The common perception in developed market economies is that we
live in a globalized world where trade barriers for developing
countries have all but disappeared. The Doha Development Agenda,
recent bilateral and regional agreements and voluntary reductions
in trade barriers favouring least developed and developing
countries are seen as having significantly enhanced market
access.
Developed market economies have taken steps to improve market
access for developing countries. They have expanded preferential
access for goods from developing countries and reduced tariffs on
goods of interest to developing countries.
Unfinished business
Yet, business people and trade policy-makers in developing
countries frequently voice their concern about what they perceive
as persistent or even increasing access barriers in their export
markets. They argue that protection levels are underestimated. Many
protectionist instruments - such as specific tariffs, antidumping
measures, tariff quotas and a plethora of non-tariff barriers - are
not taken into account, they say.
Do they have a case, and is market access 'unfinished business'
or even a deepening problem? Recent research by ITC - based on
Market Access Map, ITC's new market access database - suggests that
the answers to these questions are yes.
Three hurdles are blocking the track to better market access.
First, specific tariffs are widespread. They are less transparent
than ordinary (ad valorem) tariffs and they tend to discriminate
against developing countries. Second, commodity prices have
plummeted. If tariffs were ad valorem (a percentage of total
value), the duties actually paid would have declined with the
prices. Since specific tariffs are so important - especially for
commodities - in practice, developing countries and least developed
countries (LDCs) are witnessing an effective rise in protection.
Moreover, the share of LDC exports with duty-free access is
decreasing. Third, non-tariff barriers (food safety standards,
environmental certification, etc.) are growing; in the case of
LDCs, they are particularly dramatic.
First hurdle: Specific tariffs
Specific tariffs - levied on quantity rather than value - are
the first hurdle to better market access. The negative impact of
specific tariffs (more common since the Uruguay Round ended) offset
the benefits of lower ad valorem tariffs.
Most countries levy tariffs in ad valorem terms - as a
percentage of a product's total value. But some countries use
specific tariffs instead. This has been especially the case for
agricultural products, which remain major exports for developing
countries and LDCs in particular. The reason for this is that
during the Uruguay Round countries agreed to convert quotas
(quantitative restrictions) and variable levies for agricultural
products into tariffs.
Specific tariffs tend to discriminate against exports from
low-income countries, whose producers often specialize in the lower
price-quality segment of export markets.
While ad valorem tariffs are transparent (say, 20% of import
value), specific tariffs are not. When product prices and exchange
rates fluctuate, ad valorem tariffs fluctuate in their amounts
too.
Specific tariffs, on the other hand, remain tied to quantity.
When commodity prices fall, specific tariffs do not fluctuate. Thus
market access becomes doubly difficult when prices go down.
Protection is equal for a US$ 20-per-tonne specific tariff and a
20% ad valorem tariff, when the price equals US$ 100 per tonne. If
the price falls to US$ 50 per tonne, however, the same specific
tariff is equivalent to a 40% protection level.
To assess overall protection levels correctly, then, one must
measure the combined effect of ad valorem tariffs and specific
tariffs. To combine them, one must first calculate the ad valorem
equivalent of specific tariffs (and other related measures).
Second hurdle: Falling commodity
prices
Commodity prices are currently at their lowest level since the
mid-1990s. All commodity groups (except petrol) saw prices fall
significantly. So even when countries reduce specific tariffs, this
may not translate into lower barriers, if prices are falling
faster.
ITC examined whether tariff protection actually declined since
the Marrakech Agreement (which laid the foundations for the world
trading system) was signed. ITC's analysis covered the period from
1996 to 2001, and focused on agricultural products, textiles and
clothing exports to OECD (Organisation for Economic Co-operation
and Development) countries, from developing countries and LDCs.
Agriculture
ITC's findings suggest that expectations have not been fulfilled
in these three sectors. According to the spirit of the Uruguay
Round and excluding price effects, tariffs for LDC agricultural
exporters should have declined by two-thirds between 1996 and 2001.
Because of declining commodity prices, however, ad valorem
equivalents came down only by a quarter, namely from 5.1% in 1996
to 3.9 % in 2001. Moreover, effective agricultural protection
levels have varied up to 50% from one year to the next as a result
of fluctuating commodity prices and the application of specific
tariffs.
Textiles and clothing
For LDCs' textiles and clothing exporters, tariff protection in
terms of ad valorem equivalents has actually increased: barriers in
OECD countries rose from 3.0% to 5.5% for textiles and from 7.5% to
8.3% for garments from LDCs. For developing country textiles and
clothing exporters, barriers declined marginally - less than 10% of
the 1996 level.
Third hurdle: Non-tariff
barriers
Quantifiable tariff barriers aren't the only hurdle for
developing country exports. A recent ITC study shows that LDCs are
the most exposed to non-tariff barriers (see Trade
Forum 2/2001). Examples include plant and animal
health standards, food safety standards, environmental
certification and other such export quality standards.
A staggering 40% of LDC exports are subject to non-tariff
barriers. For developing and transition economies and developed
countries, the figure is only 15%.
Even with preferential agreements that grant LDCs duty-free
access to markets, non-tariff barriers may prevent these countries
from entering those markets. This may oblige exporters to diversify
into markets with fewer non-tariff barriers, but which may have
higher tariff rates. In fact, between 1996 and 2001, the share of
duty-free LDC exports in their total exports - excluding oil and
arms - fell sharply from 81% to 69% (see table on LDC exports).
This has hardly been in line with the spirit of the Uruguay
Round.
A fresh look
Exporters from developing countries clearly face an uphill
battle:
- Widespread specific tariffs discriminate against low-cost and
low-price suppliers.
- Falling commodity prices are a double curse: not only do
exporters earn less foreign exchange, but they face higher
effective market access barriers.
- Non-tariff barriers are multiplying, and especially affect LDC
exports.
It is true that genuine efforts towards improving market access
for low-income countries have been made. And market access
conditions are not the most important determinant of international
competitiveness.
Yet market access has hardly improved for exporters of
agricultural products, textiles and clothing from developing
countries. LDCs are losing on all fronts: their effective market
access barriers have actually become higher, the share of their
exports that enter their target markets duty-free is declining and
they are particularly exposed to non-tariff barriers.
The above evidence shows the need to take a fresh look at
traditional perceptions about market access. Why? First, there are
several deep-rooted factors at work that undermine market access
conditions for developing country exporters. Second, these factors
are difficult to capture and are therefore often omitted from
policy analysis. Hence, third, there is a strong case to enhance
the analytical and negotiation capacity of trade policy-makers, the
business community and other stakeholders in developing countries
to ensure that the Doha Development Agenda lives up to its
name.
Declining commodity prices
Source: IMF, International Financial Statistics, 2003
Market access: The real picture
LDCs and developing countries face surprising market access
barriers in OECD countries for agriculture, textiles and clothing
exports. Below are protection levels for the period 1996-2001. The
calculations are based on ad valorem tariffs and specific tariffs
(translated into ad valorem equivalents). The overall levels have
not declined significantly contrary to Urugay Round expectations.
In some cases (textiles and clothing for LDCs) they have actually
increased.
Source: ITC calculations based on WTO, UNCTAD and ITC sources,
2003
LDCs: Are they benefiting from duty-free
access?
Source: ITC calculations based on WTO, UNCTAD and ITC sources,
2003
ITC's Market Access Map analyses entry
barriers
ITC's Market Access Map assists the business community and
policy-makers in developing countries to participate more
effectively in international trade and to get the most out of trade
negotiations.
This comprehensive database of market access barriers
covers:
- over 160 countries;
- ad valorem and specific tariffs, tariff quotas and antidumping
duties;
- major preference schemes;
- calculations of bilateral ad valorem equivalents at the
tariff-line level; and
- options to build scenarios on how tariffs change under
different multilateral liberalization approaches and
formulas.
Market Access Map data and analysis are available as:
- country-specific Market Access Profiles on CD-ROM featuring all
market access barriers faced by exporters from one particular
country, plus scenario building;
- product-specific market access information in TradeMap (ITC's
web site with trade statistics for international business
development) and a dedicated Market Access Map web site
(operational end-2003); and
- in-depth, tailor-made analysis.
ITC developed Market Access Map in close collaboration with
the French Economic Research Institute (CEPII), UNCTAD and WTO. For
more information, contact ITC's Market Analysis Section at macmap@intracen.org
Mondher Mimouni (mimouni@intracen.org) is an
ITC Market Analyst, Friedrich von Kirchbach (vonkirchbach@intracen.org)
is the Chief, ITC Market Analysis Section. Natalie Domeisen
contributed to the development of this article.