Tariff Reduction Effects of WTO/DDA Agricultural Negotiations: Analysis of the Chairman's Second Draft Text

Abstract

The average tariff reduction rate is 20% point higher in five developed countries analyzed in this study compared to five developing countries following the direction offered by the Chairman's Draft Text. Average tariff reduction rates are 31.6% for the five developing countries and 51.4% for the five developed countries. Korea's tariff reduction rate reaches to 36.1%, the highest reduction in developing countries, when Korea retains the developing country status. When Korea makes tariff reductions following the direction for developed countries, the average tariff reduction rate rises to 55.8%. Tariff reductions following the second Draft Text affect the tariff structure. Tariff escalation, dispersion and peaks can be mitigated by applying the tariff reduction methods proposed in the Second Draft Text. Tariff reductions give rise to the effects of reducing tariff escalation problem and the effects are stronger for the commodities with higher tariff rates and in developed countries. The average tariff rate for tariff peak commodities is reduced by 40% in developing countries and by 60% in developed countries. Tariff dispersion is also mitigated by reducing tariff rates. The difference of the average tariff rate between Korea and Australia is reduced to 38.5% from 59.8% by cutting tariff rates with the rules proposed in the second Draft Text. Korea needs to prepare the Country Schedule in advance to evaluate the potential outcome of the tariff cut following the Draft Text and to capture various voices from producers, consumers and other related institutions. For the preparation of the Country Schedule, Korea needs to decide minimum tariff cut items within a group of the commodity classified by tariff rates and this procedure requires discussion among producer and consumer groups.