World Economy

Sorry Wilbur Ross, China isn't the most protectionist country — at least by tariffs

Key Points
  • Commerce secretary Wilbur Ross said he believes China is the most protectionist among large economies
  • But data indicates that Brazil takes the crown for tariffs

Commerce secretary and billionaire investor Wilbur Ross recently referred to China as "the most highly protectionist of the big countries" in an interview with the Wall Street Journal, repeating a claim he made back in January.

But data seems to suggest otherwise.

Average tariff rates are actually higher in Brazil and India, two of the world's other big countries, Zixuan Huang and Nicholas Lardy from the Peterson Institute for International Economics wrote in a recent note.

Referring to World Bank statistics, the duo noted how weighted average applied tariffs in Beijing stood at 3.4 percent, versus New Delhi's 6.3 percent, Brasilia's 8.3 percent and Washington's 1.6 percent.

"China is a difficult investment environment for foreign firms in some industries, but its trade protection is modest, not significantly above that in large high-income economies like the U.S.," Huang and Lardy said.

The 79 year-old Ross believes Beijing has "beautiful free-trade rhetoric" but in reality, it implements high tariff and non-tariff barriers to imports.

Huang and Lardy point out that China was a highly protectionist trading nation three decades ago, but it has reduced average statutory tariffs from 45 percent in the mid-1980s to 10 percent in 2015 in order to qualify for entry to the World Trade Organization.

Beijing has also abolished most of its non-tariff barriers, such as import quotas and licensing requirements, that were once pervasive, the analysts said.

Trump and China

"It does retain tariff rate quotas but has reduced the number of products covered, from 16 in 2001 to only 8 in 2015, and the quotas for these products have been substantially increased. In comparison, the U.S. maintains tariff rate quotas on 9 products."

In 2010, Brazil adopted a slew of protectionist industrial and trade policies that favored domestic production but under President Michel Temer, the South American giant has expressed a willingness to embrace a more open trade policy as it attempts to recover from an economic recession.

India, meanwhile, has a long history of defending major industries, particularly farming and pharmaceuticals, but Finance Minister Arun Jaitley has said his country aspires to be more open.