# **2.2 MFN Specific Duties Under the WTO**

While the vast majority of import tariffs are applied as ad valorem duties, there are a number of important instances in which countries apply trade policy through specific, or per-unit duties. We first document the countries and sectors in which such duties continue to be applied. We then explore how a country’s decision to apply an import tariff as a specific duty instead of an ad valorem duty can also affect our answers to questions regarding how the restrictiveness of an import tariff _changes_ over time and whether a country’s tariff discriminates _between_ trading partners.<sup>28</sup> First consider countries’ applied MFN tariffs imposed as specific duties. While the WTO (2014c) reports that in most countries the share of product lines with non-ad valorem tariffs is zero, a number of major economies constitute sizeable exceptions. Figure 6 reveals that specific duties remained a significant part of the applied MFN tariff policy arsenal in 2013 for many of the 31 major economies in our sample. Indeed, Russia had more than 11 percent of its product lines set as specific duties in 2013; Thailand, the US, the EU, and India also apply specific duties to 5 percent or more of their imported products.<sup>29</sup> Figure 7 further identifies the sectoral distribution of MFN tariffs applied as specific duties across our three country groupings. For the high-income economies, specific duties are overwhelmingly found in agriculture - more than 10 percent of animal products, more than 15 percent of vegetables, and nearly 25 percent of foodstuffs report MFN tariffs being applied as specific duties. A smaller, though still nontrivial, incidence of specific duties is found in sectors such as footwear, textiles and clothing, and fuel. For the United States, MFN tariffs are applied as specific duties for nearly 50 percent of vegetables and foodstuffs, 27 percent of animal products, 10 percent of minerals, 16 percent of fuels, 9 percent of textiles and apparel, 21 percent of footwear, and 18 percent of miscellaneous products.

Second, and as we further describe in Section 3 below, MFN applied tariffs are not the only instrument of trade policy in which specific duties are found to arise; they are also a somewhat common outcome of temporary trade barrier investigations. In some instances, a newly imposed antidumping or safeguard restriction may result in a new and additional specific duty, even though the benchmark trade policy had been applied as an ad valorem import duty.

An open research question is what explains the cross-country and sectoral variation in MFN tariffs applied as specific duties, and in particular, the relatively high incidence in agriculture, textiles and clothing, and footwear in high-income economies. Given that the US applied specific duties much more prevalently across products during the pre-GATT period (Irwin 1998a,b), this

> 28We do not analyze computed _levels_ of ad valorem equivalent estimates (AVEs) of the specific duties described here because the AVEs would be time-varying for reasons unrelated to changes in policy. UNCTAD (via TRAINS) frequently provides ad valorem equivalent estimates for products with MFN tariffs applied as specific duties, using a number of different methodologies. These have been made freely available from the World Bank via the World Integrated Trade Solution (WITS) web-based software platform.

> 29Of the WTO member countries not included in our sample, Switzerland is the only one with a higher share of imported products subject to specific duties than Russia in 2013, at 78.3 percent. Belarus and Kazakhstan have a customs union with Russia and thus roughly the same share of products subject to specific duties. Other countries with shares larger than 5 percent of imported products not shown in Figure 6 include Norway (7.8), Zimbabwe (6.4) Uzbekistan (5.8) and Israel (5.0).

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