Cover IMF Working Papers
Buy Book in Print
Trade Policy Implications of a Changing World: Tariffs and Import Market Power
Author:
Adam Jakubik
Search for other papers by Adam Jakubik in
Current site
Google Scholar Close
,
Alexander Keck
Search for other papers by Alexander Keck in
Current site
Google Scholar Close
, and
Roberta Piermartini
Search for other papers by Roberta Piermartini in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 2023: Issue 005
Language:
English
Publication Date:
13 Jan 2023
DOI:
https://doi.org/10.5089/9798400224324.001
ISBN:
9798400224324
ISSN:
1018-5941
Pages:
20
Keywords:
trade agreements; trade policy; terms of trade; import market power; WTO system; WTO member; tariff commitment; trade policy implication; WTO's negotiation function; Tariffs; Imports; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (2.3 MB) Download Epub
Economic theory suggests that countries’ tariff commitments in trade agreements reflect their import market power at the time of negotiations. However, as countries grow, their market power in different sectors can change in unforeseen ways and their commitments may no longer reflect changed economic conditions. Using a newly built dataset of pre-Uruguay Round applied tariffs and relying on the theoretical framework of the terms-of-trade motive for trade agreements, we estimate hypothetical tariff commitments under current levels of market power and compare them with actual tariff commitments. We find that lower tariff commitments required to reflect current economic conditions would amount to a reduction in annual tariff costs of up to $26.4 billion – equivalent to nearly 10% of global tariff costs. Our results reveal substantial heterogeneity between countries and sectors. The sectors with the largest potential tariff cost reductions are vehicles (HS 87) and machinery and appliances (HS 84-85). Product-level tariff reductions would range from 0 to 18.5 percentage points and are on average largest for China. In the past, the GATT/WTO system has updated tariff commitments through periodic rounds of negotiations, and our findings support the revival of the WTO's negotiation function in this area.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund