Asian trade barriers against primary and processed commodities

Many developing countries are being encouraged to shift toward increased processing and exports of domestically produced natural resource based products now exported in primary form. But in many major markets, the structure of tariffs and nontariff barriers militate against such efforts. Zero or low tariffs are generally applied to industrial countries'imports of primary (unprocessed) commodities; duties increase, or"escalate", as the level of processing or fabrication increases. Tariff escalation produces a trade bias against processed goods. In the past, such trade barrier escalation has been attributed chiefly to industrial countries. The authors examined the structure of restrictions in Asian countries and found that most Asian countries'tariffs incorporated more escalation than do tariffs in industrial countries. Apparently tariff escalation is often reinforced by nontariff barriers on processed goods, although supporting data for this finding are less firm. This issue should be viewed as a North-South issue, contend the authors. A bias against imports of processed goods is built into trade barrier escalation among Asian countries and should be addressed in regional initiatives to liberalize intra-Asian trade barriers. The authors make three recommendations for dealing with escalation issues in multilateral negotiations: Japan, and to a lesser extent, the Republic of Korea are the keys to successful negotiations on these issues, as they have a far greater import bias against processed commodities than do all other countries with which the authors compare them. That is, Japanese and Korean trade barriers incorporate far more escalation than do trade barriers in other countries studied. Disproportionately high cuts in trade barriers for unprocessed commodities are not the solution, as they would increase effective protection for processed goodss. Any approach to trade liberalization should deal with both tariffs and nontariff barriers, to ensure that a reduction in one type of restriction is not offset by a further tightening in the other. Several Asian countries apply both types of restrictions to commodity imports.TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Environmental Economics&Policies,Transport and Trade Logistics,Common Carriers Industry,Trade Policy

How changes in the former CMEA area may affect international trade in manufactures

The authors give a long-term perspective on how changes in the former CMEA areas will affect international trade in manufactures. They show that expanding Eastern European exports to the West should be viewed as a step toward normalizing the Eastern European countries'trade patterns. First, proportionally less of the Eastern European economies'trade will be with each other, especially with the former Soviet Union. Second, Western Europe will be their major trading partner but their trade with (especially imports from) Japan and North America may increase dramatically (from a small base). Their exports to and imports from developing countries may also change dramatically. The volume of Eastern European trade is in line with the low income of these economies. In the long run manufactures trade will increase four- to sixfold, once Eastern European income levels catch up with industrial country levels. Until incomes in Eastern European and former Soviet economies increase significantly, labor-intensive goods are likely to dominate their exports to market economies, and sophisticated goods their imports. The authors contend that, since the end of the Cold War, the West has successfully improved the Eastern European countries'access to Western trade, and that the Eastern European countries should now enjoy equal or favorable treatment. Czechoslovakia, Hungary, and Poland, in particular, may become the most favored outsiders in the European Economic Space, the largest single market in the world. One short-term effect of the Eastern European countries'improved outlook may be that developing countries that rely on manufactures for export revenues may have tougher times in major Western markets. But the emancipation of Eastern European and former Soviet economies - and the pent-up demand for consumer goods likely from deprived populations - should provide important opportunities for the dynamic developing countries. The former Soviet Union was not a large market for developing countries - except for India and Yugoslavia and to a lesser extent Algeria and Egypt. Countries such as India that did supply the former Soviet Union with manufactures may soon have to seek alternative markets.Economic Theory&Research,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade Policy,Transport and Trade Logistics

NAFTA's Implications for EastAsian exports

Several studies have quantified the influence of the North American Free Trade Agreement (NAFTA) and the earlier Canada - United States Free Trade Agreement on member countries. Less attention has been paid to their effects on nonmembers. The authors try to quantify NAFTA's third-party effects on East Asia using a partial equilibrium trade model and a gravity flow model. They identify and focus on East Asian export sectors that are especially at risk of trade diversion. Their results suggest that the NAFTA-induced trade diversion losses could range from $380 million to$700 million. The larger figure represents less than 1 percent of East Asia's nonoil exports to the United States. Their analysis also indicates that losses would be concentrated in a few sectors - such as textiles, clothing, and ferrous metals - where high U.S. trade barriers exist. A larger share of Hong Kong and Macau trade would be diverted than trade in other East Asian economies because textiles and clothing represent a larger share of their exports. Economies specializing in such products as machinery and equipment (Singapore) would have relatively little trade diverted. East Asia's trade losses might be reduced by roughly half once the results of the Uruguay Round are implemented because that will lower the preference margins NAFTA members can extend to each other. To put things in perspective: the trade losses East Asian economies might incur because of NAFTA are roughly 1 percent of the gains they will receive from successful implementation of the Uruguay Round results.Economic Theory&Research,Environmental Economics&Policies,Trade Policy,Trade and Regional Integration,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT