1 GSTP Trade Current Trends and Implications of Intra-GSTP Tariff Reductions UNCTAD/DITC Trade Analysis Branch UNCTAD.

1

GSTP TradeCurrent Trends and

Implications of Intra-GSTP Tariff Reductions

UNCTAD/DITC

Trade Analysis Branch

UNCTADUNCTAD

2

Outline of this presentationOutline of this presentation

1.1. Trends in trade of GSTP Trends in trade of GSTP countriescountries

2.2. Patterns of protectionPatterns of protection

3.3. Simulation of impacts of intra-Simulation of impacts of intra-GSTP tariff cutsGSTP tariff cuts

4.4. Summary findings Summary findings

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Total exports from GSTP = US$ 1.8 trillion (2005)

Total GSTP exports to the world (2005)= 17.5% of total world exports

or = 48.7% of total DC exports to the world.

Total GSTP imports from the world= US$ 1.6 trillion= 16% of total world imports

or = 50% of total imports of DCs from the world.

Trends in GSTP tradeTrends in GSTP trade

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Total intra-GSTP trade = US$ 813 billion (2005)

Intra-GSTP exports = US$ 405.4 billion= 22% of GSTP exports to the world.

Intra-GSTP imports = US$ 407.6 billion= 25% of GSTP imports from the world.

Regional breakdown:


For GSTP-Asia: 25.9% of their total exports is intra-GSTP.

For GSTP-Latin America: 18% is intra-GSTP exports.

For GSTP-Africa: 12% is intra-GSTP exports.

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Sectoral breakdown

• Over 90% of intra-GSTP exports are in non-agri sector. • Agricultural exports accounts for 8% of total intra-GSTP

exports. – Share of agriculture – higher in Latin America (15%) than in Africa

(6.6%) and Asia (4.8%)

• In terms of the destination, non-agricultural exports tend to remain within the region than agricultural exports.– For GSTP-Asia and GSTP-Latin America, around 90% of non-

agriculture exports are destined to GSTP countries in the same region.

– For GSTP-Africa, exports to other GSTP regions are significant.


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Intra-GSTP exports: By regional destinationTrends in GSTP tradeTrends in GSTP trade

261.2

23.2

87.5

0

50

100

150

200

250

300

350

400

GSTP non-agriculture GSTP agriculture

To GSTP-Africa To GSTP-Latin America To GSTP-Asia

(US$ billion)

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Trends in GSTP exports (Regional breakdown of flows)Trends in GSTP exports (Regional breakdown of flows)

67%

32%

87%

59%

0%

20%

40%

60%

80%

100%

GSTP_AFRICA GSTP_LATINAMERICA

GSTP_ASIA GSTP TOTAL

To GSTP Africa To GSTP Latin America To GSTP-Asia

41%

14%

89%72%

0%

20%

40%

60%

80%

100%



To GSTP Africa To GSTP Latin America To GSTP Asia

Agriculture

NAMA

51%

32%17% 11%

26%

15%

34%

25%

84%

7%24%

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There is a strong upward trend in intra-GSTP exports.

• Intra-GSTP exports are growing faster than GSTP countries’ exports to the rest of the world.

– Between 2000-2005, intra-GSTP exports increased by 50%, while exports by GSTP to the rest of the world increased by 39%.

– GSTP-Asia and Latin America showed particularly high growth.

– The growth for GSTP-Africa exports picked up during 2003-2005.


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There is an increasing level of export complementarity among GSTP countries.

• Both Asia and Latin America GSTP countries are increasing exports in transport machinery and manufactured goods – two sectors that are more horizontally differentiated than others.

• Each region has its own “specialized” sector vis-à-vis other GSTP regions, for example:– Asia in textile and clothing, Latin America in food and live

animals, and Africa in minerals.


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Export Structure: Sectoral breakdown for each region

0

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400000

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GSTP-Africa GSTP-Asia GSTP-Latin America


(US$ million)

Sectoral breakdown of GSTP exports (by region) to the world

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Export Structure: Sectoral breakdown for each region

0%

10%

20%

30%

40%

50%

60%

70%

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(% of total exports)

Sectoral breakdown of GSTP exports (by region) to the world

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2. Patterns of tariff protection2. Patterns of tariff protection

• The sectors most protected by GSTP countries are those in agricultural sectors (e.g. food and beverages). – But the averages tariffs are relatively high (14-18%) in other traded

sectors (e.g. manufactured goods and textile and clothing).

• Current applied tariff rates in GSTP countries are significantly lower than the WTO bound rates.

• They also show that tariff peaks are not pronounced in the applied rates compared to the bound rates.

• Tariff escalation is also mitigated to a considerable extent in the applied rates.

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Patterns of tariff protectionPatterns of tariff protection

Tariff protection across sectors (SITC Rev.3)Tariff protection across sectors (SITC Rev.3)GSTP AverageGSTP Average

(%)

6.7 7.4 8.0 8.914.1 15.7 17.5 17.7 20.5

76.2

0

20

40

60

80

100

Average applied rates

14

0

20

40

60

Min

era

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fuel/

lub

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Ch

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/fat/

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tob

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Patterns of tariff protectionPatterns of tariff protection

Tariff protection across sectors (SITC.Rev3)Tariff protection across sectors (SITC.Rev3)Regional AverageRegional Average

(%)

15

Brazil

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

%

MFN

Bound

Comparison of applied and bound MFN tariffsComparison of applied and bound MFN tariffs

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Comparison of applied and bound MFN tariffsComparison of applied and bound MFN tariffs

India

0.00

50.00

100.00

150.00

200.00

250.00

%

MFN

BOUND

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Comparison of applied and bound MFN tariffsComparison of applied and bound MFN tariffsMalaysia

0.00

5.00

10.00

15.00

20.00

25.00

%

MFN

BOUND

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3. Impact of intra-GSTP tariff cuts3. Impact of intra-GSTP tariff cuts

• We estimated impacts of intra-GSTP tariff cuts, using SMART (static, partial equilibrium) simulation model.

• The scenario studied here is a linear cut across all products, by 20%, 30% and 50%.

• All GSTP members (excl. Romania) are included in the simulation, plus eight countries which applied to the GSTP Membership.

• This simulation is static, therefore does not take into account the dynamic impact of tariff liberalization, including that flowing from increased FDI, transfer of technology, better terms of trade, etc..

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Increase in intra-GSTP exports can be as much as US$ 20 billion (50% cuts in intra-GSTP tariffs).

• Cuts in intra-GSTP tariffs by 20% (30%) will generate export gains by US$ 7.7 billion (11.7 billion).

• Intra-GSTP export increase can occur from:– Trade creation – a genuine increase in exports (i.e.

replacing domestic goods), and – Trade diversion – by replacing exports from non-GSTP

countries.• Around 55% of export increase is due to trade

diversion effect.

Intra-GSTP tariff cuts - SimulationIntra-GSTP tariff cuts - Simulation

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(US$ million) 20% cut 30% cut 50% cut

GSTP - Africa 293.0 444.7 760.9

GSTP - Latin America

1,611.3 2,453.4 4,141.3

GSTP - Asia 5,836.6 8,835.3 15,027.3

GSTP-TOTAL 7,741.1 11,733.4 19,929.9

Increase in intra-GSTP exportsIncrease in intra-GSTP exports

Intra-GSTP tariff cuts - Simulation Intra-GSTP tariff cuts - Simulation

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Intra-GSTP tariff cuts will enhance inter-regional GSTP trade as well as intra-regional one.

• At this stage, many countries within the same regions do not have a bilateral or regional trade arrangement.

• Looking only at the trade creation effect, the simulation suggests that there will be a high rate of increase in trade within the same region, in addition to an increase in trade with GSTP countries in other regions.

Intra-GSTP tariff cuts - SimulationIntra-GSTP tariff cuts - Simulation

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Increase in intra-GSTP exportsIncrease in intra-GSTP exportsTrade Creation EffectTrade Creation Effect

Intra-GSTP tariff cuts - Simulation Intra-GSTP tariff cuts - Simulation

3259.9

4889.9

8149.8

0100020003000400050006000700080009000

GSTP-Africa GSTP-Latin America GSTP-Asia

20% cut 30% cut 50% cut(US$ million)

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Increase in intra-GSTP exportsTrade Creation - Destination breakdown

Intra-GSTP tariff cuts: SMART Simulation Intra-GSTP tariff cuts: SMART Simulation

34%14% 8% 10%

16% 61%

18%27%

51%26%

75%63%

0%

20%

40%

60%

80%

100%



to GSTP Africa to GSTP Latin America to GSTP Asia

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4. Summary Findings4. Summary Findings• There has been a massive growth of intra-GSTP trade in the last 5

years (2000-2005).• This reflects, inter alia, increased complementarity in trade among

GSTP members.• Intra-GSTP tariff cuts will enhance exports among GSTP members

within each region, as well as inter-regionally.• The actual increase is likely to exceed the simulated results, as the

simulation model does not take into account the dynamic factors. • Time is ripe for stimulus through liberalization because of buoyant

upward trend in intra-GSTP exports. • Whilst gains from optimum liberalization can be significant,

adjustment costs to GSTP countries would be minimal particularly if some sensitive products are set aside.

• Since bulk of gains come from shifting demand to GSTP products from non-GSTP products, all GSTP countries will be net gainers in exports.

• The comparative advantage of GSTP liberalization arises from immediate cuts in applied rates, thus leading to immediate creation of trade flows.

1 GSTP Trade Current Trends and Implications of Intra-GSTP Tariff Reductions UNCTAD/DITC Trade Analysis Branch UNCTAD.

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