1 Market Access: Whats At Stake Christopher A. Padilla Co-Chair, WTO Working Group National Foreign Trade Council (U.S.) April 2002 Christopher A. Padilla Co-Chair, WTO Working Group National Foreign Trade Council (U.S.) April 2002

2 Tariffs Remain An Issue Two-thirds of collected tariffs are on industrials Source: The World Bank

3 Where the Money Goes Industrial Tariff Payments Developing countries pay 40% of tariff bill, but only 22% of GDP High tariffs on developing country exports are a significant problem But developing countries pay most tariffs to each other Source: The World Bank

4 Developing Countries Pay Most of their Tariffs To Each Other $23 billion $57 billion Source: The World Bank

5 Where The Money Goes Industrial Tariffs Tariffs on South-to- North trade are typically 4X higher than tariffs on North-to-North trade But rates on South-to- South trade are the highest Source: The World Bank

6 Rapid Growth in South-South Trade Nearly 40% of developing-country exports are to other developing countries May rise to 50% by 2005 Source: The World Bank

7 Major Regional Free Trade Agreements, 2005 (Major FTAs covering a significant portion of world trade) FTAA EU & Associates ASEAN FTA Mexico - EU Mexico - EFTA Mexico - many Mercosur - EU South Africa - EU SADC - EU Australia-NZ Egypt - EU? Aus/NZ/AFTA?Various Intra-Africa More than half of world trade covered by an FTA in 2005

8 Major Regional Free Trade Agreements, 2010 (Major FTAs covering a significant portion of world trade) FTAA EU & Associates China- ASEAN FTA Mexico - EU Mexico - EFTA Mexico - many Mercosur - EU South Africa - EU SADC - EU Australia-NZ Egypt - EU Aus/NZ/AFTA?Various Intra-Africa

9 Major Regional Free Trade Agreements, 2020 (Major FTAs covering a significant portion of world trade) FTAA FTAA and APEC EU & Associates APEC Mexico - EU Mexico - EFTA Mexico - many Mercosur - EU Egypt - EU South Africa - EU SADC - EU Various Intra-Africa

10 The U.S. Basic Necessities Tax Clothes & Shoes All Other Goods Source: Progressive Policy Institute, using ITC data

11 Backpack: 18.3% Pencils, Markers: 4.3% Jeans: 16.4% T-Shirt: 17.8% Shoes: up to 48% Peanut-butter sandwich: 30% The Basic Necessities Tax Average U.S. Tariffs On Back-to-School Items

12 The Cheap Goods Tax U.S. Import Tariffs Source: Progressive Policy Institute, Americas Hidden Tax on the Poor Ladies Undergarments Silk:2.4% Polyester:16.2% Tableware - Forks Silver-plated:2.4% Stainless steel:15.8% + Footwear (90% imported) <$6.50/pair: up to 48% >$12/pair:20% Tariffs on luxury items are lower. Every-day goods are taxed more.

13 Cheap Goods Tax Not Unique to Developed Countries Nepal exports more to the United States than it does to India, which borders Nepal on three sides. Same is true for Sri Lanka, Maldives Source: Progressive Policy Institute

14 Getting to Zero Modalities for Industrial Tariff Elimination Request/offer process S&D through phasing 2020: Industrial Tariffs Eliminated Eliminate LLDC tariffs BEFORE 2005 More products in later buckets for developing countries

15 1.Developing countries: Pay most tariffs to each other, on growing South-South trade Face high tariffs in developed countries on key export items Need to reduce costs of production to attract investment 2.Developed countries: Pay $16 billion in residual tariffs on North-North trade Face broadly high tariffs in key developing markets Should eliminate basic necessities tax on poor consumers Summary: Why Zero? Summary: Why Zero?

16 3. Were halfway there already: 42% of world trade is duty-free, percentage is growing Web of FTAs threatens: more complexity economic distortions second-class status for many poor countries 4. Grand political bargain: Addresses high tariffs on selected goods in developed countries AND broadly high rates in developing countries If no bargain, little progress likely on either front Summary: Why Zero? Summary: Why Zero?