International Trade - Theory and Policy, 2010a

1.9 Appendix B: Bound versus Applied Tariffs
The WTO agreement includes commitments by countries to bind their tariff rates at an agreed-upon
maximum rate for each import product category. The maximum tariff in a product category is called
the bound tariff rate. The bound tariff rates differ across products and across countries: some countries
agree to higher maximums; others agree to lower maximums. In general, less-developed countries have
higher bound tariff rates than developed countries, reflecting their perception that they need greater
protection from competition against the more highly developed industries in the developed markets.
However, some countries, especially those with higher bound tariffs, decide to set their actual tariffs at
lower levels than their bound rates. The actual tariff rate is called theapplied tariff rate. Table 1.4 "Bound
versus Applied Average Tariffs" lists the average applied tariff rates compared to average bound tariffs for a
selected set of WTO member countries. [1] Also listed is the percentage of six-digit tariff lines that have a
tariff binding. For products that have no tariff binding, the country is free to set whatever tariff it wishes.
The countries are ordered from the highest to the lowest gross domestic product (GDP) per person.
Table 1.4 Bound versus Applied Average Tariffs
Country Applied Rate (%) Bound Rate (%) % Bound
United States 3.6 3.6 100.0
Canada 3.6 5.1 99.7
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