Trans-Pacific Tariff Barriers: a Case Study of Five Asia—Pacific Developing Countries and Canada

Abstract

Though the Trans Pacific Partnership (TPP) is believed to greatly benefit the developing countries of the Asia—Pacific (AP) region, most of the countries, such as China, are still hesitant to join. The major concern for these countries is whether or not the gains from the free trade provisions of the TPP will provide enough of an advantage given that most of them have already joined the WTO. In this paper, I first apply Feenstra’s (1995) TRI to gauge the actual Canadian tariff barriers facing five Asia—Pacific developing countries: China, Thailand, Malaysia, the Philippines, and Indonesia. The calculation of TRIs enables us to estimate the gains (from retrieving deadweight loss due to tariff distortion) to Canada if it completely removes its tariff barriers from the 2010 level against the five exporting countries. The gains for Canada would reach USD 276.45 million solely from China’s exports, and another USD 33.96 million total from the four other countries. Then, based on the gravity model, I estimate the impact of tariff reduction on imports and the gains, in terms of possible export growth, to the five developing countries. I find China’s exports to Canada may increase by 60.58%. Export growth then would be 68.21% for Indonesia, 39.77% for Malaysia, 69.64% for the Philippines, and 42.62% for Thailand.

Keywords:

• trade restrictiveness index
• demand elasticities
• deadweight loss (DWL)

JEL classification:

• F12
• F14
• O47

Acknowledgements

For financial support, I thank the Natural Science Foundation of China, NO. 71103116, and the 2013 Shanghai Municipal Government Consultation Project on ‘China (Shanghai) Pilot Free Trade Trial Zone’, NO. 2013-YJ-H01.

Notes

1. One common way is to use actual import volumes as weights. See, for example, Edwards (1998).

2. See Anderson and Neary (2005) for a thorough discussion.

3. They include Australia, Brunei Darussalam, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, New Zealand, Papua New Guinea, Philippines, Russia, Singapore, Taiwan, Thailand, and Vietnam.

4. In 2003, Canada dramatically increased its import tariffs on alcoholic and nonalcoholic beverage products which are important Canadian imports. For instance, Canada increased its tariff on HS code-220710 (‘undenatured ethyl alcohol of an alcoholic strength by volume of 80 % vol or higher’) from 15% to 1546%; it also increased the tariff on HS code-220410 (‘Sparkling wine’) from 4% to 446%.

5. Time specific effect fully absorbs Canadian GDP and country specific effect