A note on protection and the processing of primary commodities

Abstract

It is well known that "escalated" tariff structures in more developed countries (MDCs) serve to inhibit the ability of less developed countries (LDCs) to process their own primary commodities for export. What has not received attention, however, and what is demonstrated here, is that tariff structures of the LDCs, themselves, may add an additional bias against such processing activities. So reform of protection systems in both groups of countries is important to the success of industrialisation in LDCs. The terms of trade implications are noted as a possible explanation of the UNCTAD emphasis on trade preferences in MDC markets rather than on LDC tariff-reform. However, it is noted that LDC tariff reform would tend to remove a bias against trade among LDCs and that this mitigates the terms of trade argument. Finally, this also provides a new argument for trade preferences among LDCs.