Is it possible to obtain a Good Indication of the Precise Degree of Protection Accorded by a Country to its Import-Substitute Industries?(Global Economics)

It is seen that as the countries negotiate for the free and fair trade practices by reducing various restriction, they also, on the other hand, have been developing numerous explicit and implied restrictive measures to protect their domestic industries or generate revenue for national expenditure. On the one hand their loud voice unequivocally advocates for the free and fair trade which they have been doing since the inception of GATT and its transformation to WTO, but ironically, on the other hand, they even don't hesitate to impose various non-tariff barriers to countervail their trade competitors through creating various multilateral mutual trade blocks like NAFTA, SAARC, BIMSTEC et cetera and making it difficult to measure the actual amount to the tariff levied.

International trade is no more a compulsion, it has now become a necessity. Advocated by the comparative theory of trade, countries exports products in which they have the relative advantage and imports ones in which they have comparative disadvantages. The factor of production (i.e. raw materials, semi-finished products, finished goods, money, technology, information et cetera) moves in such a way that, often the product exported to country X by country Y might contain component from country X, a case similar to the developing and least developed countries where the developed and industrialized country imports the raw material from the developing and LDC, and exports the finished products back to them.

But ironically, in doing so countries use various forms of tariff and non-tariff barriers to protect their industries or to generate revenue. Most often, the imposed tariffs whether it be a specific tariff or Ad Valorem tariff crafted along with various preferential duties /rights including the provision of normal trade relations(NTR) treatment and offshore assembly if any,  are explicit to measure to some extent. These tariffs are specified and are quantifiable. As an example, the specific tariff could be $10 per pound or an Ad Valorem tariff 10% of the imported monetary value of the goods. Arithmetically, the heights of tariffs are calculated by taking an average of existing tariffs or by taking the proportionate value of products imported with their tariff rates called weight -average tariff rates but the chances of overestimation and happening of underestimation of tariffs remain in the above-mentioned calculations respectively.

Moreover, specific tariffs are non-responsive to the inflation whereas Ad-valorem is compounded with confronting administrative procedure.  Similarly, in case of the prohibited tariff(a situation where some goods are highly tariffed by the country ), if a country imports few goods with zero tariffs but has prohibited tariffs on all others potential import, the weighted average tariff rate seems to be zero (0) and a country looks like to be a free trade, which in reality is not 

As depicted above, the intricate trade mechanism has really made it difficult for developing and least developed countries to ascertain the exact numerical value of tariffs as they lack effective retrieval date, accumulation, and calculation mechanism; the same scenario proliferates for the LCD's and developing countries while calculating the tariffs under offshore assembly provision. 

But presently, the focus of scholars and economist has been in understanding the impact and implication of nominal and effective rates or effective rates of protection (ERP). The nominal rate of protection (NRP) is the rate published by the country, which is applied to the final product and is relatively easy to measure and compare but ERP is the quantification of the value addition in the domestic import-competing industry due to the imposition of the tariff; the focus here is on measurement of the tariff for intermediate goods that are required in the production of the final products. The ERP considers all the goods included in the process of making the product along with the final products. Generally, nominal rate is used in accessing the price impact of the tariffs on consumer and ERP for producers. In each of the above-mentioned tariff, quantification requires the pool of data which are generally hard enough for the countries to get. With the significance of each ERP and NRP on their place, they both incorporate different calculation modalities with their own assumptions making the policymaker difficult to advocate. For example, a higher NRP than ERP(i.e. NRP > ERP), could be favorable for the industrialized countries (IC's) as the imports of raw material becomes cheaper compared to final manufactured products but the same is seen as negatively by exporting countries(if are LCD's or developing countries) creating a dilemmatic situation.

With the above-mentioned things in place, there further exits various cross-border reservations which could not be as explicit and tangible as the tariffs are, actually, these are the non-tariff barriers which accounts for the increase in the cost of manufacturing for the producing country. The monetization of non-tariff barriers(NTB) to the costing scale is really a difficult and convoluting task as these are in times hidden protocol the countries uses to block the free trade. These NTB could be imposed as import quotas, voluntary export restraint, government procurement provisions, domestic content provision, and administrative classification, delaying customs procedure and additional documents requirements.

A perfect apotheosis could be the currency war between China and the USA, where USA has blamed Chain for artificially devaluating its currency which ultimately leads to make the export of the USA dearer in China and its import cheaper in the USA; here neither USA has been able to quantify the tariff nor China been friendly to share its implied reservations. Similarly, Japan still relies on complex NTB which is really difficult to quantify, rhetorically Japan's trade economy is somewhat a zero tariff economy but the NTB is so confusing that it has always infuriated its global trade partners from the USA and EU; in 2012, the foreign auto companies only sold 13,637 units of car in the Japanese auto market whereas it sold 5,343,579 cars in the USA, Japan relies in deep non-tariff barriers (lengthy import authorization and certification process).

I personally feel that the exact estimation and calculation of the trading cost has always been a tough task. Though tariff could be quantified its data has been difficult to accumulate or access and further the quantification of NTB is even more complex as they are generally impliedly initiated by the importing countries.

Bibliography

Appleyard, D. R., & Field, A. J. (2014). International Economics. Irwin: McGraw-Hill.