NATIONAL RESTRICTIONS By John C. Renner I. TARIFFS ON INDUSTRIAL TRADE. II. QUANTITATIVE RESTRIC- IV. RESTRICTIONS ON AGRICULTURAL TRADE. V. IMPLICATIONS. Governments use many mechanisms to control imports. International trade in industrial products is restricted by tariffs, quantitative restrictions, including "voluntary" restraints on exports, and a wide variety of other non-tariff barriers. Even greater ingenuity is demonstrated by governments in regulating the international flow of agricultural prod ucts. The quality of the debate on trade policy will depend in part on our understanding of the extent and significance of these restraints on imports. I. TARIFFS ON INDUSTRIAL TRADE It took five years to complete the Kennedy Round negotiations. This was due in large measure to the difficulty of striking an equitable deal. The aggregate figures suggest that the negotiators were generally successful. As a result of the Kennedy Round, the United States and the European Community will have reduced their tariffs on manufactured and semi-manufactured products by 36 percent. The United Kingdom and Japan will have reduced their tariffs by 39 percent. While claims that this picture of rough equity was highlighted by the uniformity of the complaints from industries in all of the major countries. When the Kennedy Round reductions are completed the end of this year, the average tariff rates maintained by the major industrialized countries on manufactured and semi-manufactured products (weighted by OECD trade) will be as shown in the following table. You will note that these countries fall into two groups. The average tariff rates of the United States and the European Community will be between 8 and 9 percent. The tariffs of Japan, Canada, and the United John C. Renner is Director, Office of International Trade, Department of State. Kingdom will be about two points higher, between 10 and 11 percent. Thus, we see that the average tariff rates of the major industralized countries will be quite comparable, with less than three points separating the lowest and the highest rates. However, like all averages, these figures mask significant differences. If the averages are broken down by industrial sectors, one gets a different perspective on the problem. The next table indicates the number of the industrial sectors where each of the major industralized countries will have the highest and lowest average tariff. This sectoral analysis reveals a greater difference in the relative position of these countries than the overall averages. When the Kennedy Round tariff cuts are completed, the European Community will have the highest average tariff rate in none of the industrial sectors and the lowest in eleven sectors. The Canadian position is just the reverse, with the highest average in ten sectors and the lowest in one. The United Kingdom is in the middle, flanked on the low tariff side by the United States and on the high tariff side by Japan. Focusing on the most detailed common tariff breakdown, the 919 categories of the four-digit Brussels Tariff Nomenclature in the industrial sector, we get another view of the spread of the tariff rates of the major industralized countries. From this picture of tariff dispersions, we see that the United States has considerably more high tariffs and somewhat more low tariffs than any of the other countries. The tariffs of the European Community group more closely around the general average than the other countries. Japan and the United Kingdom have roughly comparable tariff spreads. To round out this brief review of industrial tariffs, we ought to look at the highest and lowest tariff rates in the 12 industrial sectors accounting for 85 percent of OECD non-agricultural imports. Two interesting facts emerge from this table. First, the average sectoral tariffs of the countries with the highest rates are usually higher than 10% and frequently higher than 15%. Second, the discrepancy between the highest and the lowest rates is considerable in some sectors. We have now looked at industrial tariffs from four different angles. What conclusions can be drawn from this brief analysis? Although we do not have the price data that would enable us to make a reasonably accurate estimate of the trade impact of the tariffs remaining after the Kennedy Round cuts are completed, several rough judgments can be made. While general averages are relatively low, tariff rates of the major industrialized countries at the most detailed common level are over 10 percent very often and over 15 percent with surprising frequency. Even higher rates are not rare. The close grouping of the general average tariff rates of the major industralized countries disguises considerable differences in the sectoral tariff rates. The spread between the lowest and the highest average rates is over 8 points in 50 percent of the major industrial sectors. Thus, we see that the level of tariffs is higher and the spread is greater than generally supposed. While successive rounds of multilateral negotiations have reduced the relative importance of tariffs, the frequently repeated view that tariffs are no longer significant is clearly wrong. We have also discovered several noteworthy facts about how the tariffs of the industrialized countries compare with each other. Canada has the highest average tariff and the European Community the lowest average tariff in more industrial sectors than the other countries. The American tariff structure has more high and more low tariffs than any of the other countries. The tariffs of the European Community are grouped together around its general average. II. OUANTITATIVE RESTRICTIONS ON INDUSTRIAL TRADE In addition to tariffs, most governments impose quantitative limitations on some imports. These usually take the form of quotas imposed by the importing country or "voluntary restraints" established by the exporting country to avoid quotas. State trading practices are also used to limit imports. The economic and commercial consequences of limiting imports by quotas, "voluntary restraints", or state trading practices are the same. The impact of quantitative restrictions on the particular product under control is precise. But it is difficult to compare the totality of quantitative restrictions maintained by one country with the totality maintained by other countries. At any point in time, hampered as we are by insufficient data, it is virtually impossible to estimate the amount of trade that would have taken place in the absence of restrictions that have been in existence for some time. However, there are several ways of comparing quantitative restrictions that will give us a rough appreciation of their significance. The following table lists the number of industrial categories subject in whole or part to quantitative restrictions when imported from other OECD countries. A number of noteworthy facts arise from this table: A small but significant proportion of the 919 industrial categories is hampered by quantitative restrictions. Japan employs quantitative restrictions more often than the other countries. Japan has also reduced its use of quantitative restrictions during the last seven years by a considerably greater extent than the other countries. Canada, the United Kingdom and the United States now maintain substantially more quantitative restrictions than they did previously. Discrimination against Japan, mainly by the European Community, is still substantial. We can get a somewhat truer picture if we also consider the estimated value of the imports of industrial products covered by quantitative restrictions. Products (weighted by OECD trade) will be as shown in the following table. You will note that these countries fall into two groups. The average tariff rates of the United States and the European Community will be between 8 and 9 percent. The tariffs of Japan, Canada, and the United Kingdom will be about two points higher, between 10 and 11 percent. Thus, we see that the average tariff rates of the major industrialized countries will be quite comparable, with less than three points separating the lowest and the highest rates. However, like all averages, these figures mask significant differences. If the averages are broken down by industrial sectors, one gets a different perspective on the problem. The next table indicates the number of the industrial sectors where each of the major industrialized countries will have the highest and lowest average tariff. This table should be interpreted cautiously. Very restrictive quotas allow little trade to flow and have little impact on the table. At the other |