The Truth About Industrial Country Tariffs

• Author: Dustin Smith
• Position: Senior Research Officer in the IMF's Policy Development and Review Department

Average tariff rates mask one important fact: the poor get hit the hardest

What's wrong with tariff structures?

Although most tariffs in industrial countries are low, those on several categories of goods remain prohibitively high. Tariffs on many consumer, agricultural, and labor-intensive products are 10-20 times higher than the overall average tariff. For example, U.S. import tariffs on clothes and shoes average 11 percent and go as high as 48 percent. Although, in 2001, clothes and shoes accounted for only 6.5 percent of U.S. imports, in value terms, they brought in nearly half of the $20 billion of U.S. tariff revenue (Table 1). Other industrial economies are no different. The European Union (EU), for example, applies tariffs of up to 236 percent on meat, 180 percent on cereals, and 17 percent on sneakers. In contrast, its tariffs on raw materials and electronics rarely exceed 5 percent.

[ SEE THE GRAPHIC AT THE ATTACHED RTF ]

Who gets hurt?

Developing countries that export primarily agricultural and labor-intensive goods such as textiles and clothing are hard hit by industrial countries' tariff policies. One can clearly see the disparate effects of these tariffs by looking at the effective tariff rates-the amount of import duties collected as a percent of total imports-of different countries. For example, on imports of $2.5 billion from Bangladesh (a major clothing exporter), the United States collected duties of $331 million in 2001-slightly more than the $330 million it collected on $30 billion of imports from France (Table 2). Thus, poor countries like Bangladesh-that are beginning to move from subsistence agriculture and dependency on exports of primary commodities into light manufacturing-face the highest effective tariffs, on average, four or five times those faced by the richest economies.

[ SEE THE GRAPHIC AT THE ATTACHED RTF ]

Who else gets hurt?

Tariffs that single out clothes and shoes also harm consumers in industrial countries. These tariffs weigh heavily on lower-income groups, which spend a large share of their income on such basic necessities (Table 3). A single-parent family in the United States, for instance, has...