Henrik Isakson, Economist at the National Board of Trade in Stockholm, Sweden

1. Henrik Isakson, Economist at the National Board of Trade in Stockholm, Sweden Editor - but not sole author – of the report The board is an independent government agency Not official Swedish or EU-policy

2. A comparative analysis of the trade policies of the EU, the US, Canada and Japan Main focus: openness for all imports. Secondary objective: Developing countries Why? Do we live in Fortress Europe? Or are we a role model? Does it matter? 51 % of all merchandise imports How? Not ideological (Fraser), ”diplomatic” (TPR) or econometric (OTRI) Our study is a compilation of statistics – use as a source of reference

3. The study covers: Industrial goods (tariffs, trade defence, NTB’s, subsidies) Agricultural goods (tariffs, safeguards, support, export subsidies) Services(impact of regulations) Free Trade Areas and GSP All in all: 70 indicators We do not look at: Singapore issues, TRIPS, flow of capital, corruption, social and environmental aspects, taxes, trade boycotts, SPS

4. Industrial goods – tariffs • Based on TRAINS data (UNCTAD) from 2002 • Reliable figures, produce clear results • Large number of indicators • Extent of bound tariff lines (positive) • Trade weighted averages: bound tariffs, MFN-tariffs, effectively applied tariffs • Tariff peaks: proportion of tariff lines and maximum levels of tariffs • Duty free tariff lines and nuisance tariffs • Degree of non ad valorem tariffs (negative) • Effectively applied trade weighted tariffs toward country groups • Special look at textiles, foot wear and fish/fish products • Tariff escalation: tariffs at different stages of production

5. Overall differences relatively small Canada lowest tariffs due to NAFTA. Without preferences: Japan lowest tariffs EU lower effectively applied rates than US due to more FTA’s and better preferences.

6. Miscallenous about industrial tariffs Canada most tariff peaks (4.4 %) but the US the highest (48 %) Japan and the US more duty free tariff lines (50 %) than the EU (33 %) The US much more non ad valorem tariffs (6.5 %) We regard Japan as being most open and Canada as least open. The EU and US falls in between.

7. Trade defence measures: • Antidumping • Countervailing • Safeguards (GATT XIX, ATC, China safeguards) • Basic assumption: all trade defence regarded as protectionism • Source: WTO statistics. Indicators: • Initiated anti-dumping and counter vailing investigations • Average imposed anti-dumping duty • Average duration of anti-dumping measures • Countervailing measures in force • Intensity of use of anti-dumping and countervailing measures • Safeguard measures imposed • Qualitative analysis of anti-dumping in the WTO dispute settlement mechanism

8. A very clear pattern emerges Japan bascially never use trade defence The US use trade defence measures by far the most. In AD the US also has the longest duration and highest duties EU US Canada Japan AD (investigations) CVD (Investigations) Imposed safeguards

9. Non tariff barriers (NTB’s) • Probably the most important area • Hard to define, measure and compare less reliable results • Sources: Calculations based on data from UNCTAD, literature study (World Bank, OECD, IIE etc) • We look at • NTB’s overall. Indicators: frequency and import coverage of affected tariff lines, price comparisons • Quotas. Indicators same as above. • Technical barriers to trade. Indicators: interview, business survey and econometric calculations of relationship between tehcnical standards and imports.

10. NTB’s overall and quotas (based on inconclusive and old evidence) The US has more NTB’s than the EU (tariff lines and imports) The EU has more than Canada and Japan… but an analysis of price differentials due to NTB’s indicates that US and Canadian NTB’s are ”softer”, i.e. create smaller price hikes Japanese NTB’s appear very hard – very costly European (five countries) prices are in the middle. Quotas: Japan has more than the others and they are costlier

11. Technical barriers to trade (TBT) US and Canadian multitude of regulations constitute a problem: each state (province) and city have their own requirements In Japan the opposite is true: lack of formal regulations. Only 15 % of what comparable countries have. A 10 % increase in international standards in Japan would lead to an increase in imports with 7.4 %. EU technical regulations attract imports from developing world. In the US the oposite is true. Could hold for developed countries as well? Hypothesis: The EU internal market contributes to external openness.

12. We regard Japan as least open in NTB’s. Perhaps Canada is the most open?

13. Our analysis on subsidies to industry is too weak to be presented. Lack of reliable data (does not include sub federal level, tax breaks) (Official data states that the EU subsidises the most)

14. ? Overall conclusion industrial goods EU: moderate middle of the road position in all areas US: uses most trade defence, moderate on tariffs and NTB’s Canada: highest tariffs but perhaps least NTB’s Japan: lowest tariffs and no trade defence, but big NTB problems

15. Agricultural goods – tariffs • Level – Transparency – Structure • Sources: Customs schedules, WTO (TPR), UNCTAD • Very precise but mostly MFN figures • Only simple averages, but good reason for that. Downward biased. • 17 indicators: • Average applied MFN-tariff and bound average tariff • Duty free tariff lines, peak and mega tariffs • Seasonal tariffs (tariff lines, import coverage) • Tariff rate quotas (TRQ) tariff lines and fill rate • Tariff escalation • Tariff dispersion • Non ad valorem (tariff lines and import coverage)

16. The average applied MFN-rates and the bound rates The US not always most open - severly protected market for tobacco and cotton. Canada dairy: 202 %!

17. Miscallenous about agricultural tariffs Canada by far most duty free tariff lines...but Canada also most mega tariffs (≥100 %) EU and Japan more tariff peaks (≥ 15 %) than the US and Canada Japan use seasonal tariffs much less than the others . Small differences concerning TRQ’s. Canada more restrictive: higher fill rate Tariff escalation: massive in Canada, negative in Japan. Dispersion (standard deviation): large in Canada and Japan, medium in the EU and relatively small in the US Transparency: EU and US use more non ad valorem than Canada/Japan

18. Conclusion regarding agricultural tariffs We regard the US to be the most open market. This holds for both tariff levels and least distorting tariff structure. It is not possible to say which country is least open. Perhaps Canada would be most open if it were not for dairy and poultry?

19. The Special Safeguard (SSG) The trade defence option used in agriculture (WTO AoA) An insurance that facilitates tariff cuts? Nevertheless, the direct impact is to close markets. Sources: WTO, UNCTAD, UN. Reliable figures, but not always easy to interpret. Potential application: EU (31 % of tariff lines and 21 % of imports). Many times more than the others. Actual application (until 2002): EU and US around 40 tariff lines annually. Japan use it less than half as often as the EU and US. Canada has never used SSG.

20. Domestic support • Both budgetary support and market price support • Used OECD data (more recent and comprehensive than WTO) • Weakness: figures cover 2001-2003, does not capture CAP reform and US Farm Act. Otherwise very reliable and valid data. • Indicators: • Producer Support Estimate (PSE), and PSE per capita and related to GDP • Percentage PSE (share of farm income attributable to support) • Share of trade distorting support (market price, input and output based support)

21. Domestic support EU by far largest supporter of agriculture (43 % of all OECD support, more than rest of QUAD combined). Japan spend more per capita (348 USD) than the EU (268). The EU and Japan spend 1 % of GDP in agricultural support The US and Canada only spend 0.4 – 0.5 % of GDP Japanese farmers most dependent on support (58 % of incomes) EU farmers depends less on support (35 %), and US and Canadian farmers even less so (19-20 %). Almost only trade distorting support in Japan (98 %). The EU has decreased trade distortive support drastically to 68 %. Canada has also cut sharply and is today below the US at ”only” 60 %. We regard Canada as most open, closely followed by the US. Then the EU and finally Japan.

22. Export subsidies Linked to border protection (protects farmers incomes) Depressing world market prices Also include officially supported export credits and food aid. Hard to compare. Source: WTO notifications. The EU is the main subsidiser (more products and larger subsidies) The US comes second, mostly via food aid (own production) Canada uses some indirect form of export subsidies. Japan hardly use any export subsidies (not a sign of openness though)

23. This figure says it all: The price gap between domestic and international prices boils down all the policies to a figure. Based on pNPC. US tariffs lower but Canada no SSG, less subsidies.

24. Trade in services • Hard to measure openness for services • No traditional trade barriers, instead domestic regulations. Service trade usually takes place within countries: • Mode 1: cross border supply (not consumed within a country) • Mode 2: consumption abroad (hard to regulate) • Mode 3: commercial presence (in focus) • Mode 4: temporary movement of physical persons (still rather small) • Method/indicators: • GATS committments (formal openness, minimum level – ”MFN”) • Restriction index 0 (open) – 1 (closed). Subjective valuation and weighting of regulations. Calculated weighted EU average based on share of EU service imports. • Also some price gap data included.

25. Source: WTO (GATS committments). Literature review (OECD, Australian Productivity Commission, World Bank) • Weak data due to • Only studied 7 out of 12 service sectors • Subjective exercise • Different data sources - hard to compare (different modes, domestic/foregin? Etc) • Old data • Only some data on FTA’s • Interpret results with caution All four countries relatively open formally.

26. Actual openness – our overall assessment: Actual import of services much larger in the EU than in the US but US more open for services liberalisation in their FTA’s However – does not include mode 3 (investment)

27. Overall conclusion services trade • Ranking: • EU • US • Canada • Japan • but the EU/US ranking is weak. Could be altered if we had • information on all sectors

28. EU most open towards LDC’s, due to EBA LDC’s may also gain from holes in the EU agricultural tariff wall (preferences) as well as export subsidies

29. Developing country aspects… We regard the EU and Canada more open to the developing world than the US and Japan. More generous preferences (except for US AGOA) EU more open for industrial goods (low textile and shoe tariffs). Much more imports than Canada… but Canada more open in agriculture and more liberal rules of origin. Indications in NTB’s and services also favourable to the EU Not all is well: EU target developing countries in trade defence more than the others. And then of course agriculture… Japan clearly least open: agriculture and poor preferences

30. Our overall conclusion and rankings

32. Higher tariffs for low income than high income countries UMIC: oil, FTA’s and Eastern/Central Europe New Canadian ”EBA” changes the picture The US least open towards poor countries