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GTAP Resource #4804

"Utilization of Preferential Tariffs"
by Mimouni, Mondher, Xavier Pichot and Badri Narayanan

While there has been a proliferation of Free Trade Agreements (FTAs) and Preferential Tariff Agreements (PTAs) across the world, very few of them are implemented as agreed upon. In many cases, even after agreements and initial implementation, the preferential tariffs are just not utilized enough. We employ a unique transaction-level data, for the United States, Canada and European Union on the utilization of preferential tariffs in this paper to illustrate the importance of taking into account the utilization of preferential tariffs. Based on this dataset, we calculate the tariffs implied by the lack of complete utilization of preferential tariffs first at the HS6 level and then extend it to the GTAP sectoral level. We undertake some comparisons between the preferential tariffs with complete and incomplete utilization of preferences at the GTAP sectoral level. Then, we run counterfactual simulations of completely eliminating tariffs from the complete utilization level and partial utilization level of the preferential tariff rates in the sectors and countries where we find a difference between the two. Economy-wide results are analyzed and conclusions are made on the welfare implications of incomplete vis-à-vis complete utilization of preferential tariffs. We find that not accounting for utilisation of preferences over-emphasizes the welfare losses arising from unilateral tariff elimination for the countries with incomplete utilization of these preferences and the welfare gains for their partner countries. The welfare loss differences are as high as US$ 3 billion in France and welfare gain differences are twice as high for all the partner countries put together.

Resource Details (Export Citation) GTAP Keywords
Category: 2015 Conference Paper
Status: Published
By/In: Presented at the 18th Annual Conference on Global Economic Analysis, Melbourne, Australia
Date: 2015
Created: Mimouni, M. (4/16/2015)
Updated: Mimouni, M. (4/16/2015)
Visits: 1,600
- Preferential trading arrangements
- Other data bases and data issues
- The GTAP Data Base and extensions
- Not Applicable

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