Tariffs of big developing countries can hurt the poorest
By Charles Krakoff
Published: April 8 2006 03:00 | Last updated: April 8 2006 03:00
From Mr Charles Krakoff.
Sir, Alan Beattie ("Forget tariff cuts, the poor need trade facilitation," April 1/2) correctly identifies the critical importance for poor countries of trade facilitation, and the foreign aid and technical assistance that must often accompany it. Fragmented and disorganised internal markets, corrupt tax and customs administrations, poorly staffed and equipped standards organisations and oppressive bureaucracies are far more serious obstacles to market access than import tariffs or even export subsidies applied by the rich countries.
Mr Beattie's article, however, fails to mention another critical obstacle to increased market access for poor countries - the high tariffs imposed by many other poor and middle-income countries. India, for example, is the world's largest consumer and second-largest producer of sugar.
Until 1999, India imported up to 10 per cent of the sugar it consumed but in 2000 it raised the import tariff from 40 to 60 per cent and imposed a surcharge of about $18 per tonne. Imports fell to zero, where they have remained, hurting relatively efficient sugar producers such as Zambia, Malawi and Mozambique.
Sugar may be a special commodity, and India may be one of the highest-tariff countries in the world, but other examples can be found. Nigeria, a very poor country with a population of about 120m, imposes an average most-favoured nation (MFN) import duty of 30 per cent. Iran, a middle-income country with over 70m consumers, applies an average import duty of 27.3 per cent. Bangladesh levies an average tariff of 19.1 per cent.
By way of comparison, the European Union average MFN tariff is 4.2 per cent and that of the US is 3.9 per cent. Japan, that paragon of protectionism, applies an average tariff of just 3.2 per cent. Still, most poor countries focus their efforts in trade negotiations on trying to exact further tariff reductions from the rich countries while ignoring the far bigger trade barriers imposed by big developing countries.
The poorest countries have much more to gain than to lose from trade liberalisation that accelerates tariff reductions in poor countries (including their own). Without proper trade facilitation, poor countries cannot export even to those markets that are largely open to their products. But without trade liberalisation in developing countries, more than half of the world's most attractive markets will remain closed to them.
Charles Krakoff,
Managing Partner,
Koios Associates LLC - Emerging Markets Investment and Trade,
Acton, MA 01720, US
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