Over the last two decades, tariffs in nearly all emerging economies have dropped substantially. In many cases, the average tariff rate applied by a given country has fallen below 10 percent, a historical low since the Second World War. Despite this clear downward trend, over the same time period the world has witnessed a commensurate increase in non-tariff barriers, partially offsetting the benefits of reduced tariffs.
These and many other findings on current and future challenges in trade policy were discussed by Chad P. Bown, lead economist in the World Bank’s research department, at April’s Policy Research Talk. The Policy Research Talk series is a monthly event held by the research department to foster a dialogue between World Bank researchers and operational colleagues.
“We know that as countries develop they inevitably become more integrated into the global economy, and trade policy becomes a key part of a successful development strategy,” said World Bank Research Director Asli Demirguc-Kunt, who hosted the event. “But today’s trade policy has become more challenging than ever to get right, particularly in the face of growing concern about globalization, jobs, and inequality.”
Bown’s research builds on the Temporary Trade Barriers Database, a unique set of data collected by the World Bank’s research department that covers more than thirty countries’ use of policies such as antidumping, global safeguards, and countervailing duties. The freely available database covers the period from the 1980s until 2012, and allows users to track the evolution of the frequency and incidence of temporary trade barriers.
Drawing on these data, Bown has demonstrated that even as tariff levels have plummeted as part of multilateral and regional trade agreements, trade policy continues to respond to political and economic shocks. For example, while India’s average applied tariffs dropped from 35 percent in the late 1990s to 14 percent in 2012, it also enacted a sixfold increase in the share of products covered by temporary trade barriers over the same period. His research suggests that although there have been large gains in international cooperation in trade policy, further extending those gains may be progressively more difficult.