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

Author

Listed:
  • 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.

Suggested Citation

  • Richard Pomfret & Uwe Kaufmann & Christopher Findlay, 2010. "Are Preferential Tariffs Utilized? Evidence from Australian Imports, 2000-9," School of Economics Working Papers 2010-13, University of Adelaide, School of Economics.
  • Handle: RePEc:adl:wpaper:2010-13
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    File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2010-13.pdf
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    References listed on IDEAS

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    1. Manchin, Miriam & Pelkmans-Balaoing, Annette O., 2008. "Clothes without an Emperor: Analysis of the preferential tariffs in ASEAN," Journal of Asian Economics, Elsevier, vol. 19(3), pages 213-223, June.
    2. Pomfret, Richard, 2001. "The Economics of Regional Trading Arrangements," OUP Catalogue, Oxford University Press, number 9780199248872.
    3. Katsuhide Takahashi & Shujiro Urata, 2009. "On The Use Of Free Trade Agreements By Japanese Firms," World Scientific Book Chapters,in: Free Trade Agreements In The Asia Pacific, chapter 7, pages 241-257 World Scientific Publishing Co. Pte. Ltd..
    4. Thomas W. Hertel & Terrie Walmsley & Ken Itakura, 2005. "Dynamic Effects Of The "New Age" Free Trade Agreement Between Japan And Singapore," World Scientific Book Chapters,in: Quantitative Methods For Assessing The Effects Of Non-Tariff Measures And Trade Facilitation, chapter 18, pages 483-523 World Scientific Publishing Co. Pte. Ltd..
    5. Mary Amiti & John Romalis, 2007. "Will the Doha Round Lead to Preference Erosion?," IMF Staff Papers, Palgrave Macmillan, vol. 54(2), pages 338-384, June.
    6. Philippa Dee & Jyothi Gali, 2005. "The Trade and Investment Effects of Preferential Trading Arrangements," NBER Chapters,in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 133-176 National Bureau of Economic Research, Inc.
    7. Joseph Francois & Bernard Hoekman & Miriam Manchin, 2006. "Preference Erosion and Multilateral Trade Liberalization," World Bank Economic Review, World Bank Group, vol. 20(2), pages 197-216.
    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. Handley, Kyle, 2014. "Exporting under trade policy uncertainty: Theory and evidence," Journal of International Economics, Elsevier, vol. 94(1), pages 50-66.
    2. Okabe, Misa & Urata, Shujiro, 2014. "The impact of AFTA on intra-AFTA trade," Journal of Asian Economics, Elsevier, vol. 35(C), pages 12-31.
    3. Keck, Alexander & Lendle, Andreas, 2012. "New evidence on preference utilization," WTO Staff Working Papers ERSD-2012-12, World Trade Organization (WTO), Economic Research and Statistics Division.
    4. Masahiro Kawai & Ganeshan Wignaraja, 2014. "Policy challenges posed by Asian free trade agreements: a review of the evidence," Chapters,in: A World Trade Organization for the 21st Century, chapter 8, pages 182-238 Edward Elgar Publishing.

    More about this item

    Keywords

    preferential tariffs; trade liberalization; preference erosion;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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