Tariffs applied by WTO members have almost halved since 1996
By Monia Snoussi-Mimouni and Edvinas Drevinskas
There has been a clear downward trend in tariffs since the WTO was established in 1995.
Since 1996, global trade in goods has more than quadrupled, reaching a total of US$ 18.6 trillion for imports in 2021, compared to US$ 4.4 trillion in 1996.
Over the same period, available data indicate that the simple average tariff applied by WTO members on a most-favoured nation basis — by which WTO members extend the same trade treatment, including tariff rates and market access, to all other members — has declined by 44 per cent, falling from 13.2 per cent to 7.4 per cent, as shown in Figure 1.
A similar trend emerges for tariffs applied on a trade-weighted basis, with the average MFN tariff dropping by 47 per cent, from 7.1 per cent to 3.7 per cent.
Taking into account preferential tariff regimes, including those offered by developed countries to developing and least-developed countries, and those in regional trade agreements (RTAs), an even steeper decline is visible. Between 1996 and 2021, the trade-weighted average of effective applied tariffs — based on the assumption of full utilization of preferential tariffs — dropped from 6.8 per cent to 2.5 per cent. The reason for this larger decrease was the increased trade in products subject to lower tariffs provided by these trade agreements.
Figure 2 illustrates changes by sector between 1996 and 2021. Notably, the tariffs on agriculture products declined more than those of industrial products, which were already low in 1996. For example, the largest decrease in trade-weighted MFN applied tariffs on agricultural goods was for animal products, which fell from 37.4 per cent to 17.5 per cent between 1996 and 2021, while the largest decrease in tariffs on industrial goods was for textiles, which declined from 11.7 per cent in 1996 to 7.6 per cent in 2021.
The changes in trade-weighted averages could be attributed not only to changes in tariffs, but also to changes in trade flows. For instance, an increase in trade in goods combined with a lower tariff within a product group will result in a decrease in the trade-weighted average.
It is difficult to predict the future direction of tariffs as a range of factors can influence WTO members' actions. However, the WTO remains committed to helping its members ensure that trade flows as smoothly, predictably and freely as possible.