Nominal Protection Rates Research Articles

A reassessment of industrial growth in interwar Turkey through first-generation sectoral estimates

This study presents the first sectorally disaggregated estimates of the industrial output growth for Turkey between World War I and II. These estimates indicate that at the aggregate level the existing official index overestimates the output growth. Secondly, the sectoral disaggregation shows that the industrial growth was balanced, as both textiles and food-processing branches, which comprised most of the value-added, grew significantly. Local industries expanded against the only modest gains in per capita consumption of manufactured goods and incomes. Output growth was positively correlated with higher initial import penetration and nominal protection rates, which implies that trade protectionism helped favorable relative prices induce domestic expansion. On the other hand, both import-competing and domestic-market-oriented sectors significantly expanded, which suggests that import repression and increasing domestic demand drove industrial growth.

Non-Tariff Trade Regulations in Indonesia: Nominal and Effective Rates of Protection

Non-tariff regulations on imports and exports have spread in Indonesia since 2011. I report findings of a study of many of these regulations, in which a variety of methods were used to estimate the associated nominal rates of protection. These findings were then used to estimate effective rates of protection (ERPs) across 140 tradable-goods sectors in the Indonesian economy in early 2015, taking into account also the effects of the most-favoured-nation and preferential-import tariff schedules, anti-dumping and safeguard duties, export levies, duty drawbacks and exemptions, domestic sub-sidies, and excise taxes. I find that the magnitude and dispersion of ERPs were higher in 2015 than in early 2008, for which a similar study was previously conducted, and that much of the variability was related to quantitative trade restrictions. In particular, the regulations examined boosted a measure of the cost of living by 7.6% in 2015, compared with 2.5% in 2008.

Can budget support to the cotton sector be used more efficiently? An assessment of the policy support measures in Mali and Burkina Faso

In Burkina Faso and in Mali, cotton is the main cash crop, export of cotton lint accounting for 60 percent and 15 percent of the value of national exports, respectively, in 2014. To maintain the level of cotton production, the Governments of Burkina Faso and Mali support the sector by ensuring stable and remunerative prices for producers. Indeed, analyses based on the Monitoring and Analysing Food and Agricultural Policies (MAFAP) methodology show that the policy environment supported producer prices by 21 and 12 percent in Burkina Faso and Mali, respectively, between 2005 and 2012. To do this, a price stabilization fund is implemented to support the sector in case prices on the international market fall. The MAFAP analysis shows that this type of price intervention, with other cotton-related budgetary transfers, represented 9 percent of food and agricultural expenditure in Burkina Faso between 2006 and 2012 and 31 percent in Mali. The present analysis assesses the level of policy support to the cotton sector in both countries. This is done, first, by calculating and discussing the level of price distortion within both countries for the 2005-2012 period, using the observed Nominal Rates of Protection at producer level. Two adjusted NRP are also computed, one using an adjusted benchmark price for cotton 2014 Annual Meeting of the International Agricultural Trade Research Consortium (IATRC)that is netted out of policy interventions at the international level (Anderson, 2006) and one using an alternate, non-misaligned CFA Franc to US dollar exchange rate (BCEAO, 2013). The comparison between the three nominal rates of protection provides insights on the level of domestic price distortion that compensates endogenous inefficiencies (high production and transport costs) against price distortions that result from exogenous causes (international price distortions and Euro to Dollar exchange rate misalignment). The cost of the price distorting policies, but also of other budgetary transfers such as input subsidies and the building and maintenance of infrastructure, is then examined for Burkina Faso and Mali. A budgetary allocation analysis is proposed, along with the computation of Nominal Rates of Assistance that reveal the full extent of policy support to the cotton value chain. The value chain inefficiencies are then discussed, using the Market Development Gap indicator, which was computed for the cotton value chain in both countries. The analysis reveals that a higher producer price that could be obtained by Mali and Burkina Faso producers, should inefficiencies be corrected through sound investment policies.

Policy or Markets? An Analysis of Price Incentives and Disincentives for Rice and Cotton in Selected African Countries

African governments have intervened extensively in markets through regulations and other price, trade, or marketing policies to provide price incentives to farmers. Using data from the Monitoring and Analyzing Food and Agricultural Policies program, this paper reports nominal rates of protection (NRPs) for rice and cotton at wholesale and farm level in selected African countries between 2005 and 2010. Rice is an import that has received high levels of border protection by the governments concerned while cotton is a key export crop which has been the focus of direct and indirect public intervention. For both commodities, we provide evidence for both market and nonmarket failures. In the case of rice, these prevent border protection from reaching farmers while raising consumer prices. Cotton ginning and marketing is concentrated in a small number of private sector companies in most countries studied. The farm level NRPs provide evidence of market failure in these countries that may be mitigated by policies that set indicative prices and encourage competition. The NRPs indicate nonmarket failure in the two countries that maintain parastatal monopsonies for cotton.

A profile of trade protection in Egypt: an effective rate of protection approach adjusting for energy subsidies and non-tariff barriers

This study examines effective rates of protection (ERPs) in Egypt due to tariffs, non-tariff barriers (NTBs), and energy subsidies, and compares them with those of a decade ago. Two sources of cost-share information at different levels of aggregation are used: data on specific industries (four-digit ISIC code, 20 in the private and 17 in the public sector), and data on the inter-industry intermediate input costs from the latest available input–output matrix (2006/2007) with 23 aggregated sectors. Trade liberalization since late-1990s appears to have reduced protection, although some industries remain relatively highly protected due to tariff escalation, NTBs, and energy subsidies. Energy subsidies favor energy intensive sectors, of particular note the electricity sector. Energy subsidies also offset the dis-protection that results from intermediate input tariffs. The cement sector is notable, energy subsidies almost exactly offsetting the negative impacts of tariffs and indirect taxes. The fertilizer sector has zero nominal tariffs (benefiting agriculture) and so has a negative ERP due simply to tariffs on inputs; nevertheless, the sector has a high positive ERP due to energy subsidies. ERPs in the private sector have declined notably, and nominal rates of protection have declined generally. ERP dispersion across industries also fell over the decade, but there remains an unexpectedly high dispersion relative to that suggested by applied tariffs only due to the unequal impact of subsidies. Estimated tariff equivalents of NTBs are also highly dispersed.

Trade Liberalization, State Trader Management Tenure, and Grain Pricing in Botswana

This article examines how trade liberalization and grain marketing board management tenure influenced grain pricing in Botswana. Regression analyses of nominal protection rates (NPRs) and marketing margins (MMs) are used to test the hypothesis that policy reforms influenced grain pricing in the country. Moreover, a comparison of NPRs is undertaken to determine whether management tenure has had an influence on grain pricing. The results indicate that the marketing board switched from taxing to subsidizing consumers following the 1991 policy reform from food self-sufficiency to food security. A reversal occurred after the board's 1997 restructuring, which involved, among other things, closing down Botswana Agricultural Marketing Board's (BAMB's) loss-making units and a change in the composition of BAMB's board of directors. Management tenure at BAMB also had an influence on grain pricing. The period 1989–1997, in particular, was characterized by high consumer subsidization, highest marketing margins, and lowest profits. This could have been avoided had management adopted pricing regime consistent with public policy. This notwithstanding, perennial losses experienced by the marketing board also resulted from fragmented production and low producer market participation.

DETERMINANTS OF PROTECTION IN THAI MANUFACTURING

This paper examines determinants of effective rates of protection (ERP) and nominal rates of protection (NRP) in Thai manufacturing. Our results indicate political bargains in Thailand are struck over ERP rather than NRP. Moreover, protection tends to be granted to industries that have a high level of industry concentration and are experiencing increased import competition. The relatively open foreign investment policy regime in Thailand means that policymakers are more responsive to requests made by foreign investors, including requests for tariff cuts. The decision to grant protection to Thai industries is justified on the basis of the ability of industries to generate employment and backward linkage to the rest of the economy.

Welfare impacts of import controls on Botswana's horticulture

AbstractBotswana has, for the past two decades, used import controls (permits) to regulate horticultural imports, and thereby promote economic diversification through import substitution. This article estimates import demand equations to capture the impact of import controls on horticultural imports (oranges, potatoes, and onions) into Botswana, using data for 1974 to 2001. Parameter estimates are used to compute nominal protection rates (NPRs) and welfare effects. Model‐generated NPRs are estimated at 191%, 75%, and 109% for oranges, potatoes, and onions, respectively. Imports of oranges, potatoes, and onions declined by 32%, 29%, and 35%, respectively, due to the implementation of import controls. Over time consumer losses and quota rents rose while producer gains declined. Net social losses also increased, implying that import controls became increasingly burdensome. It is argued that import controls have not been very effective in promoting import substitution. The study is important for the trade liberalization debate in the Southern African Customs Union (SACU) and within the Southern African Development Community (SADC), where import permits and other nontariff barriers are pervasive, have proliferated, and are a major hindrance to intraregional trade.

Effective and Nominal Rates of Protection

Effective and Nominal Rates of Protection

Tracking Distortions in Agriculture: China and Its Accession to the World Trade Organization

This article examines the impacts of China's accession to the World Trade Organization (WTO) on prices in its agricultural sector. The analysis uses a new methodology to estimate nominal protection rates in China's agricultural sector before its accession to the WTO. These new measures account for differences in commodity quality within China and between China and world markets. The analysis shows that some of China's agricultural commodities are well above world market prices and others are well below. The article also assesses market integration and efficiency in China. It finds high degrees of integration between coastal and inland markets and between regional and village markets. The remarkable improvements in market performance in recent years mean that if increased imports or exports affect China's domestic price near the border, producers throughout most of China will feel the price shifts.

Lobbying, Counterlobbying, and the Structure of Tariff Protection in Poor and Rich Countries

A political economy model of protection is used to determine endogenously the intersectoral patterns of protection. Three propositions are derived that are consistent with the stylized patterns of tariff protection in rich and poor countries: Nominal protection rates escalate with the degree of processing, protection is higher on average in poor countries, and rich countries protect agriculture relatively more than they protect manufacturing, whereas poor countries do the reverse. Numerical simulations for archetypal rich and poor economies confirm that the endogenously determined structure of protection is broadly consistent with observed patterns of protection.

Distortions at the Border; Integration Inland: Assessing the Effect of WTO Accession on China's Agriculture

The main goal of the paper is to address the impact of the WTO on China's agricultural sector. To accomplish this goal we address two sets of issues. First, we seek to provide measures of the distortions in China's agricultural sector at a time prior to the nation's accession to WTO. This is accomplished by estimating the nominal rates of protection (NPRs) of the agricultural sector's major commodities using a new methodology to account for grain quality differences within China and between China and the world market. Second, we seek to assess how well integrated China's markets are in order to understand which areas of the country and which segments of the farming population will likely be isolated from, or affected by, the changes that WTO will bring. We find that NPRs differ among commodities. Some of China's agricultural commodities are well above and others are well below world market prices. We also find that if increased imports or exports affect China's domestic price at the border, its own domestic markets are mostly integrated so that price shifts in one area will affect prices in most of the rest of China. Our analysis finds, however, that a number of policy and structural factors limit the overall size of the shock.

Wheat policy and economy-wide reform in Brazil

Abstract In recent years, the wheat sector in Brazil has moved from governmental protection and public intervention to a free market and privatization. In this study, those changes are analyzed through measures of governmental intervention on nominal rates of protection and on welfare of producers and consumers. Elasticities of demand and supply of wheat are estimated, and the effects of changes in policies are analyzed under official and shadow exchange rates. Welfare measures indicate that almost US$ 8 billion were spent from 1970 until 1989 with policies to subsidize producers and consumers. The policy-induced stimulus to consumer demand exceeded the stimulus to domestic production, and self sufficiency in wheat declined. The reduction in wheat subsidies since 1989 was more than an isolated sector-specific policy. It was part of macroeconomic anti-inflation policy, and it coincided with other economy-wide changes such as real appreciation and a decline in international commodity prices.

Wheat policy and economy‐wide reform in Brazil

AbstractIn recent years, the wheat sector in Brazil has moved from governmental protection and public intervention to a free market and privatization. In this study, those changes are analyzed through measures of governmental intervention on nominal rates of protection and on welfare of producers and consumers. Elasticities of demand and supply of wheat are estimated, and the effects of changes in policies are analyzed under official and shadow exchange rates. Welfare measures indicate that almost US$ 8 billion were spent from 1970 until 1989 with policies to subsidize producers and consumers. The policy‐induced stimulus to consumer demand exceeded the stimulus to domestic production, and self sufficiency in wheat declined. The reduction in wheat subsidies since 1989 was more than an isolated sector‐specific policy. It was part of macroeconomic antiinflation policy, and it coincided with other economy‐wide changes such as real appreciation and a decline in international commodity prices.

Transition économique et réforme de la politique commerciale en Chine

Trade policy reform is an essential feature of China's economic transition to a market economy. On the one hand, the liberalisation et decentralisation of export activities has boosted exports. On the other hand, the reform of China's import regime has been progressing much more slowly. This has two negative consequences. The persisting combination of high nominal protection rates and numerous tariff exemptions creates a dual regime : export-oriented firms enjoy free access to imports, while the domestic sector remains highly protected from international competition, which allows for continuing misallocation of resources. This incompleteness of trade reforms currently prevents China from joining the wto, which might eventually hamper its further integration into the world economy.

Estimates of national parameters for the economic analysis of projects in Brazil

The main objective of this paper is the derivation of a set of conversion factors (CFs) that can be applied to the economic analysis of projects. The availability of the national input-output table and data provided by a study that estimated nominal protection rates for Brazil were essential for this application of the semi-input-output (SIO) method. A recent methodological development that avoids the well-known computational problem of the wages of unskilled labour not reflecting the output forgone in the economy is incorporated into the analysis.

Trade reform under regional integration: Policy simulations using a CGE model for Guatemala

The present paper evaluates the effects of alternative trade policy reforms to the Central American Common External Tariff (CET) schedule on the Guatemalan economy. To accomplish this, the paper develops a multiperiod Computable General Equilibrium (CGE) model, with dynamic sequencing to link interperiod equilibria. As is common in other CGE applications, the model allows for product differentiation, sector specific capital, and substitution in production and consumption. Furthermore, the model incorporates explicitly Guatemala's main economic features — including its membership in the Central American Common Market — and gives special attention to the tradable goods and commercial services sectors, to capture adequately the response of the economy to trade policy changes. The trade reforms analyzed include small changes in the average CET rates, and a reduction in the dispersion of nominal protection rates across sectors. The results suggest that GDP, investment, employment and exports, particularly non-traditional exports to non-regional markets, are likely to increase moderately as a result of the policy reforms. Although the changes are modest, they are commensurate with the magnitude of the trade reforms analyzed — and they are likely to underestimate the gains achieved from trade liberalization.

The pattern of protection for food crops and cash crops in developing countries

A broad commodity-related data base is utilized to investigate the structure of agricultural protection in developing countries over time. A decomposition approach for net nominal rates of protection, which distinguishes direct and indirect agricultural policies, is proposed and applied to protection levels for wheat, rice, and coffee in the period 1969-85. We show that the food crops are favored compared with the export crops with regard to (1) average levels of net protection, (2) the trend of net protection, and (3) the impact of policies on the stability of producer prices. Indirect agricultural policies are crucial for producer incentives but are not necessarily dominating direct agricultural policies. Copyright 1993 by Oxford University Press.

Japan's agricultural policy in international perspective

Agricultural protection in Japan began at the turn of the century, later than in Western Europe. But it has grown much more rapidly than in Western Europe and so Japan's nominal protection rates are now more than twice as high as Europe's. As a consequence, the domestic welfare cost of Japan's agricultural policy, as a percentage of GNP, is well above that for Europe. Moreover, even though the Japanese economy is much smaller than Western Europe's, the cost of Japan's protection to food-exporting countries is not a great deal less than that of the European Community's policies, according to the results of a simulation model of world food markets. J. Japan. Int. Econ., June 1987, 1(2), pp. 131–146. Department of Economics, University of Adelaide, Adelaide, S.A. 5001, Australia; and National Centre for Development Studies, Australian National University, Canberra, A.C.T. 2601, Australia.