Key message: Closed for business
The largest developing economies still offer limited access to their market (see Figure 3). Trade-weighted average tariffs applied by the 10 largest developing economies (by GDP) amount to 9.9 percent—a significant mark-up and a drag on the competitiveness of imported goods.15 Among these 10 countries, seven rank below the 100th place in the rankings on the Domestic market pillar of the ETI, including the four BRICs: China (101st), Brazil (109th), Russia (112th) and India (135th), which is second to last, only ahead of Iran. Mexico (10th) and two ASEAN members—the Philippines (22nd) and Indonesia (30th)—are the three notable exceptions.
ETI results based on data from the International Trade Centre, show that, on average, countries have become more open since 2014 (see first column in Table 2). But this average conceals vast differences across countries and regions. For instance, ASEAN members have become more open while enjoying better foreign access, as a result of the region’s steady integration and thanks to a number of trade and investment agreements with its main partners. At the same time, the current “trade fatigue” in advanced economies is reflected in the lack of progress in trade liberalization in Europe. Access to South Asia’s markets was already the most restricted in the world in 2014 and it has become even more so in the past two years. Economies in Eurasia exhibit the largest deterioration of both foreign and domestic market access.
In contrast with developing economies, advanced economies apply very low tariffs. For instance, the average tariff applied by the 10 largest advanced economies is 2.1 percent. This openness, however, is partly offset by very complex tariff regimes. Thirty-two of the 36 advanced economies, including nine of the 10 largest, rank in the bottom half of the tariff complexity indicator.16 The four exceptions are Singapore and Hong Kong, tied for the first spot, Australia (5th) and New Zealand (53rd). One of the five indicators used to assess tariff complexity is the number of distinct tariffs; the higher the number, the more difficult it is to navigate a country’s tariff schedule. Switzerland is by far the worst performer on this measure: its schedule contains a staggering 6,710 distinct tariffs. The median number of distinct tariffs for advanced economies is 1,924, which is the number of distinct tariffs for most EU members, whereas for developing economies it is a mere 22.
As tariffs have been progressively reduced over the past two decades, trade policy has become relatively less important. But further multilateral trade liberalization would yield sizeable welfare gains (see Chapter 1). However, a troubled international governance system, trade fatigue and a backlash against globalization make any significant progress in market access negotiations extremely unlikely for the foreseeable future. In this context, governments around the world should at least refrain from renouncing existing commitments, including unilateral ones (e.g. generalized systems of preferences), and resist protectionism.