Monitor Vol 39 08_Final_Nov08.pdf - tips

More documents

Recommendations

Info

Table 3: Preferences and Utilization Rates, All Goods Preference margin Preferential trade agreement T > 4 percent a r>8 percent a T> 12 percent a North American Free Trade Agreementb 87(1,239) 86.0(558) 82.8 (287) GSP c 50.2(1,297) 52,5 (91) 66.2 (44) Cotonou Agreement c 92.5(1,627) 94.3 (892) 96.4 (566) Note: Averages are unweighted. Numbers in parentheses are the number of tariff lines. a is the preference margin. b Computed at the six-digit Harmonized System tariff-line level with 2001 data. c Computed at the eight-digit Harmonized System tariff-line level with 2004 data for 92 countries (GSP) and 37 countries (Cotonou Agreement) qualifying for preferential market access. Source: Cadot, de Melo, and Portugal-Perez (forthcoming), table 2. Table 4: Tariff Peaks and the R-index North American Free Trade Agreement Restrictiveness-lndex value PANEURO Tariff peaks a 6.2 (257) 5.2 (780) Low tariffs b 4.8 (1.432) 3.9 (3,241) Total number of tariff lines 3.555 4.961 Note. Numbers in parentheses are numbers of tariff lines. Restrictiveness indexes are unweighted. a Tariff lines whose tariffts exceed three times the (JSP average. b tariffs lines whose tariffs are less than one-third of the GSP average. 5 Trade & Industry Monitor Source: Cadot, de Meio. and Portugal-Perez 200I>, table 3 compared with only 10 for the GSP, which also excludes the textile and apparel sector (chapters 50-63) from the 10 percent tolerance rule. Table 3 shows that the evidence of hidden costs goes beyond the textile and apparel sector, where differences in uptake at similar margins may reflect composition effects. Define the preferential margin T by the normalized difference between most favored nation and preferential tariffs (2) Table 3 shows that, contrary to expectations, when the preferential margin rises, utilization rates fall for NAFTA. This suggests that an omitted variable is positively correlated with tariffs but negatively correlated with preference utilization. Rules of origin are an obvious culprit. Table 4 shows that lines with tariff peaks (that is, with tariffs more than three times the average), where preferential margins are highest, do have higher R-index values than those with low tariffs. This relationship holds for both NAFTA and PANEURO. Figure 1 confirms the patterns in tables 2-4; utilization rates do not really increase with tariff-preference margins. For NAFTA, they actually decrease due largely to the influence of the textile and apparel sector, where tariff preferences are deep and rules of origin stringent. 3. Quantifying the Effects of Rules of Origin Although product-specific rules of origin, as already noted, take a variety of legal forms (changes of tariff classification, value content rules, technical requirement, and the like), they can all be represented conceptually as floors on domestic value added. Suppose that a producer in Madagascar wishes to sell a shirt under preferential access in the European Union, this shirt is made with both originating intermediate goods (that is, intermediate goods that are either local, EU-made, or imported from other qualifying countries, according to cumulation rules) and nonoriginan’ng intermediate goods, say from Bangladesh, China, or India, Now assume that to satisfy origin requirements (whether change of tariff classification, value content rule, or technical requirement), the Why OECD countries should reform Rules of Origin
Trade Policy Figure 1: Average Utilization Rates for Different Preferential Margin Thresholds GSP NAFTA 120 6 Trade & Industry Monitor 43.7 86.1 50.2 87 56.8 86.4 52.5 86 71.4 84.8 66.2 82.8 46.8 81.9 45.4 77.8 55.9 78.5 54.7 76.6 Minimum preferential margin (percent) 100 80 60 40 20 0 2 4 6 8 10 12 14 16 18 20 Average utilization rate (percent) Cotonou Agreement GSP NAFTA Note: Cotonou Agreement includes 37 countries, computed at the eight-digit Harmonized System level; GSP includes 92 countries, computed at the eight-digit Harmonized System level: and the NAFM includes 3 countries, computed at the six-digit Harmonized System level. Data are unweighted averages computed at the most disaggregated tariff-line level (table 2). Averages are based on more than 100 observations except for GSP (minimum of 27 observations for preference margins. equal to or greater than 20 percent). Source: UNDP, 2003: IEA, 2000 Malagasy producer uses a higher proportion of originating inputs than would be the case in the absence of rules of origin (which is precisely the rule’s purpose). Let superscript R denote a choice restricted by rules of origin. Unrestricted value added is va i , and restricted value added is va R i , so rules R of origin content reduces to va i > va i . whether or not it explicitly takes the form of a value content rule. Thus, conceptually a value content rule can be thought of as a generic rule that can play the role of all others by quantifying the objective common to all. This principle is important because it underlies an approach to rules of origin reform, discussed later, that substitutes a value content rule—possibly, although not necessarily, at differentiated rates across products—for the current array of instruments. It also highlights how information on rules of origin restrictiveness can be aggregated across instruments and subsumed into a single restrict iveness index, which itself can be then aggregated across product lines by averaging. Five results emerge from the quantitative analysis of the relationship between rules of origin restrictiveness and preference uptake: • For a given preference margin a higher restrictiveness index translates into a lower utilization rate, all other things being equal. • For a given restrictiveness index a higher tariff-preference margin translates into a higher utilization rate, all other things being equal. • The compliance decisions of individual firms are binary; how the decisions aggregate into industry-wide utilization rates depends on the unobserved distribution of compliance costs. • A lower pass-through of tariff preferences for the least developed economies (due to low bargaining power) implies lower uptake of preferences, all other things being equal. • Improvements in the uptake of preferences can be obtained either from reductions in the restrictiveness of rules of origin or from costreducing administrative simplifications (such as transparent and uniform criterion).
Page 1 and 2: TIPS T R A D E & I N D U S T R Y M
Page 3 and 4: TIPS Executive director: Stephen ha
Page 6 and 7: trade policy 1 Why OECD countries s
Page 8 and 9: Table 1: EU and U.S. Examples of Re
Page 12 and 13: The third result implies that the s
Page 14 and 15: where “NAFTA markup” is the per
Page 16 and 17: exports toward already high levels
Page 18 and 19: in a multiregional trade model. Des
Page 20 and 21: value added in least developed econ
Page 22 and 23: 11. The decline in exports to the p
Page 24 and 25: trade policy 19 Global Trade Models
Page 26 and 27: depending on whether or not the dat
Page 28 and 29: Although these three studies examin
Page 30 and 31: countries are vulnerable to trade s
Page 32 and 33: OECD data, Gurgel et al. (2006) sho
Page 34 and 35: The credibility of CGE models will
Page 36 and 37: 9th Annual Conference on Global Eco
Page 38 and 39: industrial policy 33 Industrial Pol
Page 40 and 41: 1991-2004 when South Africa’s per
Page 42 and 43: of clothing and textiles 14 . These
Page 44 and 45: will need to be embodied in new wel
Page 46 and 47: Second, the constraints imposed by
Page 48 and 49: Edwards, L. and Lawrence, R. (2006)
Page 50 and 51: environmental policy 45 Biofuels, a
Page 52 and 53: By 2011 around 20% of Brazilian bio
Page 54 and 55: 5. Starving the People to Feed Cars
Page 56 and 57: In policy terms, improving the bene
Page 58 and 59: environmental policy 53 Commerciali
Page 60 and 61:
(PMS) with ethanol and help cushion
Page 62 and 63:
The low levels of modern (commercia
Page 64 and 65:
oil. Efforts are in place to establ
Page 66 and 67:
since it is the first barrier that
Page 68 and 69:
plant size. The optimum plant size
Page 70 and 71:
the local environment). On the posi
Page 72 and 73:
15 World Bank, world development in
Page 74 and 75:
environmental policy 69 Climate cha
Page 76 and 77:
individual African countries are re
Page 78 and 79:
Table 3: Fossil fuel production and
Page 80 and 81:
The re-injection process is estimat
Page 82 and 83:
References 1 IPCC, 2005, IPCC Speci
Page 84 and 85:
food policy 79 Rising food prices:
Page 86 and 87:
But food prices have risen since th
Page 88 and 89:
9. The Medium-term Response Rising
Page 90 and 91:
food policy 85 The World Food Situa
Page 92 and 93:
Figure 1: World cereal production,
Page 94 and 95:
trade liberalization and the integr
Page 96 and 97:
Supply and demand changes do not fu
Page 98 and 99:
Figure 9: Brazil: Ethanol and sugar
Page 100 and 101:
Great technological strides are exp
Page 102 and 103:
Figure 12: Modeling the actual pric
Page 104 and 105:
Figure 14: Changes in the Global Hu
Page 106 and 107:
4. The acute risks facing the poor
Page 108 and 109:
OECD (Organisation for Economic Co-
Page 110:
105 10. Currently, the Monitor is d
show all

Monitor Vol 39 08_Final_Nov08.pdf - tips

Create successful ePaper yourself

Delete template?

Save as template?