Measuring and analyzing the impact of customs tariffs on foreign trade in developing countries for the period 1990-2022

Abstract

Customs tariffs are one of the main economic tools used by governments to regulate the macroeconomy and mobilize budget revenues towards the goal of economic growth, poverty alleviation and social justice. Therefore, the aim of this study is to identify the impact of customs tariffs on the foreign trade of developing countries. The problem of the study can be summarized as most countries of the world faced challenges in their foreign trade and enhancing economic growth rates. Due to the strategies employed in its trade policies, customs tariffs are one of the strategies it adopts to regulate trade operations with the outside world, which impacts economic indicators. The study is based on the hypothesis that the structure of foreign trade is affected by a set of economic variables, including customs tariffs, which have an impact on foreign trade in the selected sample countries. To this end, the study used secondary data sources from the World Development Indicators for longitudinal data spanning the period 1990-2022. The study relied on a measurement methodology using the Panel-ARDL autoregressive distributed lag (PADL) model and the PMG-ARDL method to analyze the long- and short-term effects between the studied variables, as well as the adjustment speed parameter. Additionally, the study used imports as an indicator of foreign trade. However, the study incorporated other economic variables as control variables that can affect foreign trade, such as gross capital formation, foreign direct investment, the exchange rate, and government spending. The study's long-term findings show a significant and inverse relationship between imports and both customs tariffs on manufactured products and gross capital formation. There is a significant positive relationship between imports and both foreign direct investment and government spending. The effect of the exchange rate variable was not significant at the 5% significance level, but was significant at the 10% significance level. Based on the findings, the study recommends that governments worldwide, particularly those in the study sample, focus policies on gradually opening up their economies to foreign trade based on strategic trade agreements that protect key domestic industries while strengthening sectors where developing countries have a competitive advantage. This approach will help mitigate any short-term negative impacts while leveraging long-term benefits.