Market Access: What’s At Stake

1. Market Access: What’s At Stake Christopher A. Padilla Co-Chair, WTO Working Group National Foreign Trade Council (U.S.) April 2002

2. Tariffs Remain An Issue • Two-thirds of collected tariffs are on industrials Source: The World Bank

3. Where the Money GoesIndustrial Tariff Payments • Developing countries pay 40% of tariff bill, but only 22% of GDP • High tariffs on developing country exports are a significant problem • But developing countries pay most tariffs to each other Source: The World Bank

4. Developing Countries Pay Most of their Tariffs To Each Other $23 billion $57 billion Source: The World Bank

5. Where The Money GoesIndustrial Tariffs • Tariffs on South-to-North trade are typically 4X higher than tariffs on North-to-North trade • But rates on South-to-South trade are the highest Source: The World Bank

6. Rapid Growth in South-South Trade • Nearly 40% of developing-country exports are to other developing countries • May rise to 50% by 2005 Source: The World Bank

7. Australia-NZ Major Regional Free Trade Agreements, 2005 (Major FTAs covering a significant portion of world trade) Mercosur - EU Mexico - EU Mexico - EFTA Mexico - many Egypt - EU? Various Intra-Africa Aus/NZ/AFTA? South Africa - EU SADC - EU More than half of world trade covered by an FTA in 2005 FTAA EU & Associates ASEAN FTA

8. Australia-NZ Major Regional Free Trade Agreements, 2010 (Major FTAs covering a significant portion of world trade) Mercosur - EU Mexico - EU Mexico - EFTA Mexico - many Egypt - EU Various Intra-Africa Aus/NZ/AFTA? South Africa - EU SADC - EU FTAA EU & Associates China- ASEAN FTA

9. Major Regional Free Trade Agreements, 2020 (Major FTAs covering a significant portion of world trade) Mercosur - EU Mexico - EU Mexico - EFTA Mexico - many Egypt - EU Various Intra-Africa South Africa - EU SADC - EU FTAA FTAA and APEC EU & Associates APEC

10. Clothes & Shoes All Other Goods The U.S. “Basic Necessities Tax” Source: Progressive Policy Institute, using ITC data

11. The “Basic Necessities Tax”Average U.S. Tariffs On Back-to-School Items T-Shirt: 17.8% Backpack: 18.3% Peanut-butter sandwich: 30% Pencils, Markers: 4.3% Jeans: 16.4% Shoes: up to 48%

12. The “Cheap Goods Tax”U.S. Import Tariffs Footwear(90% imported) <$6.50/pair: up to 48% >$12/pair: 20% Ladies’ Undergarments Silk: 2.4% Polyester: 16.2% Tableware - Forks Silver-plated: 2.4% Stainless steel: 15.8% + Tariffs on luxury items are lower. “Every-day” goods are taxed more. Source: Progressive Policy Institute, “America’s Hidden Tax on the Poor”

13. “Cheap Goods Tax” Not Unique to Developed Countries • Nepal exports more to the United States than it does to India, which borders Nepal on three sides. • Same is true for Sri Lanka, Maldives Source: Progressive Policy Institute

14. Getting to ZeroModalities for Industrial Tariff Elimination Eliminate LLDC tariffs BEFORE 2005 Request/offer process S&D through phasing More products in later buckets for developing countries 2020: Industrial Tariffs Eliminated

15. Summary: Why Zero? 1. Developing countries: • Pay most tariffs to each other, on growing South-South trade • Face high tariffs in developed countries on key export items • Need to reduce costs of production to attract investment 2. Developed countries: • Pay $16 billion in “residual” tariffs on North-North trade • Face broadly high tariffs in key developing markets • Should eliminate “basic necessities tax” on poor consumers

16. Summary: Why Zero? 3. We’re halfway there already: • 42% of world trade is duty-free, percentage is growing • Web of FTAs threatens: • more complexity • economic distortions • second-class status for many poor countries 4. Grand political bargain: • Addresses high tariffs on selected goods in developed countries AND broadly high rates in developing countries • If no bargain, little progress likely on either front