When the Marrakesh Agreement Establishing the World Trade Organization (WTO) was signed 30 years ago, it was expected that the world would witness a gradual decline in tariffs obstructing free trade in goods among the nations. The contracting parties of the General Agreement on Tariffs and Tariffs (GATT) spent seven and half years completing the largest trade negotiation ever, the Uruguay Round. The result was a total of 22,500 pages of documents that listed commitments of 123 countries on specific categories of goods and services. These also include pledges to reduce and 'bind' the countries' customs duty rates on imports of goods.
GATT, the predecessor of the WTO, witnessed a series of tariff negations in 50 years until the end of the Uruguay Round. After GATT's coming into force on January 1, 1948, until the Dillon Round of 1960-61, tariffs were negotiated item by item or product by product under the request-and-offers system. The major product supplier to another GATT member had the right to request tariff reductions. From the Kennedy Round (1963-67) onwards, linear tariff cut was the dominant method where all sections of the tariffs were reduced uniformly following an agreed formula. In the Tokyo Round (1973-79), the Swiss formula for liner tariff cut was used, under which a more significant proportion than lower ones reduced higher tariffs. Finally, tariff negotiations under the Uruguay Round (1986-94) were partly of the product-by-product type and partly zero-for-zero tariff reductions under which tariffs are reduced to zero for all whole classes of products [P-414; Dictionary of Trade Policy Terms (Fifth Edition); Cambridge University Press, 2007]. The round is an agreed period of specific multilateral trade negation.
It is to be noted that GATT was an international organisation that passed through eight rounds of negotiations in its 46 years of its existence. The text of the Agreement itself is labelled GATT 1947, which was later replaced by GATT 1994 and became a component of the WTO agreements that govern trade in goods.
WTO replaced GATT through the Marrakesh Agreement in 1994 and became operational on January 1, 1995. It is entrusted with the responsibility of overseeing the tariff cut, implementing other commitments, and providing a legal platform to settle any trade dispute among the organisation's member countries. It was also entrusted with the task of facilitating rule-based trade negotiations in the future.
Three decades later, tariffs in the developed countries have declined significantly and, mostly, in the first five years after the WTO started its journey. During the period, these countries cut 40 per cent of their industrial tariffs from 6.30 per cent to 3.80 per cent on average. In some cases, tariffs are being cut to zero. There has also been a significant increase in the number of "bound" tariffs or the maximum customs duty rates committed in the WTO, which is difficult to increase. In the later years, the world saw more tariff cuts by the developed nations, though there is still some room there. Developing countries, however, cut the tariffs at a slower rate using the WTO concessional or waiver provisions. Least Developed Countries (LDCs), including Bangladesh, are free from any reduction commitments.
The WTO, along with the International Trade Centre (ITC) and UN Trade and Development (UNCTAD), released the World Tariff Profiles 2024 last month. It is the 18th annual version of the world tariff profile on market access for goods. It provides comprehensive information on the tariffs and non-tariff measures (NTMs) imposed by over 170 countries and customs territories.
The publication, however, does not provide any analysis on the latest status of global tariffs except an analytical section titled 'Tariffs on critical minerals in the electric vehicle value chain.' The production of electric vehicles (EVs) is gaining momentum as the world seeks to combat climate change, and the analysis is relevant. It examined the tariffs levied by various economies for cobalt, graphite and lithium, as these are the critical minerals in the EV value chain.
The statistical yearbook generally contains a comprehensive compilation of the main tariff parameters for each of the 164 WTO members plus other countries and customs territories where data is available. "Each tariff profile presents information on tariffs imposed by each economy on its imports complemented with an analysis of the market access conditions it faces in its major export markets," said the introductory note of the latest version of the yearbook.
For instance, Bangladesh's tariff profile shows that the country's simple average final bound tariff rate is 155.10 per cent, and the MFN applied tariff rate is 14.10 per cent. For agriculture products, the average and applied rates are 186.20 per cent and 14.10 per cent, respectively.
The preface of the first edition of the tariff profiles, published in 1996, said: "A key factor that drives trade negotiations and tariff reductions is often the interests of exporters in their endeavours to capture new export markets. Access to new export markets is largely influenced by preferential arrangements as by export supply capacities. Indicators on these two aspects are therefore included in this publication because they are key to the understanding of the structure of today's trading networks."
The statement is still relevant, and so is the publication, as it is generally asserted that the WTO plays a critical role in supporting free trade worldwide. One may be interested in the WTO's role in driving countries to reduce tariffs in the last 30 years. This column will try to explore the answer in the next week.
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