Regardless of the level of aggregation or source of cost-shares, a practical problem is the appropriate correspondence between products and inputs on one side and tariff lines and levels on the other. For this study the basic source of _applied_ tariff data is that which the Egyptian government reports to the WTO. The latest such data for 2009 are available in the Integrated Data Base at the six-digit level. Tariff information adjusted for preferential trade agreements is also available from Bouet et al., although their data have not been updated since 2004; and it appears that trade-weighted average tariffs that account for preferences differ very little. In fact those lines where preferences and applied tariffs differ by more than 10 percent are small, fewer than 7 percent of tariff lines for products of any appreciable total import value. Therefore, the decision was made to use the updated tariff schedule for 2009, without preference adjustments, considering that such an adjustment in the case of Egypt would be highly unlikely to alter the results.<sup>3</sup> The reader should note that specific duties appear only to apply to tobacco products: there are 11 tariff lines with non-AV duties according to the WTO integrated data base. (For the Bouet et al. data base for 2004, these non-AV duties are converted to an ad valorem equivalent.) Also note that between the WTO for the years 2005 and 2006 use the 2002 HS codes, and 2007 and beyond use the 2007 HS codes. At least in the case of Egypt, the differences between the code years appears only apply to the telephony group (cell phones).

Returning to the topic of aggregation, within each of the 23 sectors in the I-O matrix available to this present study, there are, of course, likely to be some subsectors more protected than others; and so one would ideally like to see even more detail. The risk of a high level of aggregation is that it would hide large disparities between industries grouped under the same broad heading. For example, in the tariff data for the food industry (the HS 2-digit codes 16 to 24) the simple average is over 200 percent, and Lederman reports ERPs for beverages based on average tariffs of 1600 percent. The reason for such large average tariffs at this level of aggregation is seen in Table 1, where imported alcoholic beverages are taxed at an almost prohibitively high rate. The highest tariff for non-alcoholic and non-automobile products is 30 percent, and is usually reserved for finished products produced in Egypt. But within industry groupings tariffs range from lows of zero and 2 percent to 10, 20 and 30 percent based on the degree of valued added that might be done in Egypt; several sectors show clear cases of tariff escalation. When reading the ERP estimates reported below, the reader should be aware of this aggregation problem and interpret the result appropriately.

# **3. A Quick Review of the Algebra of Effective Protection**

Because subsidies are important in the case of Egypt, both on outputs and especially on energy inputs, the algebra for estimating effective rates of protection requires an extension to that usually found in textbooks. We quickly review below the manner by which we calculate effective rates of protection, first incorporating output subsidies, then input (energy) subsidies. The ERP is defined in terms of the percent deviation of an industry’s value added from what it would otherwise be in the absence of protection (both formal applied tariffs and NTBs). (See, for example, Corden, 1971, Vousden,

> 3 Two cases where preferences might make a difference among most-traded goods are HS 270900 (Petroleum oils and oils obtained from bituminous minerals, crude)  and  HS 090240 (Black fermented tea and partly fermented tea, whether or not flavoured, in immediate packings of > 3 kg).

4