New Tariff Analysis Urges Aggressive WTO Tariff Reduction 

Washington, DC – The National Foreign Trade Council (NFTC) today issued an updated set of recommendations on the Doha Development Agenda and a new tariff study that highlighted the critical importance to US exporters and advanced developing countries of reducing and eliminating industrial tariffs as a chief outcome of the Doha Agenda. The two papers will be a topic of discussion during an NFTC delegation visit next week to the WTO headquarters in Geneva. 

“This is a make or break year for the Doha Round.  The NFTC has updated its 2002 set of recommendations, which continue to focus on achieving an ambitious outcome across all major areas of the negotiation.  We view this overall objective as vital to the continued credibility and relevance of the WTO in advancing global trade liberalization and trade governance,” stated Mary Irace, NFTC Vice President for Trade and Export Finance and Co-Chair of the NFTC Doha Round Working Group. 

The NFTC is also releasing a separate new NFTC tariff study, prepared by the International Trade Services Corporation.  It reveals what is at stake in the negotiations on non-agricultural market access (NAMA).  According to Irace, “the tariff study’s findings demonstrate that the Doha Round must aggressively cut non-agricultural tariffs for any real new market access for US exporters and major developing countries.  A Swiss tariff-cutting formula and commitment to eliminate tariffs on a range of sectors among a critical mass of countries are crucial in the NAMA negotiations.  Tackling non-tariff barriers must also be a core outcome of the Doha Round on industrial goods.”

More specifically, the tariff analysis looked at the trade, and tariff rates, for 50 priority manufactured exports of NFTC members companies to five industrialized-developing countries — Brazil, Egypt, India, Malaysia and South Africa (Intra-Five).  It also looked at the five top manufactured exports from these five major developing countries and their trade, and tariff rates, in these products with each other. The countries were selected due to their importance as leading industrial-developing nations, their significant contribution to world trade, and their influence within the WTO negotiations. 

The study’s key findings include:

–         In 2003, NFTC member companies exported more than $26.5 billion of the selected products worldwide, of that only 3.7 percent ($922 million) was to the five developing countries.

–         More than 70 percent of the US exports studied to these countries are potentially exposed to the risk of duties increasing to 20% or higher.

–     If the formula for NAMA tariff reductions results in cuts of less than 75% off the bound rate, there would likely be no benefit of tariff liberalization on more than 60% of the trade in the selected priority US exports into the five industrialized-developing country markets.  

–         Applied duties as high as 160% are contributing to limited trade among the Intra-Five countries.  They exported more than $36.5 billion to the rest of the world and $1.3 billion to their free trade partners, but only $361 million – less than 1% — to each other.

–         High bound tariffs and unbound tariffs create uncertainty for exporters and importers in the Intra-Five countries, with almost 70% of the tariff lines in the analysis facing the possibility of unstable or potentially prohibitive tariffs among each other.

–         Ambitious cuts in bound rates are necessary for real market access opportunities for top exports among the Intra-Five countries. If the NAMA formula cuts bound tariffs by only 50%, more than half the sample’s applied tariffs would likely not be reduced at all.

“The NFTC tariff analysis highlights the potential for growth in both US and South-South trade through ambitious tariff cuts in NAMA.  It also underscores the importance of achieving substantial reduction and elimination of tariffs in major developing countries for a commercially meaningful result in the Doha Agenda on market access for US exporters,” added Irace.    

The National Foreign Trade Council (www.nftc.org) is a leading business organization advocating an open, rules-based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves 300 member companies through its offices in Washington and New York.

Statement by Bill Reinsch, President, National Foreign Trade Council

Washington DC – In the following statement, Bill Reinsch, President of the National Foreign Trade Council, praised President Bush’s announcement today that the United States will comply with the WTO panel ruling that U.S. Section 201 steel safeguard tariffs violate WTO rules, eliminating the disputed tariffs. 

“Today’s announcement goes a long way in showing the world that the United States does not simply use its world leadership to ‘point its finger’ but also to abide by the rules they help to set.

“As the NFTC urged weeks ago, the U.S. today set the example for all other countries seeking to ensure an effective dispute settlement process at the WTO.  The step the U.S. takes today in eliminating the tariffs demonstrates this country’s dedication to the stability and orderly function of the WTO.  This is critical to encouraging better and more open trade policies throughout the world. 

“Building on today’s announcement, the U.S. and the rest of the WTO member nations should now focus on ensuring the successful and timely conclusion of the Doha Round.  The NFTC calls on U.S. officials to use their prominent global position to boost efforts in getting those talks back on track.  The future of the WTO – and better global trade practices – depend on it.”

The National Foreign Trade Council is a leading business organization advocating an open, rules-based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves 400 member companies through its offices in Washington and New York.

Paper Concludes Tariffs are a Significant Tax on Economic Development

Washington, DC – The National Foreign Trade Council (NFTC) released today a background paper on the positive benefits of industrial tariff liberalization in spurring the global economy and eliminating a significant tax on development. The paper, authored by Dartmouth professor Matt Slaughter, examines the major concerns of developing countries that have been raised since the NFTC issued its March 2001 proposal calling for the gradual elimination of industrial tariffs as a centerpiece objective of the WTO Doha Development Agenda negotiations, combined with the elimination of major non-tariff measures.

“With the WTO Cancun Ministerial just weeks away, this new background paper provides further evidence of the major benefits to developing countries of multilateral tariff liberalization.  The Doha Development Agenda offers a rare opportunity to gradually eliminate what is essentially a tax on development and reignite the global economy as an engine of growth and prosperity.  The Cancun Ministerial should reinforce the importance of achieving an ambitious level of tariff liberalization for non-agricultural products as a chief outcome of the Doha Agenda,” according to Mary Irace, NFTC Vice President for Trade and Export Finance.

The study looks at the three most frequently cited concerns — potential government revenue loss, erosion of trade preferences, and competing without tariff protection — and offers factual evidence as to why such concerns are misplaced.  The report finds that on balance developing countries stand to gain substantially, not lose, from tariff elimination.  Some of the key findings include:

 • The reduction and gradual elimination of tariffs would stimulate, rather than reduce, tariff and other revenue sources.  It cited, for example, a study which found that a 1% increase in Chinese tariffs resulted in a 3% increase in tariff evasion — with even larger magnitudes at higher tariff rates.

• Comprehensive tariff reduction would have little impact on developing country exports to preference-granting countries.  Any impact would be offset by the costs associated with GSP programs and the fact that preferences are already disappearing due to growing bilateral and regional free trade agreements. Moreover, preferences deter countries from pursuing beneficial market opening measures.

• So-called infant industry arguments harm, not help, industrial development, which is backed up by a wealth of evidence.  Tariff and other trade liberalization measures provide access to new technology and needed foreign capital, among other important benefits.

“The primary objective of the paper is to examine the concerns raised by certain developing countries about tariff elimination and address misconceptions.  It finds that lowering and eventually doing away with tariffs would open up markets further than ever before and provide substantial benefits to developed and developing nations.  Developing countries would gain the most from gradually eliminating their own high tariffs, because tariffs deter developing country growth, as well as their ability to attract needed foreign direct investment and stimulate trade expansion with other developing countries.  It is worth noting that 70 percent of developing country tariffs are paid to each other,” stated Irace.

The paper also cites three case studies of developing nations that have benefited from tariff liberalization and concludes that the benefits of liberalization far outweigh the potential costs.  For example, Malaysia is found to be “widely regarded as one of the few developing countries that have been highly successful in raising their shares in world manufacturing exports and value added through participation in global production networks, such as those in electronics and computers.”  Malaysia’s strength in the information and communication technology (ICT) industries is in large part due to the WTO’s 1997 Information Technology Agreement, which eliminated all ICT tariffs among all signatory countries, spurring competition and innovation.

For copies of the study, please go to http://www.nftc.org/default/trade/NFTC%20Tariff%20Paper%200803.pdf

The National Foreign Trade Council is a leading business organization advocating an open, rules-based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves 350 member companies through its offices in Washington and New York.

National Foreign Trade Council Calls for Win-Win Strategy for Eliminating Tariffs

 Washington DC – The National Foreign Trade Council (NFTC) applauds the New Zealand government for tabling a bold proposal on industrial tariffs at yesterday’s meeting of the WTO Negotiating Group on Non-Agricultural Market Access.

“The NFTC welcomes the New Zealand proposal calling for the progressive elimination of industrial tariffs among all WTO members, with the exception of least developed countries,” said Mary Irace, NFTC Vice President for Trade and Export Finance. “While there are differences between New Zealand’s proposal and the NFTC’s tariff-elimination proposal issued earlier this year, it is strategic in its vision, and it demonstrates the bold leadership that is essential to a successful conclusion of the Doha Development Agenda.”

“During an NFTC delegation visit to Geneva last week, the number one message to WTO member delegations was to set ambitious negotiating objectives in all key areas of the negotiation,” Irace added.

“The multilateral elimination of industrial tariffs, combined with meaningful commitments on non-tariff barriers, would ensure the multilateral trading system remains relevant in this era of proliferating bilateral and regional free trade agreements,” according to Irace. “With half of world trade already duty free and growing regionalism, the WTO cannot afford to wait to complete the unfinished business begun by the GATT in 1947 on industrial tariffs,” she said.

The prospect of eliminating tariffs on industrial goods “shows NFTC member companies that the WTO negotiations hold the potential to deliver an improved international environment for trade and investment,” Irace noted.

“With the U.S. and global economy still struggling for renewed growth, the New Zealand proposal would be a huge shot in the arm for the global economy,” Irace said. “The fact that the volume of world merchandise trade in 2001 declined for the first time since 1982 and world merchandise output declined for the first time since 1991 underscores the critical significance and positive impact of eliminating industrial tariffs globally.”

Developing countries stand to gain the most from this proposal through greater market access to both developed and developing countries, and by ensuring developing countries are not left behind by growing regionalism. Just as important are the implications of such a proposal on other key areas of the negotiation, Irace noted.

“A bold approach on tariffs will create pressure for a similar ambitious approach on agriculture, which is the number one objective for much of the developing world,” Irace said. “WTO members need to set the bar high in these negotiations to overcome the obstacles to continue down the road to success.”

Earlier this year, the NFTC urged WTO members to embrace a bold global zero approach on industrial tariffs in its paper entitled Vision 2005: Free Trade and Beyond, Recommendations for the Doha Development Agenda. The paper also lays out its recommendations in other key areas of the Doha Agenda, including agriculture, services, trade facilitation and rules.

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