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Are Preferential Tariffs Utilized? Evidence from Australian Imports, 2000-9

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Author Info

  • Richard Pomfret

    ()
    (School of Economics, University of Adelaide)

  • Uwe Kaufmann

    (School of Economics, University of Adelaide)

  • Christopher Findlay

    ()
    (School of Economics, University of Adelaide)

Abstract

Preferential tariff rates are often not utilized by qualified beneficiaries. Two reasons are complex rules of origin and erosion of preference margins as a result of multilateral trade liberalization. Our paper contributes to this research by providing evidence from high-quality disaggregated customs data of the utilization rate for Australia's preferential trading arrangements in the period 2000-9. A pattern of low ratios of imports receiving preferential tariff treatment to the total value of bilateral imports applies to all six of Australia's PTAs. Over half of Australian imports from New Zealand, the Pacific Island Forum economies, Thailand and Chile claimed preferential treatment in 2000, but all had lower utilization rates by 2009. This is primarily because of the increasing number of zero MFN tariff lines. Where MFN tariffs are positive, preferential tariffs are utilized and preferred trading partners pay lower customs duties. Positive utilization rates indicate that tariff preferences do have an impact, and at a minimum the exporters claiming the preferential tariff rate are better off than they would be in its absence, but by themselves utilization rates shed no light on the size of the impact on trade flows or on economic wellbeing.

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File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2010-13.pdf
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Bibliographic Info

Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2010-13.

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Length: 22 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:adl:wpaper:2010-13

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Web page: http://www.economics.adelaide.edu.au/
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Related research

Keywords: preferential tariffs; trade liberalization; preference erosion;

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  1. Francois, Joseph & Hoekman, Bernard & Manchin, Miriam, 2005. "Preference erosion and multilateral trade liberalization," Policy Research Working Paper Series 3730, The World Bank.
  2. W. Hertel, Thomas, 2001. "Dynamic Effects of the “New Age” Free Trade Agreement between Japan and Singapore," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 16, pages 446-484.
  3. Miriam Manchin & Annette O. Pelkmans-Balaoing, 2007. "Clothes without an Emperor: Analysis of the Preferential Tariffs in ASEAN," Development Working Papers 223, Centro Studi Luca d\'Agliano, University of Milano.
  4. Mary Amiti & John Romalis, 2007. "Will the Doha Round Lead to Preference Erosion?," NBER Working Papers 12971, National Bureau of Economic Research, Inc.
  5. Philippa Dee & Jyothi Gali, 2003. "The Trade and Investment Effects of Preferential Trading Arrangements," NBER Working Papers 10160, National Bureau of Economic Research, Inc.
  6. Pomfret, Richard, 2001. "The Economics of Regional Trading Arrangements," OUP Catalogue, Oxford University Press, number 9780199248872.
  7. Masahiro Kawai & Ganeshan Wignaraja, 2009. "The Asian “Noodle Bowl”:Is It Serious for Business?," Working Papers id:1936, eSocialSciences.
  8. Mitsuyo Ando & Fukunari Kimura, 2005. "The Formation of International Production and Distribution Networks in East Asia," NBER Chapters, in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 177-216 National Bureau of Economic Research, Inc.
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Cited by:
  1. Shujiro URATA & Misa OKABE, 2013. "The Impact of AFTA on Intra-AFTA Trade," Working Papers DP-2013-05, Economic Research Institute for ASEAN and East Asia (ERIA).
  2. Handley, Kyle, 2012. "Exporting under Trade Policy Uncertainty: Theory and Evidence," Working Papers 634, Research Seminar in International Economics, University of Michigan.

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