Trade Adjustment Costs in Developing Countries: - World Bank ...

106Marc-Andreas Muendlera large-scale trade reform that involved both the removal of non-tariff barriersand the adoption of a new tariff structure with lower levels and smaller crosssectoraldispersion. As a surprise to most observers at the time, Collor abolishedall non-tariff barriers by presidential decree on his first day in office.Implementation of these policies was largely completed by 1993.Figure 7.1 depicts Brazil’s product-market and intermediate-input tariffschedules in 1990 and 1997 for the twelve manufacturing industries at thesubsector IBGE level. Intermediate input tariff levels are calculated as weightedproduct tariffs using the economy-wide input-output matrix. Both the level andthe dispersion of tariffs drop remarkably between 1990 and 1997. While advalorem product tariffs range from 21 (metallic products) to 63 per cent (appareland textiles) in 1990, they drop to a range from 9 per cent (chemicals) to 34 percent (transport equipment) in 1997. Except for paper and publishing in 1990,sectors at the subsector IBGE level receive effective protection in both years, withmean product tariffs exceeding mean intermediate-input tariffs. By 1997,however, the relatively homogeneous tariff structure results in a small rate ofeffective protections for most industries—with the notable exception of transportequipment.Brazil underwent additional reforms over the sample period. In 1994, during theFranco administration and under the watch of then finance minister Cardoso,drastic anti-inflation measures succeeded for the first time in decades. Aprivatization program for public utilities was started in 1991 and accelerated inthe mid 1990s, while Brazil simultaneously liberalized capital account restrictions.These measures were accompanied by a surge in foreign direct investment inflowsin the mid 1990s. The pro-competitive reforms during the 1990s, mostly targetedat product markets, had been preceded by changes to Brazil’s labor marketinstitutions in 1988.Tariff Rates in 1990 Tariff Rates in 1997Figure 7.1: Product-market and intermediate-input tariffs 1990 and 1997Sources: Muendler (2008). Ad valorem product tariffs at Nível 80 from Kume et al. (2003).Note: Intermediate input tariffs are weighted product-market tariffs using national input-outputmatrices at Nível 80 (from IBGE). Product-market and intermediate-input tariffs are transformed tothe subsector IBGE level using unweighted means over the Nível 80 classifications.