International trade in goods - tariffs

Data extracted in May-June 2017

Planned article update: November 2019

Highlights

In 2015, around 70 % of the imports that entered the EU did so at zero or reduced tariff.

Tariffs applied to the value of imports, by processing stage, world average, 2002-2015
(%)
Source: World Bank, WITS (World Integrated Trade Solution)

Globalisation patterns in EU trade and investment is an online Eurostat publication presenting a summary of recent European Union (EU) statistics on economic aspects of globalisation, focusing on patterns of EU trade and investment.

The EU has a common trade policy, whereby the European Commission negotiates trade agreements and represents the EU’s interests on behalf of its 28 Member States. As such, trade policy is an exclusive power of the EU — so only the EU, and not individual Member States, can legislate on trade matters and conclude international trade agreements. This article covers the specific topic of tariffs that may be imposed on traded goods and services.

The benefits of free trade have been alluded to earlier in this publication: when making trade deals, the EU seeks to tackle those things that get in the way of trade when dealing with other countries. Depending on the agreement, such deals may lead to a series of commitments on behalf of the parties concerned, for example:

  • removing or cutting customs duties (taxes) on goods;
  • scrapping any limits (quotas) on the amounts of goods that can be exported;
  • allowing enterprises to provide services and bid for public contracts;
  • cutting red tape which makes it harder for enterprises to export.

For more information, refer to the European Commission’s Directorate-General for Trade website.

Full article

The EU’s common trade policy and tariffs

Box 2.3 — The EU’s common trade policy and tariffs

The European Commission negotiates trade deals either directly with other countries or regions, or through its membership of the World Trade Organisation (WTO). The WTO is the only international organisation dealing with multinational trade issues — the global rules of trade between nations; its main function is to ensure that trade flows as smoothly, predictably and freely as possible. The General Agreement on Tariffs and Trade (GATT) covers international trade in goods.

Goods can be imported into the EU under different trade regimes depending on the product and the country of origin. The main trade regime is the most-favoured nation (MFN) which applies, in principle, to all countries — it provides normal non-discriminatory tariffs charged on imports and excludes preferential tariffs under free trade agreements and other schemes or tariffs charged inside quotas. MFN tariffs are what countries promise to impose on imports from other members of the WTO, unless that partner country has a preferential trade agreement or preferential treatment, such as the Generalised System of Preferences (GSP) for developing countries or the EU’s Everything But Arms (EBA) programme. Virtually all countries in the world have joined at least one preferential trade agreement, under which they promise to give another country’s products lower tariffs than their MFN rate, for example, through a customs unions or a free trade area, where the preferential tariff rate for essentially all products is zero.

Tariffs applied to the value of imports by processing stage

The highest trade tariffs were applied on consumer goods

Alongside increased levels of international trade in goods, there has at the same time been a concerted reduction in tariffs. Figure 1 presents information for a world average, which shows that tariffs applied to imports of intermediate goods, capital goods and raw materials were particularly low, in contrast to tariffs for consumer goods which were more than twice as high. During the period from 2002 to 2015, average tariffs applied to imports were reduced approximately by half for each of the different processing stages.

Figure 1: Tariffs applied to the value of imports, by processing stage, world average, 2002-2015
(%)
Source: World Bank, WITS (World Integrated Trade Solution)


Box 2.4 — Tariffs on trade for goods

The EU is a customs union, operating a single, uniform trade and tariff policy. As part of this, the European Commission represents the EU Member States at WTO meetings and in negotiations for bilateral trade deals.

Although the emergence of globalised production chains has tended to strengthen the case for multilateral trade negotiations, the relatively limited progress made in recent years in this domain (the slow progress on the Doha Development Agenda) has led the EU to adopt a pragmatic approach. While continuing to actively participate in the WTO, the EU has also negotiated a number of bilateral trade agreements, which cover a broad range of issues, including: trade in goods and services, intellectual property, investment, government procurement, access to energy and raw materials, environmental protection, working conditions, or regulatory cooperation.

Comprehensive negotiations have taken place, among others, with China, Japan, Singapore, South Korea and the United States, with varying degrees of success; a Comprehensive Economic and Trade Agreement between the EU and Canada was signed in October 2016. In July 2017, the EU and Japan reached an agreement in principle on the main elements of an EU-Japan Economic Partnership Agreement. This will be the most important bilateral trade agreement ever concluded by the EU.

Tariffs applied to the value of imports of selected products

In 2015, around 70 % of the imports that entered the EU-28 did so at zero or reduced tariff

Figure 2 shows average tariffs that were applied globally in 2002 and 2015 to a more detailed list of selected products: there was a considerable reduction in the average tariff applied to each of these selected products during the period under consideration and by 2015 the average tariff applied was usually in single digits. The largest tariff reductions (in percentage terms) were recorded for fuels, minerals, stone and glass, and transportation.

Figure 2: Tariffs applied to the value of imports of selected products, world average, 2002 and 2015
(%)
Source: World Bank, WITS (World Integrated Trade Solution)

Application of import tariff regimes

In 2015/2016, more than two fifths of all large enterprises in the EU-28 felt they were affected by non-tariff measures

EU trade agreements enable European enterprises to compete more effectively and export more to countries and regions outside the EU; they also give better access to raw materials and vital components for importers residing within the EU, as well as a greater choice of products for consumers. Such trade agreements may also require partner governments to protect human rights, labour rights and the environment, for example, through tackling issues such as safety or gender equality in the workplace.

The EU benefits from being one of the most open economies in the world, as around 70 % of its imports enter the EU at zero or reduced tariffs. Figure 3 presents information for 2015 on the share of EU-28 imported goods that originated from selected partners and which were subjected to a range of different tariffs.

Figure 3: Application of import tariff regimes as a share of the value of imports, selected partners, EU-28, 2015
(%)
Source: Eurostat (DS-041719)

Issues faced when exporting to non-member countries

With the considerable reduction in tariffs across most global markets, the focus of policymakers has gradually shifted towards tackling unnecessary costs that may be associated with a range of non-tariff measures; a body of evidence suggests that these measures have become increasingly important in recent years. While they may seek to preserve legitimate interests such as protection of the environment or the health of consumers, non-tariff barriers also include those which may be characterised as having protectionist intent.

As larger enterprises generally produce a wider range of goods and may have a larger number of trading partners compared with smaller companies, it is likely that a higher proportion of large enterprises will have faced hurdles in at least one of their export transactions. A survey conducted by the International Trade Centre (ITC) and the European Commission’s Directorate-General for Trade in 2015 and 2016 reveals that some 42 % of large enterprises (employing 250 or more persons) in the EU-28 felt that they were affected by non-tariff measures (for example, burdensome regulations including: certification; labelling requirements; rules of origin; customs procedures) when exporting to non-member countries outside of the EU. By contrast, the corresponding share among micro enterprises (employing fewer than 10 employees) was 28 %. Figure 4 presents a detailed list of issues raised by EU-28 exporters that were considered as burdensome when exporting to non-member countries. The most common of these was conformity assessment (raised by 31.9 % of respondents), followed by export-related measures (17.8 %) and technical requirements (16.9 %).

Figure 4: Issues raised by exporters as burdensome when exporting to extra-EU partners, EU-28, 2015-2016
(% share of all issues raised)
Source: Eurostat (DS-041719), International Trade Centre (ITC) and the European Commission (EC), ITC business survey in the EU, 2015-2016

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