NCPA - National Center for Policy Analysis

Tariff Tax Cut

November 27, 2002

The proposal yesterday by U.S. Trade Representative Robert Zoellick and Commerce Secretary Donald Evans to eliminate tariffs on manufactured goods over the next few years was "timed to get the current World Trade Organization negotiations in Geneva off to a rousing start," says the Wall Street Journal.

The Zoellick-Evans proposal would take 13 years to implement. All tariffs below 5% would be eliminated by 2010; higher tariffs would be flattened to 8 percent; and all would be eliminated over the following three years.

Industrial tariffs are taxes on trade that increase prices for consumers and reduce demand.

  • The National Foreign Trade Council estimates that tariffs on manufactured goods cost the world economy $190 billion a year -- amounting to two-thirds of all tariffs, with levies on agricultural products and minerals accounting for the rest.
  • About $57 billion of the cost of tariffs comes at the expense of trade between developing countries, which pay the highest tariffs.
  • Zoellick said the proposal would save an American family of four $1,600 a year.

The creation of wealth that would result from lifting industrial tariffs would offset the revenues they yield.

The U.S. tariff system is complicated, dividing imports into no less than 10,200 categories.

Most of the tariffs are low, but those on the clothing industry take a heavy toll on some of the world's poorest countries, such as Bangladesh, with rates as high as 32.5% for sweaters, 48% for some sneakers and 20% for T-shirts.

Source: Editorial, "Cut Tariffs Now," Wall Street Journal, November 27, 2002.

For text (requires WSJ subscription),,SB1038358486318920068,00.html


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