Tariff and Non-Tariff Barriers

The thrust of the Final Act of the Uruguay Round is tariff reform - that is, the reduction and eventual elimination of all impediments that add to the cost of international economic transactions.

The impediments to international economic transactions include (1) traditional tariffs, (2) non-tariff barriers (NTBs) and (3) policy impediments such as differences in, or lack of transparency of, domestic regulatory and administrative systems or product standards.

Tariff bindings (limits on raising tariffs from existing or determined levels) will increase most in developing countries, from covering 14 percent to covering 59 percent of imports, with major effects on exports from North to South. The tariff cuts announced in the Uruguay Round are not evenly distributed. Deeper cuts apply to products exported by industrialised countries and shallower cuts to products in which developing countries enjoy a comparative advantage, such as textiles and clothing, leather, footwear, travel goods, transport equipment, fish and fish products. An example of this unevenness is the Multi-Fibre Agreement (MFA). Analysis shows that most gains will be in North - North trade expansion and increased Northern access to Southern markets in a range of goods and services.

Tariff reductions are required of WTO member countries. Developed countries are to cut their tariff barriers by 36 percent over 6 years, with a minimum reduction of 15 percent per item. Developing countries are to cut their tariffs by 24 percent over 10 years, with a minimum reduction of 10 percent per item. However, some tariffs have been extremely high - for example, 400 percent; so when 36 percent of tariffs are removed, the products would still be protected by 256 percent of tariffs. Tariff reduction is supposed to result in a 40 percent cut in industrial countries’ tariffs in industrial products, from an average of 6.3 to 3.8 percent. Stage 1 of tariff reduction was to be achieved on 1 January 1995, when each WTO member was supposed to have reduced tariffs for at least 16 percent of the country’s total volume of imports in 1990.