Trade policy without trade facilitation: Lessons from tariff pass-through in Tunisia

This chapter evaluates the extent to which changes in tariffs and in international prices were transmitted into consumer prices in Tunisia over the period 2000– 2008. A pass-through equation is estimated using sectoral panel data at the retail product level and controlling for unobserved sectoral heterogeneity. The main results show that, on average, tariff pass-through (TPT) is 10 per cent and it varies across sectors. In particular, agricultural products seem to be driving the results. In summary, the change in Tunisian tariffs has affected local prices, but the effect is lower in magnitude than that found for other developing countries. This is in part due to imperfect competition and state interventions by means of subsidies and price controls that prevent the full transmission of changes in international prices. This research suggests that, for Tunisia, trade facilitation measures and sectoral actions to facilitate the business environment could positively impact on the passthrough effect and that reductions in border prices could have higher effects on retail prices, which, in turn, contribute to increase domestic welfare and generate inclusive development.