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GOAL AND TARGET ADDRESSED

Goal 8. Develop a global partnership for development.
Target 8A. Develop further an open, rule-based, predictable, non-discriminatory trading and financial system. Includes a commitment to good governance, development and poverty reduction—both nationally and internationally.
Target 8B. Address the special needs of the least developed countries. Includes: tariff and quota-free access for least developed countries’ exports; enhanced programme of debt relief for HIPCs and cancellation of official bilateral debt; and more generous ODA for countries committed to poverty reduction.


DEFINITION AND METHOD OF COMPUTATION

Definition
This indicator is the average tariffs imposed by developed countries on agricultural products, clothing, and textile exports from developing countries. Three sectors deemed of special interest for developing countries and LDCs are considered: agricultural products, clothing, and textile.

Concepts
Average tariffs are the simple average of all ad valorem tariffs (tariffs based on the value of the import) applicable to the imports of developing countries. Tariffs are customs duties on merchandise imports. Ad valorem tariffs (AV) are those imposed as a percentage of the custom value of the product imported. Other types of tariffs (NAV) need to be converted to the AV type, since the indicator requires that all tariff rates are expressed in ad valorem terms.. When tariff rates are not expressed in ad valorem form, their ad valorem equivalents (AVEs) are estimated.
Tariff treatments considered for this indicator cover unilateral or reciprocal preferential schemes, or, if there is not any preferential scheme applicable, the multilateral duty treatment (Most Favoured Nation clause, MFN duty free).
The fixed-structures of trade are referred to as "Standard Import Structure" and are the same for all developed market imports originating either from developing countries or from least developed countries. These two structures were calculated at the HS6-digit level by averaging total imports of OECD from, respectively, developing and least developed countries in the period 1999-2001. The use of those fixed structures allows the tracking over time of tariffs, independently of the variations in the composition of the trade flows. In addition, it limits the endogeneity bias caused when high tariff peaks imposed by some countries for some products are prohibitive and drive the bilateral trade flow to zero. For this reason, this indicator should not be used to represent the actual tariff schedule of any individual importing country, as the actual composition of trade may differ from the "Standard Import Structure". The list of least developed countries (LDCs) is defined by the United Nations General Assembly (see United Nations, 2008).
There is no official definition of developed and developing countries. For the purpose of calculating this indicator, developed countries include: Japan in Asia, Canada and the United States in North America, Australia and New Zealand in Oceania and Iceland, Norway, Switzerland and the EU(25 countries included since 2004) in Europe, following the common accepted practice used for MDG indicators.
Developing countries are those not listed as developed or transition countries by the United Nations Department of Economic and Social Affairs (for details see http://www.un.org/esa/desa/).
The Harmonized Commodity Description and Coding System (the Harmonized System, or HS) is used by customs services around the world and is the basis for the definition of MDGs groups of products.
Sectoral definitions follow those used in WTO agreements. Agricultural products comprise plant and animal products, including tree crops, but excluding timber and fish products, corresponding to the definition in the HS chapters 01 to 24 less fish and fish products, and some products in HS chapters 29, 33, 35, 38, 41, 43, and 50 to 53. Textiles are mainly covered in chapters 50 to 60. The bulk of clothing products are found in chapters 61 to 63.


Method of computation
To calculate average tariffs, all relevant trade agreements and preferential schemes are used. When several preferential schemes coexist, the selected rate is the most favourable tariff that an exporter from an eligible developing country can obtain under the different agreements. After a first simple-average aggregation at the Harmonized System (HS) six-digit level, tariffs are averaged using the Standard Import Structures as weighting scheme.


RATIONALE AND INTERPRETATION

This indicator monitors efforts made by developed countries to reduce or remove tariff barriers to imports from developing countries as part of a global partnership for development and given the way it is constructed, it is not affected by changes in trade.
High tariffs in developed countries deny market access opportunities to exporters. Tariffs on agricultural products, clothing and textiles are of particular concern since they account for a large portion of developing country exports. Removing developed country tariffs in these sectors could significantly increase economic growth in developing countries.
There is no target set for this indicator which is measured as the average tariff applied by developed countries on imports from developing countries. As a lower tariff provides a higher access to markets, a reduction of the average tariff towards zero should be the objective.


SOURCES AND DATA COLLECTION

National governmental agencies provide data for this indicator directly to the International Trade Centre (ITC), United Nations Conference on Trade and Development (UNCTAD) and World Trade Organization (WTO) annually. All data are reported according to the international agreed Harmonized System classification. This indicator is calculated only for developed countries.

DISAGGREGATION



COMMENTS AND LIMITATIONS

There are a number of limitations in the ability of this indicator to fully reflect the level of openness of the trading system.
First, tariffs are only one of the trade limitations faced by developing countries. Non-tariff measures, such as technical regulations and standards, or sanitary and phytosanitary regulations, can also impose trade limitations, but are not reflected in the indicator.
Second, the indicator, given the way it is constructed, is not affected by changes in trade flows—, such as those reflecting the diversification of exports by developing or least developed countries, or their progressive concentration on least protected sectors. The purpose of this indicator is to isolate and track changes in developed countries' tariff policies. Therefore, it is not comparable with the usual trade-weighted average of tariffs and should not be used to characterise the actual tariff schedule of any importing country.
Second, the indicator does not include information on the extent of the utilization of preferential treatment scheme, assuming that preferential schemes are fully utilized. However, even when duty-free access to developed country markets is provided, such access may not be fully used by developing countries for different reasons, such as the inability of some exporters to meet eligibility criteria (i.e. complying with rules of origin).
Third, this indicator only assesses the extent of tariffs in developed country markets. Although trade between developing countries comprises a growing share of world trade and emerging countries have become major players in international trade, their openness to such trade is not measured by the indicator.
Finally, the indicator focuses on three sectors that have traditionally been of interest to developing and least developed countries. The potential benefits of trade diversification are not assessed nor are the benefits of tariff decreases (or increases) in other sectors. Thus, the market access evolution of countries having a non-traditional exporting profile may e not be accurately reflected by the indicator.
A comparable indicator on MFN basis is also produced. A margin of true preference, between the MFN comparator and the MDG indicator might be defined.


GENDER EQUALITY ISSUES

See “GENDER EQUALITY ISSUES” for indicator 8.6.

DATA FOR GLOBAL AND REGIONAL MONITORING

Tariffs, preferences and imports data are compiled by the International Trade Centre (ITC), United Nations Conference on Trade and Development (UNCTAD) and World Trade Organization (WTO). The data are reported annually by national government institutions and processed and verified by the agencies before their validation. The reference period for annual data is the calendar year January to December. Reporting starts from 1996, since comprehensive detailed data on imports and preferences at the tariff line level are not available for earlier years. The sample does not cover all developed countries. Trade and tariff information covers Australia, Canada, the European Union (EU), Japan, Norway (included in MDG exercise in 2007), Switzerland, and the US. Iceland and New Zealand have not yet been included because of problems in availability of data on preferences. Changes in the EU membership modify the size of this group: 15 countries were included in EU until 2004, 25 until 2007 and 27 from 2007 onwards. Also, changes occurred in the LDC group within the period of the calculation, modifying the size of this group. Therefore, growth calculations of trade and duty-free trade absolute numbers during this period are not accurate.
The website www.mdg-trade.org provides data at regional and sectoral level. Data at national level can be obtained by importer market or by benefitiary country. However, because the trade structure is regional and fixed around 2000, it is not comparable to a weighted trade average.


SUPPLEMENTARY INFORMATION



EXAMPLES



REFERENCES

INTERNATIONAL TRADE CENTER, UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT, WORLD TRADE ORGANIZATION. Millennium Development Goals: Market Access Indicators. Geneva. Available from http://www.mdg-trade.org/.

UNITED NATIONS (1998). International Merchandise Trade Statistics – Concepts and Definitions. New York. Available from http://imts.wto.org/imts_rev2_e.pdf

UNITED NATIONS STATISTICS DIVISION (2009). Country or Area and Region Codes. New York. Internet site http://unstats.un.org/unsd/methods/m49/m49regin.htm

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (2003). Trade Analysis and Information System (TRAINS). Geneva. Internet site www.unctad.org/Trains

WORLD CUSTOMS ORGANIZATION (1996). Harmonized Commodity Description and Coding Systems. Brussels. Available from http://www.wcoomd.org/

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