Tariff escalation

Tariff escalation occurs when the tariff applied to a product category rises as the level of processing increases, from raw material to manufactured product.

The "effective rate of protection of value added" in the processing industry of the importing country will be higher than the nominal tariff on the product of that industry. The result is

• a higher level of protection of the more processed products in the importing country, and
• smaller imports of the more processed products both because domestic production is greater and because higher domestic prices reduce domestic consumption.


Tariff escalation effectively limits the scope for trade-related industrialization in developing countries.

Tariffs of Developed Economies on industrial product imports from Developing Economies - by Stage of Processing

Product group	Import value	Pre-UR tariff avg.	Abs. Reduction	% reduction
Raw materials	36,665	2.1	1.1	52
Semi-manufactures	36,464	5.3	2.4	45
Finished products	96,534	9.1	2.7	30
Total	169,663	6.8	2.3	34

Source: GATT Secretariat MTN/GNG/W/122


Using this definition, tariff escalation is reduced between two stages of production when there is a greater absolute decline in tariffs at the higher stage than at the lower stage.

Data from the Uruguay Round suggests that, on average, tariff escalation on industrial product imports from developing countries fell as a result of the higher absolute market access improvements on finished products than on raw materials.