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This paper examines the theory underpinning the design of optimal tariffs in a developing economy, and the experience of implementation of tariff reforms. A central issue is whether and when a case can be made for a uniform tariff structure. While theory advocates a differentiated tariff structure (except under a balance of payments objective), political economy considerations, inadequate information, and administrative convenience point to a minimally differentiated tariff structure. The experience of reform indicates that tariff structures are mainly influenced by income distribution and protection objectives. The ability to successfully reduce tariffs depends on measures taken to alleviate fiscal and balance of payments constraints.

Countries of the Southeast Europe (SEE) region have witnessed significant economic improvement since the beginning of their transition to market economies in the early 1990s. Growth has been particularly strong in the past six years, but still lower than in other fast growing countries in the East Asia and Baltic regions, or some of the other new member states of the European Union (EU). The purpose of this study is twofold: (i) to present recent trends in intra regional trade in SEE, in particular following the implementation of Central European Free Trade Agreement (CEFTA); and (ii) to bring the attention of policy makers to some of the remaining impediments to enhanced intra regional trade. The rest of the study is organized as follows. Chapter two describes intraregional trade patterns, both prior and after the entry of CEFTA into force, including more detailed analysis of trade structure. Chapter three emphasizes the role of nontariff barriers (NTBs), such as technical regulations and standards, and their potential impact on trade enhancement, as well as the importance of the trade related environment drawing on global surveys and reports (doing business, Business Environment and Enterprise Performance Survey (BEEPS), logistics performance indicator, and the enabling trade index). It also looks at rules of origin and their role in trade creation. Chapter four aims to present the view of the private sector on CEFTA and on trade related reforms in general through two case studies of regional firms. Finally, chapter five concludes by summarizing the key recommendations of the study.

The Kyrgyz Republic has made major strides in the past decade in its transition to a market-based economy. Its trade and investment policies are arguably the most liberal among the member countries of the Commonwealth of Independent States. Despite the generally progressive stance on structural policies and a sound record of macroeconomic management in recent years, economic growth has been modest, living standards are low, a large burden of external debt has accumulated, and integration into global production and trade remains limited. The growth agenda must address more carefully the constraints to greater supply-side response to ongoing reforms—an agenda that can facilitate a broad-based growth of economic activity and exports. Risks to sustainability of current growth rates and continued poverty reduction will otherwise remain high as will the economy’s vulnerability to external shocks. This report is aimed at assisting authorities fashioning this agenda by focusing on three key challenges:Identifying strategic options to strengthen prospects for medium- and long-term growth and poverty reduction; Assessing ways of leveraging domestic trade policy reforms and existing regional and multilateral trade agreements for further regional and global integration; and Identifying key areas where greater efforts are necessary to facilitate improvements in enterprise capability and productivity.

Abstract This paper aims to discuss and demonstrate the non-tariff challenges to Mercosur’s trade integration. Its Common External Tariff (CET) and exceptions will be discussed, as well as the evolution of its non-tariff protectionism framework in the last three decades. This is an unprecedented exploratory exercise on all 5019 non-tariff measures (NTM) notified by Mercosur members to the WTO from 1995 to 2020. As main results, we see that (i) members with fewer exceptions to the CET are the ones that most use NTMs to protect their markets; (ii) the stock of NTMs targeted at members and non-members varies accordingly; (iii) of the 10 countries most targeted by NTMs imposed by Mercosur members, its own members figure in the 3rd, 4th, 7th, and 8th positions; (iv) the bloc lacks deep regulatory harmonization, especially with regard to sanitary and phytosanitary barriers in 11 sectors. Based on these results, two critical policy action plans are suggested to the bloc. Resumo O presente artigo tem por objetivos discutir e demonstrar os desafios não-tarifários à integração comercial do Mercosul. Serão objetivo de debate a sua tarifa externa comum (TEC) e exceções, bem como a evolução do seu quadro de protecionismo não-tarifário nas últimas três décadas. Trata-se de um exercício exploratório, sem precedentes, sobre todas as 5019 MNTs notificadas pelos membros do Mercosul à OMC entre 1995 e 2020. Como principais resultados, vemos que (i) membros com menos exceções à TEC são os que mais utilizam MNTs para proteger seus mercados; (ii) o estoque de MNTs direcionadas a membros e não-membros varia na mesma medida; (iii) dos 10 países mais alvejados por MNTs impostas por membros Mercosul, seus próprios membros figuram nas posições 3°, 4°, 7° e 8°; (iv) o bloco carece de uma profunda harmonização regulatória, sobretudo no que toca a barreiras sanitárias e fitossanitárias em 11 setores. Com base nesses resultados, são sugeridos dois planos de ação prioritários ao bloco.

This study offers an empirical microlevel analysis of the pass-through effects of the East African Community Common External Tariff on consumer prices in Kenya. Using data from the Kenya Integrated Household Budget Surveys conducted in 2005 and 2015, this research employs a fixed-effects model to estimate pass-through equations. The analysis focuses on consumer prices for agricultural and manufactured goods. It also considers household residential classifications, distinguishing between rural and urban areas, and it investigates the impact of border proximity and transportation costs on the pass-through effect. The findings show that manufactured goods have a significant pass-through effect. A 1% change in tariffs results in a 0.84% change in consumer prices for manufactured goods. However, the pass-through effects for agricultural goods were incomplete, suggesting that markets for manufactured goods are more competitive in Kenya. The study also found that pass-through effects vary depending on proximity to borders and the urban-rural divide.

With preferential trade agreements on the rise worldwide rules of origin—which are necessary to prevent trade deflection—are attracting increasing attention. At the same time, preference erosion for Generalized System of Preferences (GSP) recipients is increasing resistance to further multilateral negotiations. Drawing on different approaches, this article shows that the current system of rules of origin that is used by the European Union and the United States in preferential trade agreements (including the GSP) and that is similar to systems used by other Organisation for Economic Co-operation and Development countries should be drastically simplified if developed economies really want to help developing economies integrate into the world trading system. In addition to diverting resources for administrative tasks, current rules of origin carry significant compliance costs. More fundamentally, it is becoming increasingly clear that they are often been designed to force developing economies to buy inefficient intermediate products from developed economies to \"pay for\" preferential access for the final product. The evidence also suggests that a significant share of the rents associated with market access (net of rules of origin compliance costs) is captured by developed economies. Finally, the restrictiveness of rules of origin is found to be beyond the levels that would be justified to prevent trade deflection, suggesting a capture by special interest groups. The article outlines some alternative paths to reforms.

This article reviews the theoretical and the empirical literature on regionalism. The formation of regional trade agreements has been, by far, the most popular form of reciprocal trade liberalization in the past 15 years. The discriminatory character of these agreements has raised three main concerns: that trade diversion would be rampant, because special interest groups would induce governments to form the most distortionary agreements; that broader external trade liberalization would stall or reverse; and that multilateralism could be undermined. Theoretically, all these concerns are legitimate, although there are also several theoretical arguments that oppose them. Empirically, neither widespread trade diversion nor stalled external liberalization has materialized, whereas the undermining of multilateralism has not been properly tested. There are also several aspects of regionalism that have received too little attention from researchers, but which are central to understanding its causes and consequences.