Measuring the usage of preferential tariffs in the world

The preference utilization ratio, i.e., the share of preferential imports out of total imports, has been a popular indicator for measuring the usage of preferential tariffs vis-à-vis tariffs on a most-favored-nation basis. A crucial shortcoming of this measure is the data requirements, particularly for data on imports classified by tariff schemes, which are not available in most countries. This study proposes another measure for preference utilization, termed the “tariff exemption ratio.” This measure is a good proxy for the value of offered preferences by each importing country to the rest of the world. Importantly, it can be computed by employing only publicly available data, such as those provided by the World Development Indicators, for its computations. We can thus calculate this measure for many countries for an international comparison. Our finding is that tariff exemption ratios differ widely across countries.