Tariffs applied to imported goods have been decreasing over time across developed, developing and least developed countries (LDCs). Key drivers of this global trend are the progressive liberalization achieved under the multilateral trading system, as well as, the expansion of preferential market access under regional trade agreements, unilateral tariff liberalization and non-reciprocal preference schemes in recent years.
Average applied rates of the Most Favored Nation (MFN) tariffs have shown a steady decline for over a decade. Preferential tariffs, which are granted under bilateral or regional trade agreements or as non-reciprocal preferences to developing countries, vary widely across country groups. Tariffs rates imposed by LDCs, while remaining relatively high, have been declining as well.
Most developed countries already provide full or significant duty-free quota-free market access (DFQF) coverage to the LDCs. DFQF access in Generalized Schemes of Preferences (GSP) schemes of developed countries shows that duty-free coverage ranges from 100 percent to 37.1 percent in 2016 or the latest available year. Most developed countries already provide full or significant DFQF coverage to least developed countries.
In 2016, the product coverage of duty-free treatment for LDCs has increased by 10 percentage points from the level in 2010, and by 16 percentage points from 2005.
Across product sectors, higher tariff rates still exist on clothing and textiles exports from LDCs. This is due to the exclusion of some large Asian exporters from certain preferential tariffs.
The figure provides the relative preferential margins enjoyed by different exporting regions, in developed-country markets in 2016.
Relative preferential margins are influenced by the existence of trade agreements or non-reciprocal preferential schemes between the exporting and the importing regions. It reveals that exports from Latin America on average face the highest tariff margins at 1.1 percentage points, i.e. facing on average 1.1 per cent less tariffs than other regions exporting to the developed-country markets. The relative preferential margin for East Asia is negative (-1.2 per centage points), meaning that tariffs applying to their exports are on overage 1.2 per cent higher than tariffs applying to exports from other regions.
The boost to LDC export competitiveness that is granted by duty-free treatment can be in part measured by the magnitude of the preferential tariff margin (i.e., the difference between the preferential tariff rate for LDCs and the non-preferential tariff rate)