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Decline in Tariffs Driving Trade Growth

The surge in global trade growth has been strongly boosted by the worldwide drop in average tariffs.

GENEVA — The surge in global trade growth, which has averaged 7 to 9 percent annually in the last decade, has been strongly boosted by the worldwide drop in average tariffs, which fell to 9.4 percent in 2007 from 14.1 percent during 1995 to 1999, a World Bank report said.

The “World Trade Indicators 2008″ report concludes that, while rich countries have the lowest barriers to trade, many emerging economies also have posted large declines in import restrictions since the beginning of the decade.

The study, which examines 210 countries and customs territories, outlines that, since the beginning of the decade, Egypt has slashed its average tariff to 17 percent from 47 percent, India to 15 percent from 32 percent and Mauritius to 3.5 percent from 18 percent. China’s average tariff fell to 10 percent from 14 percent in the same period.

Rich nations, which began dismantling barriers earlier, still have the lowest average tariffs at 6 percent compared with a developing country average of 11 percent, the report said. In the Trade Restrictiveness Index, Hong Kong, followed by Singapore and Switzerland, were ranked the top three nations with the lowest import protection regimes. The U.S. was ranked 11th.

“The rankings show that those countries that have reduced their trade barriers…also have experienced sustained increases in their volume of trade,” said Roumeen Islam, World Bank Institute manager.

The report also shows, however, that rich nations still have much higher peak tariffs than poor nations and remain in sectors of greatest interest to developing countries, such as textiles and apparel.

Apparel and textiles, the report notes, “are also found among the top five export products for 45 countries. These countries are mostly concentrated among the low-income and lower-middle-income group.”

But developing nations that are apparel exporters also “face a significantly less favorable market access for their exports than the rest of the world,” it notes. Apparel exporters face tariffs more than double those faced by the rest of the developing world in rich markets, World Bank analysts estimate.

“With trade costs now higher than tariffs in many countries, improvement in trade logistics in developing countries would deliver high payoffs in improved trade performance,” the report said.