How Quickly Are Tariffs Eliminated in the TPP?
Previous posts on tariff reductions in the Trans-Pacific Partnership (TPP) have focused on the share of total tariff lines that are immediately eliminated for each TPP member following the agreement's entry into force. For a more complete picture of the scope of tariff liberalization across all sectors, this post looks at the gradual reduction in tariff rates that are not immediately eliminated. There are two types of incremental tariff reductions in the TPP. First, the B schedules, which are consistent across TPP member countries, call for an equal reduction of tariff rates in each year until they are completely eliminated, based on a formula applied to the existing most favored nation (MFN) rate. In addition to these TPP-wide schedules, each country also has its own tariff elimination schedules for its sensitive industries. In these schedules, countries can keep MFN tariffs in place for a specified number of years before reducing them gradually, keep tariffs at MFN levels until the year they expire, or reduce tariffs to specific percentages for individual products.
The chart plots the average tariff rates for 6-digit product codes against the years following implementation of the TPP, where year zero is the year the agreement goes into force. Almost all tariffs, even initially high ones like the 350 percent tariff on US tobacco products, converge to zero by the 16th year. After year 16, of the remaining products with tariffs that will be eliminated, only two, US cars and trucks for Japan, remain above zero at their MFN rates until year 30. This shows that although some countries are more committed to immediate tariff liberalization than others, as a whole, TPP countries do eventually eliminate 99 percent of their tariffs for other members.
TPP Member Tariff Rates from the Year TPP Enters into Force Until Year 30
Note: Data excludes HS 6-digit codes where tariffs have not been eliminated in one or more sub-categories of product, or cases where quotas are in place for products rather than tariffs (about 1 percent of all observations). Blue dots denote all other products for all TPP countries. Source: Author’s calculations using data from the TPP tariff schedules.