WEIGHTED AND UNWEIGHTED AVERAGE TARIFF

1. (Unweighted) average tariff –the mean (average) value of tariff in a country schedule (or part of the schedule).

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Example: given 3 goods with specified tariffs:

A – 10%; B – 15%, C – 20%.

Average tariff:_____________________________________

Average tariffindicates how much protection is applied by an economy on average. In general, lower protection level indicate a greater degree of integration with the global economy.

Disadvantage: average tariffdoesn’t take into account the quantity of goods imported.

2. Weighted-average tariff – the sum of the tariffs in a country schedule (or part of the schedule) multiplied by a product share in the total import (weighting factor).

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Weighted-average tariff takes into account the quantity of goods imported.

Example: given 3 goods with specified tariffs and volumes of imports:

Tariffs: A – 10%; B – 15%, C – 20%;

Volumes of imports: A – $500; B – $200; C – $100.

Weighted-average tariff: _________________________________

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Disadvantage: The Weighted-average tariff underestimates the country’s level of protection because heavily protected products are imported less (due to high tariffs) and therefore receive a small weight in the structure of import. For example, a good facing a 200% tariff may not be imported at all (this is called a PROHIBITIVE TARIFF).

EXERCISES

TOPIC#3. TARIFF REGULATION:

WEIGHTED AND UNWEIGHTED AVERAGE TARIFF

Exercise#1.Suppose that the nominal tariff rates on the six imports into a country, as well as the import values are listed below.

Good
Value/quantity $400 $600 $500 $300 $400/ 100 units $100/ 10 units
Tariff rates 10% 5% free 30% $0,5/unit $2,5/unit

Calculate the anweighted- and weighted-average nominal tariff rates.

The anweighted nominal tariff rate:______________________________________________________________________

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The weighted nominal tariff rate:______________________________________________________________________

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Exercise#2.Table 1 show the import value and tariff rates across different sectors of the economy.Please, calculate the simple and weighted average tariff rates respectively for the 3 major economic sectors. Please, fill in the tables 2.

Table 1. Sectoral Imports and Tariff Rates

Major Sectors Sectors Import Value, mln. $ Tariff Rates, %
Variant#1 Variant#2
Agriculture, Fising and Forestry Agriculture 45,384
Fising 35,218 50,4
Forestry 21,486 60,97
Industry Mining and Quarrying 16,041 10,15
Food Manufacturing 78,621 60,8 30,33
Non-Food Manufacturing 52,414 48,5 22,4
Services Construction 5,148 30,7 17,3
Transportation 14,513 25,6 15,4
Finance 2,789 15,3 18,5
Private Services 9,621 12,53 5,65

Table 2. Average Tariff Rates (for major sectors)

Major Sectors Variant#1 Variant#2
Simple Average Tariff Rates, % Weighted Average Tariff Rates, % Simple Average Tariff Rates, % Weighted Average Tariff Rates, %
Agriculture, Fising and Forestry
Industry
Services
TOTAL

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