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Preference Erosion, Government Revenues and Non‐tariff Trade Barriers

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  • Bob Fisher

Abstract

Developing countries benefiting from developed country unilateral trade preferences fear that Doha Round tariff cuts will erode the value of those preferences. That these programmes confer significant benefits, however, is not clear. Studies indicate that the impact of preference erosion would be minimal for most developing countries. But for a small subset of middle‐income and least‐developed countries, concern may be warranted. WTO members, should address affected countries’ concerns, perhaps by tailoring WTO tariff negotiations to lessen adjustment pressures and providing development assistance. Developing countries also are anxious that lower tariffs will reduce government revenues. Dependence on tariff revenue is diminishing and trade liberalisation need not result in lower total tax revenues or even lower customs revenues. Much depends on a country's current tariff and trade regime, its tax structure and its overall economic structure. At some point, a country does need to broaden its tax base and look to other revenue sources to offset declining tariff revenues. Tax reform, therefore, complements trade reform. A third area of developing country concern is non‐tariff barriers (NTBs), which may limit market access even after tariffs are reduced. Despite prior WTO work in this area, NTBs remain a thorny issue for all WTO members.

Suggested Citation

  • Bob Fisher, 2006. "Preference Erosion, Government Revenues and Non‐tariff Trade Barriers," The World Economy, Wiley Blackwell, vol. 29(10), pages 1377-1393, October.
  • Handle: RePEc:bla:worlde:v:29:y:2006:i:10:p:1377-1393
    DOI: 10.1111/j.1467-9701.2006.00849.x
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    File URL: https://doi.org/10.1111/j.1467-9701.2006.00849.x
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    1. World Bank, 2001. "Global Economic Prospects and the Developing Countries 2001," World Bank Publications, The World Bank, number 14779.
    2. Andriamananjara, Soamiely & Dean, Judith M. & Feinberg, Robert & Ferrantino, Michael J. & Ludema, Rodney & Tsigas, Marinos E., 2004. "The Effects of Non-Tariff Measures on Prices, Trade, and Welfare: CGE Implementation of Policy-Based Price Comparisons," Working Papers 15863, United States International Trade Commission, Office of Economics.
    3. Douglas C. Lippoldt & Przemyslaw Kowalski, 2005. "Trade Preference Erosion: Potential Economic Impacts," OECD Trade Policy Papers 17, OECD Publishing.
    4. Reint Gropp & Liam P. Ebrill & Janet Gale Stotsky, 1999. "Revenue Implications of Trade Liberalization," IMF Occasional Papers 180, International Monetary Fund.
    5. Oecd, 2005. "Analysis of Non-Tariff Barriers of Concern to Developing Countries," OECD Trade Policy Papers 16, OECD Publishing.
    6. Przemyslaw Kowalski, 2005. "Impact of Changes in Tariffs on Developing Countries' Government Revenue," OECD Trade Policy Papers 18, OECD Publishing.
    7. Douglas C. Lippoldt & Przemyslaw Kowalski, 2005. "Trade Preference Erosion: Expanded Assessment of Countries at Risk of Welfare Losses," OECD Trade Policy Papers 20, OECD Publishing.
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