Filter 1. The product must be one which imports.
Only products which partner country has imported from anywhere in the world in 2016 are included in the data for this analysis. The logic is that only those products in which has shown interest in buying should be considered in the offensive list. More importantly, it is also an indicator of which allows market access. Going further than this, it is important to consider only products for which has a non-negligible level of demand, as there are many products for which has only imported a very small value. These do not present worthwhile market opportunities for targeting.
Filter 2. The product must be one which the reporter currently produces and has the capacity to increase exports.
Goods which the reporter does not produce can be excluded from this analysis. Furthermore, for the reporter to take advantage of the increased opportunities from a decreased tariff in , it must have the capacity to increase production. This is proxied by exports to the world as a whole.
Filter 3. the partner must currently have a non-zero tariff on the product.
the partner must apply a non-zero tariff for a product to be considered in the list. The filter includes a choice of preferential, MFN applied, and bound tariffs at HS6 level, or any combination of them. When choosing a combination of tariffs, the lowest will be considered. For each type of tariff, the maximum at HS6 level is used – negotiators would need to look into details at tariff line level to see which tariff-line products specifically are affected.
It is important to be mindful about which types of tariffs to consider, for example, if the partner has a large difference between MFN applied and bound rates. Ignoring high bound in such case may leave the reporter vulnerable to potential increases in MFN applied rates by the partner, if those products are put in an exclusion list of the trade agreement.
Filter 4. The product must be one in which the reporter has demonstrated comparative advantage bilaterally or generally. Click on the information icon next to each of these sliders for additional information.
Comparative advantage looks at whether a country is particularly good at producing a good relative to producing other goods, and relative to other countries’ production abilities. As such, the reporter must demonstrate a comparative advantage in a product for its inclusion in the negotiation list. A product has a revealed comparative advantage when the reporter’s exports of that good, relative to total exports of the reporter, are greater than the world’s exports of that good, relative to total world exports (Standard Revealed Comparative Advantage, or SRCA). SRCA takes a value of greater than one for a given product if the reporter exports a disproportionate amount of that product (relative to its total exports) compared to other countries. Similarly, Bilateral Revealed Comparative Advantage (BRCA) shows whether a country is particularly good at exporting a product to a partner country (in this case to the partner), when comparing with other countries’ exports of that product (to the partner). As such, this filter is optional, since it is possible that there is substantial unrealized potential in a product that the reporter has a comparative advantage globally, but not when exporting to the partner country (the partner) due to market access reasons.
When drawing up a negotiation list, it is also important to consider whether it is likely that partner country would act in a defensive manner when negotiating a tariff reduction on a product. To address this, one may want to look at whether partner country has a strong domestic industry in a good, and whether it is likely to be threatened by new imports from reporter country. Thus, this analysis simply highlights the products for which there is a good chance that partner country will act defensively (it is not a filter). To be considered as a defensive interest of partner country, a product must satisfy the following two conditions:
- Exports of the product from partner country to the world are in the top 75% of export values of partner country. This proxies for domestic production.
- The value of exports from reporter country to partner country is over 10% of the total value of exports from partner country for that good. This proxies for the threat imports from reporter country pose to production in partner country.
Another potential indicator is the tariff preferences given by partner country to other countries as part of trade agreements. This is available in the detailed product page after the list has been generated.
where X : exports; i : exporting economy; j : destination economy; w : world; and k : commodity/product. This SRCA takes a value of greater than one for a given commodity if economy i (in this case the reporter) exports a disproportionate amount of that commodity compared to the world.
where X : exports; i : exporting economy; j : destination economy; w : world; and k : commodity/product. This BRCA takes a value of greater than one for a given commodity if economy i (in this case the reporter) exports a disproportionate amount of that commodity compared to economy j (in this case the partner).