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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.

Macroeconomics --- Economics: General --- Taxation --- Exports and Imports --- Neoclassical Models of Trade --- Trade Policy --- International Trade Organizations --- International Agreements and Observance --- International Organizations --- Trade: General --- Economic & financial crises & disasters --- Economics of specific sectors --- Public finance & taxation --- International economics --- Tariffs --- Taxes --- Imports --- International trade --- Trade policy --- Trade agreements --- Currency crises --- Informal sector --- Economics --- Tariff --- Commercial policy --- Commercial treaties --- Uruguay

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This paper studies the effects of trade policy uncertainty on the extensive and intensive margins of trade for a sample of 65 exporters at the Harmonized System six-digit level. The paper measures trade policy uncertainty as the gap between binding tariff commitments under trade agreements (multilateral and regional agreements) and applied tariffs-what is also known as tariffs' water. The results show that trade policy uncertainty is an important barrier to exports and its effects are heterogeneous. On average and at the current level of tariff commitments, the paper estimates that the elimination of water, without any change of the applied tariff, would increase the probability of exporting by 6 percent and trade volumes by 1.3 percent. The negative impact of trade policy uncertainty on export participation is higher for countries with low-quality institutions and in the presence of global value chains. For a sample of new acceding countries, the analysis finds that removing water would boost the probability of trading by 50 percent and exports by 16 percent. The paper also estimates that the current system of commitments boosts trade by between 10 and 30 percent, compared with a world where at any moment tariffs could be raised to an arbitrarily high level.

Binding Overhang --- International Economics and Trade --- Non-Tariff Barriers --- Policy Space --- Tariffs --- Trade and Multilateral Issues --- Trade Liberalization --- World Trade Organization

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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.

Uruguay --- Macroeconomics --- Economics: General --- Taxation --- Exports and Imports --- Neoclassical Models of Trade --- Trade Policy --- International Trade Organizations --- International Agreements and Observance --- International Organizations --- Trade: General --- Economic & financial crises & disasters --- Economics of specific sectors --- Public finance & taxation --- International economics --- Tariffs --- Taxes --- Imports --- International trade --- Trade policy --- Trade agreements --- Currency crises --- Informal sector --- Economics --- Tariff --- Commercial policy --- Commercial treaties

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This paper shows that the institutional environment and the ability to export on time are sources of comparative advantage as important as factors of production. In particular, the ability to export on time is crucial to explain comparative advantage in intermediate goods. These findings underscore the importance of investing in infrastructure and fostering trade facilitation to boost a country's participation in production networks. Furthermore, the paper contributes to the so-called "distance puzzle" by showing that the increasing importance of distance over time is in part driven by trade in intermediate goods.

Bilateral Trade --- Capital Goods --- Comparative Advantage --- Economic Theory & Research --- End Use --- Environment --- Environmental Economics & Policies --- Exports --- Factors of Production --- Final Goods --- Free Trade --- Intermediate Goods --- International Economics and Trade --- Macroeconomics and Economic Growth --- Quality of Transport --- Trade Facilitation --- Trade Policy --- Transport --- Transport Economics Policy & Planning

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Zonder onderwerpscode: economie