This paper seeks to analyze the relationship between tariff protection and changes in the industrial structure by using data on the effective rate of protection and the change rate of industries. Two problems are implied by this relationship. First, how can the development of “secondary import substitution industries” be matched with tariffs. Second, how do tariff rates, adjusted by home market sales ratios, impact on domestic industries.
The major findings of the study are as follows:
(1) Spearman’s rank correlation coefficient between the effective rate of protection and the industrial growth rate was insignificant
(2) From the deflating basis of adjusted tariff rates and observed average effective rates of protection, some industries showed both a higher level of tariff protection and a higher rate of growth, but more industries showed a lower level of tariff protection and a higher rate of growth.
(3) In general, the higher was the export rate of a specific industry, the lower was the average effective rate of protection, and the ability to withstand market competition was stronger.
(4) When compared to adjusted tariff rates and nominal rates of protection, and apart from quality differentials, the phenomenon of tariff redundancy was found in a few industries.
(5) From the deflating basis of adjusted tariff rates, when tariff escalation with the degree of processing was overstressed and the existence of tariff redundancy ignored, then the effective rate of protection tended to be overestimated
(6) From the deflating basis of the nominal rate of protection, when the nominal rates of protection for input were greater than those for output, then the effective rates of protection were negative for many industries.
(7) Observation of the average effective rates of protection in “secondary import-substitution industries” revealed the phenomenon of anti-protection.
(8) The negative effective rate of protection for exports resulted in an indirect tax on intermediate and capital goods which could not be completely refunded.
(9) The imposition of tariff rates adjusted by home market sales ratios increased the effective rate of protection for the home market and decreased the effective rate of protection for exports.
