The growth of trade among developed countries has been encouraged by steadily dropping the tariffs and other barriers which they impose on each other's goods. However, the barriers they impose on the manufactured goods of developing countries have not been dropped to the same extent. In fact new barriers have been created in recent years to limit these imports, as developed countries move to protect their economies from foreign competition. This is a major obstacle to the efforts of the developing countries to expand their exports of manufactures. Relatively high and escalating tariff rates tend to discourage the establishment of export-oriented industries.
The disadvantage faced by producers in developing countries is, however, much greater than is apparent from a cursory glance at the post-Kennedy nominal tariff rates. It is a familiar feature of the tariff systems of industrialized countries that tariffs on manufactures and semi-manufactures tend to be appreciably higher than tariffs on the raw materials used in their production. In fact, on raw materials not produced in the importing country, tariffs have frequently been zero. This combination of policies to ensure supplies of cheap imported raw materials and to protect domestic industries processing these materials heightens the effects of the nominal tariffs confronting the developing countries. Manufacturing costs in any case in these countries tend to be high relative to costs of primary production; and an important task in these countries is to bring down costs of manufacturing production relative to costs of primary production in order to render their manufactures internationally competitive at prevailing exchange rates. Not only do tariffs tend to be higher on manufactures than on raw materials, but as a general rule they tend to increase with the degree of processing, with the result that effective protection of manufactures and semi-manufactures in industrialized countries tends to be much higher than would be indicated by the nominal tariffs.
It is clear that while the World Trade Organization (WTO) rules-based system seeks to establish a level playing field, remaining trade barriers have a negative impact, particularly on developing countries. Whilst trade barriers in the main markets are now generally low for most trade of developed countries, there is a lack of equal opportunities for developing countries' exports in the present system. Thus, a number of export products of particular interest to developing countries such as textiles are often subject to high import barriers, including non-tariff barriers. Further, support for agricultural production, investment and exports in developed countries may have/has negative effects on many developing countries' export and production capacity where it is of a trade-distorting nature. And high protection for the domestic food industry in some developed countries hampers diversification and value-added production in developing countries. WTO rules are stringent with respect to subsidies primarily used by developing countries. Also, anti-dumping measures and countervailing duties are used by many countries in sectors where exporters from developing countries are competitive. There is an asymmetry between liberalization of trade in goods and services on the one hand and labour-intensive services on the other, which particularly affects developing countries.
Although negotiations have significantly reduced the overall level of tariff protection by developed countries, the benefits of the tariff concessions, on average, have been far greater for the industrialized countries themselves than for the developing countries. Substantial tariff cuts have been made on those products in which industrialized countries dominate world trade (chemicals, machinery, transport equipment, etc), while in general only small tariff cuts have been made on products of current export interest to developing countries (foods, textiles, leather and leather goods and other labour intensive products).