International Handbook on the Economics of Integration, Volume II
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International Handbook on the Economics of Integration, Volume II

Competition, Spatial Location of Economic Activity and Financial Issues

Edited by Miroslav N. Jovanović

With this Handbook, Miroslav Jovanović has provided readers with both an excellent stand-alone original reference book as well as an integral part of a comprehensive three-volume set. This introduction into a rich and expanding academic and practical world of international economic integration also provides a theoretical and analytical framework to the reader, presenting select analytical studies and encouraging further research.
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Chapter 9: How the Sequence of Trade Liberalisation Affects Industrial Location

Mary Amiti


Mary Amiti 1 INTRODUCTION The reduction of industrial tariffs is one of the key planks in the Doha World Trade Organization (WTO) Ministerial Declaration. Although average tariffs have fallen significantly in the post-Uruguay Round, there are still wide disparities between products and along the production chain. In the US, for example, the average most favoured nation (MFN) tariff rate was 2.7 per cent in 2005,1 yet tariffs exceed 15 per cent on 5 per cent of products. And for some textile products these rates range between 28 and 48 per cent, with rates on tobacco products as high as 350 per cent. Large variations in tariffs are even more prevalent in developing countries. For example, in China the average MFN tariff rate was 9 per cent, with tariff rates exceeding 24 per cent on 5 per cent of the products. Within industries along the vertical production chain, many industries exhibit escalating tariffs, where tariff rates are the lowest on raw materials and increasing as one goes up the value chain.2 However, there are still many industries where the reverse is true. For example, in Malaysia tariff rates are 16 and 44 per cent on leather and shoes, respectively, but in the EU the tariff rate is higher on leather than on shoes, at a rate of 14 per cent compared with 9 per cent. Proposals to further reduce industrial tariffs are expected to lead to substantial gains for developing countries, as the average developing country now depends on manufactures...

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