The TPP and Tariffs

Recently, the U.S. Trade Representative’s office has begun pushing lower tariffs as a crucial part of the Trans Pacific Partnership (TPP).  For me, this is a welcome development, because I worry that the focus on some of the other aspects of the TPP could obscure the positive impact of eliminating or reducing tariffs.  In a press release related to a report issued last week, USTR put it like this:

The United States has one of the most open economies in the world, with an average applied tariff of 1.4%.  In fact, nearly 70% of the products we import do not face any tariffs at all.  However, when our exporters work to sell Made-in-America goods to other countries, they’re burdened with tariffs over twice as high on average.  American manufactured goods face tariffs of up to 100% on certain goods in TPP markets, and American agriculture exports face tariffs over 700% on some products.

That’s all sort of true, but there’s more to the story.  To get a better sense of tariff levels for the TPP countries, I went to a publication from the World Trade Organization called World Tariff Profiles.  Tariffs are a little complicated, because there are individual tariffs for thousands of products, and they are lower for some countries than for others due to various free trade agreements.  But a good general measure is the average applied tariff.  Here is that tariff rate for all of the TPP parties except Brunei (for which there was no data) for 2013, sorted from lowest to highest, as well as the two general product categories where tariff levels were the highest: 

Country

Average applied tariff (%)

Highest tariffs (%)

Singapore 0.2 Beverages & tobacco (21.3), all else is duty-free
New Zealand 2 Clothing (9.7), Transport equipment (3.2)
Australia 2.7 Clothing (8.9), Transport equipment (4.8)
Peru 3.4 Clothing (11.0), Textiles (8.4) 
United States 3.4 Dairy products (20.5), Beverages & tobacco (18.9) 
Canada 4.2 Dairy products (248.9), Animal products (24.5) 
Japan 4.9 Dairy products (135.3), Cereals & preparations (52.0) 
Chile 6 Flat 6.0% applied duty across almost all products 
Malaysia 6 Beverages & tobacco (105.5), Transport equipment (11.1)
Mexico 7.9 Sugars & confectionery (57.9), Animal products (36.0)
Vietnam 9.5 Beverages & tobacco (42.8), Coffee & tea (26.7)

Note that even where average tariffs are low, there remain some categories of products for which tariffs are fairly high.

The United States does OK in this comparison, although it is not right at the top (I’m not sure why the USTR average applied tariff figure differs from the World Tariff Profiles figure).  Chile deserves some special praise, because while its tariff is not the lowest, it charges the same tariff for virtually all products, which reduces the burden on customs officials of classifying imports. 

The lesson I draw from all this is that there are still plenty of tariffs out there, imposed by the U.S. and others, and it would be great if trade agreements could do something about it.

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