An Index of Industrial Country Trade Policy Toward Developing Countries

Abstract

The index of trade policy developed in this study is designed to synthesize the state of developing country access to import markets in each of the major industrial country areas. The first section presents the theoretical considerations involved in constructing the index, and weighs the pros and cons of various approaches to measuring protection. The second section presents estimates of protection against imports from developing countries for Australia, Canada, the European Union, Japan, New Zealand, Norway, Switzerland, and the United States. These estimates are calculated for three broad product categories: textiles and apparel; other manufactures; and agricultural goods. The analysis then combines the sectoral estimates into an Aggregate Measure of Protection (AMP) for each importing country. It also reports measures of revealed openness, and incorporates them along with the AMPs to obtain a composite ranking of industrial countries by degree of market access. The study then considers the additional information gained by disaggregating protection among EU member countries (in light of variation in agricultural subsidies), reviews two other recent studies similarly ranking protection and compares them to the present study, and recapitulates the principal findings. Among the big three markets, this study finds that protection against developing countries is lowest (and market access highest) in the United States, intermediate in the EU, and highest (market access lowest) in Japan. Among seven industrial countries plus the EU, market access is ranked highest for a cluster of three countries close to each other at relatively low protection levels (United States, Australia, New Zealand); followed by Canada and the EU, and then by Switzerland with somewhat lesser access. Significantly lesser market access is found in Japan and especially lowest-ranked Norway. For most countries, the results are driven heavily by estimates of agricultural protection, which is so high that it dominates the results even though the share of agriculture in total imports is modest. It is thus not surprising that the countries concentrated at the top of the market access league tend to be the agricultural exporting countries, and those at the bottom, agricultural importers.