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The Upstream Tariff Simulator (UTAS): A Tool to Assess the Impact of Tariff Reform on Input Costs and Effective Protection across Sectors

Andreas Eberhard, Gonzalo Varela (), Lucia Casal and Federico Ganz

No 9158, Policy Research Working Paper Series from The World Bank

Abstract: Increased international production fragmentation implies that firms at home rely on imported intermediates for production. In this context, tariff policy design needs to consider the impact downstream of changes in tariffs upstream. Policy makers embarking on tariff reforms need to answer questions such as: what is the impact of tariff changes on production costs downstream? What are the key input tariffs that could be reduced to lower production costs in priority sectors considering sectors'backward linkages? Or how will a tariff rationalization plan that focuses on tariff reductions in raw materials and intermediates affect effective protection across sectors? This paper presents the Upstream Tariff Simulator, a simple Microsoft Excel?based tool designed to help policy makers answer these questions, by combining information on tariffs and input-output structures and allowing alternative sectoral aggregations, and alternative market structures for input markets. It provides the underlying conceptual framework and a range of examples that show the insights that the tool can provide to policy makers when analyzing the impact of tariff reforms.

Keywords: International Trade and Trade Rules; Business Cycles and Stabilization Policies; Common Carriers Industry; Food&Beverage Industry; Pulp&Paper Industry; Textiles; Apparel&Leather Industry; Plastics&Rubber Industry; Construction Industry; General Manufacturing; Trade and Multilateral Issues; Trade Policy; Rules of Origin; Industrial and Consumer Services and Products (search for similar items in EconPapers)
Date: 2020-02-20
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