Trade Policy Note Final-rev08 - Development
Trade Policy Note Final-rev08 - Development
Trade Policy Note Final-rev08 - Development
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Such tariff policy should ensure that industries clearly perceive that high tariff<br />
protection will not be maintained indefinitely and industries that do not become<br />
competitive will be allowed to disappear. Moreover, it is important to assess whether<br />
tariffs are really forward looking and for genuine infant industry protection or<br />
whether they are actually for the protection of dying industries or those which have no<br />
chance of becoming viable and internationally competitive. They should be favoured<br />
for forward looking industries and purposes, not for dying or unviable industries.<br />
Despite these caveats, however, developing countries should ensure that they retain<br />
the ability to shift tariff protection from low to intermediate to high technology<br />
sectors as they move up the technology ladder, through a system of “cascading”<br />
tariffs. This could be achieved by not binding tariffs, or binding them at very high<br />
levels, or seeking exceptions for strategic sectors in the application of any tariff<br />
reduction formula. Ways should be sought to introduce more flexibility to tariff<br />
bindings accepted by countries at lower levels of industrialization, for example, a<br />
streamlined and more liberal interpretation of GATT Article XVIII:C which permits<br />
developing countries to deviate from their multilateral commitments, if necessary for<br />
the “establishment of a particular industry”. 21 While it is true that some countries,<br />
especially LDCs, may not have all the necessary prerequisites to use tariff policy<br />
effectively in the manner described because of a small internal market or no clearly<br />
identifiable dynamic manufacturing industry, they should retain the policy space to<br />
pursue such strategies in the future in case either their circumstances change, or they<br />
are able to enter regional integration agreements with other developing countries<br />
which make such policies and industries viable.<br />
Successful countries have used tariff treatment in tandem with other trade measures<br />
(quantitative restrictions, subsidies) and investment regulations (performance and<br />
ownership requirements, incentives) to achieve this upward spiral. As the WTO has<br />
reduced the scope to apply many of these measures (e.g. export subsidies, local<br />
content requirements, QRs), tariff policy has become relatively more important as a<br />
tool for industrialization in developing countries.<br />
21 This possibility was highlighted in the Decision on Implementation Issues and Concerns, annexed to<br />
the Doha Ministerial Declaration.<br />
23