for analysis.

How does the harmonization of tariff data affect the ability to compare between economies?

The harmonization process ensures that tariff data is consistent across different time periods and economies. However, discrepancies can arise because some countries use additional codes beyond the six-digit HS classification. This makes it slightly harder to compare national tariff schedules, but the harmonized system helps minimize these challenges.