III. TARIFF ESCALATION

III. Tariff escalation 9

Tariff escalation will also decline.

(a) Substantial reductions of tariffs, the rolling back of tariff peaks and the removal of tariff escalation

Reductions of tariff peaks and tariff escalation facing these countries exports would be important in this regard.

The study analyses the tariff situation for developing country exports and focuses on two major aspects (a) tariff peaks and (b) tariff escalation.

It was noted that numerous tariff and non tariff barriers remained, as well as tariff peaks and escalation, which affected developing countries exports.

Tariff escalation occurs if tariffs rise with stages of further processing.

It was also noted that numerous tariff and non tariff barriers remained, as well as tariff peaks and escalation, which affected developing countries exports.

Notwithstanding the efforts made in reducing quot tariff escalation quot and quot tariff peaks quot , these problems still remained.

Tariff Escalation and Environment, OECD Working Papers, vol.V, No. 10, Paris 1997.

There is also a strong tendency of tariff escalation for processed products.

NAMA It was recognized that all countries have a positive interest in seeking the reduction of tariff peaks and tariff escalation, as well as non tariff barriers.

Tariff Escalation, Note by the WTO Secretariat, WT CTE W 25, Geneva, 22 March 1996.

In outlining the negative effects of tariff escalation in section I.A of the report, more attention might have been given to the consideration of the links between MFN and preferential regimes, since the existence of preferential margins in relation to tariff levels mitigated the effects of tariff escalation.

4. However, significant non tariff and tariff barriers and high variance, with tariff peaks and tariff escalation, still affect a notable range of products and sectors, particularly ones of export interest to developing countries, including the least developed countries.

In the case of manufacturers, tariff peak and tariff escalation were a source of concern, as they discourage developing countries from developing higher value added activities.

To that end, the issue of tariff peaks and tariff escalation as regards products of special export interest to African countries needs to be adequately addressed.

Nevertheless, scope remains for the liberalization and rationalization of tariffs in non agricultural goods, particularly for the removal of tariff bias, tariff escalation and tariff peaks affecting developing country exports in their major markets.

The agricultural sector is protected through high tariffs, tariff picks, tariff escalation and non tariff barriers in many developed countries, and market access is often denied to products from developing countries, including landlocked developing countries.

In this regard it is urgent to eliminate high tariffs, tariff picks, tariff escalation, non tariff barriers, export subsidies and to substantially reduce trade distorting domestic support for protecting the agricultural sector of developed countries.

(a) Substantial reductions in all tariffs, the rolling back of tariff peaks and the removal of tariff escalation, which still affect a notable range of products and sectors

Several emphasized the actual shortcomings of the agreements the lack of tariff cuts for 22 per cent of the sensitive imports for the developing countries, and the continued existence of tariff peaks, if not tariff escalation.

Regarding tariff barriers, a number of products of export interest to developing countries remain subject to peak rates and tariff escalation in various markets (see box on peak tariffs).

7. As for non agricultural products, we call for reduction or, as appropriate, removal of non tariff barriers, tariff peaks, high tariffs and tariff escalation to enhance market access, in particular for products of export interest to developing countries.

A relatively high degree of tariff escalation in most product groups, again particularly those of export interest to developing countries

In an attempt to capture these considerations, tariff escalation is frequently measured in terms of Effective Rates of Protection (ERP).

The FAO study concludes that tariffs and tariff escalation may present an important problem for diversifying exports of developing countries.

The Impact of the Uruguay Round on Tariff Escalation in Industrial Products, Jostein Lindland, FAO, ESCP No. 3, Rome, April 1997.

(a) Trade distorting policies and practices, including tariff and non tariff barriers, tariff escalation and obstacles to competition, have a negative effect on the ability of developing countries to diversify their exports and to undertake the requisite restructuring of their commodity sector

However, for more than half of the commodities selected, a positive tariff escalation will remain in application and retain an important dimension.

FAO concludes that for some commodities tariff escalation constitutes probably one of the major constraints to vertical diversification of their agricultural exports.

However, in some sectors and products notably those of special interest to developing countries high tariff peaks still prevailed, while remaining tariff escalation in commodity based trade introduced a bias against diversification and processing.

In spite of tariff reductions as a result of the Uruguay Round, however, the post Uruguay Round bound rates will continue to display considerable tariff escalation for processed products, particularly in the EU and Japanese markets.

(a) An open trading system, in particular further reductions in protectionist measures, including domestic support for agriculture and tariff escalation, is of paramount importance

(j) In accordance with paragraph 16 of the Doha Ministerial Declaration, on market access for non agricultural products, reduction or elimination of high tariffs, tariff peaks and tariff escalation, as well as non tariff barriers, on those products, in particular on products of export interest to developing countries

13. Turning to agenda item 4, he expressed the Group s concern regarding the persistence of market access barriers such as tariff peaks and escalation, and of non tariff barriers, which jeopardized the market access of increasingly competitive developing countries.

An issue of particular importance from the standpoint of developing countries is the elimination of tariff escalation, which discourages the process of adding value through industrialization.

As much as 97 per cent of African, Caribbean and Pacific countries' exports to the European Union enter duty free, and tariff escalation is virtually non existent.

Ongoing work in FAO indicated that tariff escalation had been reduced as a result of the Uruguay Round, which could offer developing countries new opportunities for diversification.

De facto, many data, methodological and conceptual problems involved in the measurement of ERPs lead to the frequent use of nominal rates of tariff escalation as a proxy.

In the industrial sector, the high tariff, high escalation areas include many products where developing countries have a high share in the imports of the major markets concerned.

Particularly troubling is the problem of tariff escalation , whereby tariffs on some agriculture and natural resource based products increase in proportion to the degree of processing before export.

Experts agreed that developing countries engaged in steel trade, for example Brazil, China, Egypt, India, Indonesia, Thailand, Malaysia and Viet Nam, faced market distortions due both to market access barriers and to trade measures, including subsidies, anti dumping actions, and tariff peaks and tariff escalation.

The study further illustrates, by the example of some major export products of developing countries, the patterns of tariff escalation that will be encountered in the post Uruguay Round situation.