subsequent sharp wave of reductions in applied rates. (See Blackhurst _et al_ 1996, Francois 2001, World Bank 2001).

In addition to general Uruguay Round commitments, some important sectoral “zerofor-zero” agreements are reflected in the next-to-last column of Table 1. OECD economies have between roughly 10% and 30% of tariff lines bound at zero percent. Laird (1998) estimates that zero-for-zero increased developed country duty-free imports to 43% of total imports.

With the implementation of Uruguay Round commitments, average _ad valorem_ tariffs on non-agricultural products in the industrial countries generally are around 3 percent. This is reflected in the first columns of Table 2. However, there are important exceptions such as textiles and clothing, where the average rate is roughly three times the overall average. This is reflected in the standard deviation and maximum tariff columns. With full implementation of current commitments, we estimate a simple average industrial tariff in the United States of 3.2 percent, a standard deviation of 4.3, and a maximum tariff of 37.5 percent. The European Union has a higher average, but less dispersion. We estimate an EU average of 3.7 percent, a standard deviation of 3.6 percent, and a maximum tariff of 17 percent.

For the developing countries in Table 1, average industrial tariffs range from a low of 3 to 4 percent to a high of more than 20 percent, estimates that are biased downwards by the omission of specific, compound and mixed tariffs from the data we utilized<sup>2</sup> . Table 2 presents detailed data for three developing countries: Brazil, India, and Thailand. These countries span the spectrum of developing country bindings as reflected in Table 1. Brazil’s tariffs are all bound, though the average rate for industrial products is 14.9 percentage points above the current applied rate. We refer to this gap below as “ _binding overhang_ .” India and Thailand’s tariffs are partially covered by bindings, again with significant binding overhang.

As in the case of industrial tariffs, the stage for the agricultural negotiations was largely set by the Uruguay Round. One key difference from industrial products is that essentially all agricultural tariffs are bound. However, in both industrial and developing countries, there is a large degree of binding overhang resulting from “dirty tariffication” or the use of “ceiling bindings” (Hathaway and Ingco 1996).

# **3. SOME TARIFF REDUCTION FORMULAS**

A range of tariff-cutting formulas has been considered or implemented under GATT and regional trade arrangements. In this section, we focus on formulas implemented on a line-by-line basis, leaving discussion of discretionary approaches to Section 5. Stern (1976), Laird (1998), Laird and Yeats (1987) and Panagariya (2002), WTO (2003c) and World Bank (2003) survey a range of alternative line-by-line formulas. The first is a simple proportional cut, frequently described as a linear cut in policy discussions:

> 2 This omission has recently been remedied for applied rates in a few countries in the WTO’s Integrated Database and the UNCTAD TRAINS database available through the World Bank’s _World Integrated Trade Solutions_ (WITS) program, and in data compiled by the International Trade Centre and CEPII.

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