Global trade wars could expose Zimbabwe

Global trade wars could expose Zimbabwe
Published: 22 June 2018
A NEW paper released by the United Nations Conference of Trade and Development (UNCTAD) on Tuesday this week says Zimbabwe's exports face an applied tariff rate of seven percent and a tariff increase of 54 percent in case of a full trade war.

The tariffs were calculated under the assumption that all countries will engage in a trade war and set tariffs to their optimal mercantilist levels; including also nullifying any bilateral concessions and preferential conditions for specific categories of countries.

The multilateral body observed that although there is a long history of countries blaming each other for their own economic misfortunes, during the last few months there has been an escalation both in the rhetoric and in trade policy actions.

According to the UNCTAD paper, the trade tariff wars are based on the optimum tariff theory.

"Standard trade theory indicates that, by unilaterally introducing tariffs, a large country not only limits its imports from the rest of the world, but also reduces the price of its imports relative to its exports, thereby benefiting from an improvement in its terms of trade," said the paper.

It argues that in a trade war, everyone loses, adding that exporters will face higher tariffs regardless of whether they are in developed or developing countries.

"These unilateral tariffs can be calculated by estimating the leverage each country has on international markets, depending on whether its trade policies are able to influence international prices," the report says.

UNCTAD highlighted that it has been long recognised that in the presence of market power, positive import tariffs can be optimal.

"The rationale if that higher tariffs reduce import demand, which in the presence of inelastic export supply from the rest of the world allows the importing country to increase its terms of trade," says UNCTAD.

- fingaz
Tags: Zimbabwe,


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