What’s Ahead Under Zero Tariffs

The trade deal concluded Wednesday among the United States, Canada, Japan, European members of the Group of Seven and other countries in the European Community would slash tariffs on several industrial goods. For some U.S. industries, the elimination of tariffs should boost exports to foreign markets, but in some cases other trade barriers remain.

BEER

Tariffs on U.S. beer exports now range from 15% in Japan to 24% in Europe, compared with 1.9% for foreign beer coming into the United States.

At present, five nations or territories constitute about 60% of the foreign market for American beer, the largest being Japan, followed by Canada, Hong Kong, Mexico and Argentina.

Once tariffs are reduced to zero, other obstacles will remain to U.S. beer exports, including licensing requirements. U.S. beer must also overcome taste preferences, particularly in Europe, where consumers prefer generally heavier brews.

CONSTRUCTION/AGRICULTURE EQUIPMENT

Tariffs on construction and agricultural equipment now range as high as 6% in Japan and 17% in Europe. In contrast, the United States imposes tariffs as high as 25% on some foreign imports of similar equipment.

Foreign markets represent about half of U.S. equipment makers’ business, with the biggest markets in Europe, Asia and the Middle East.

Once tariffs are dropped, no significant barriers to U.S. exports will remain. But equipment manufacturers are working to make sure emissions and safety rules now being considered in the U.S. and other countries are consistent.

MEDICAL EQUIPMENT

Tariffs on medical and scientific equipment range as high as 7.2% in Japan and 11% in Europe. The United States imposes even higher duties, up to 17%, though the average is about 5%.

The United States, Europe and Japan remain the prime markets for medical equipment, accounting for 77% of the worldwide total.

Eliminating tariffs will remove only one obstacle to further exports. Most developed nations, like the United States, require an extensive approval process before medical equipment can be sold. In addition, some nations require that medical equipment meet the standards of national health insurance programs.

PHARMACEUTICALS

Tariffs on drugs, injections and other pharmaceuticals range as high as 10% in Japan and 13.6% in Europe. The United States imposes duties as high as 27.1% on some foreign drugs.

About 80% to 90% of U.S. drug exports go to the industrialized nations, including Europe and Japan.

But drugs must overcome formidable non-tariff barriers, including regulatory approval processes that take as long as 10 years. Also, in developing nations such as Turkey, Brazil, Argentina and India, the governments do not recognize drug patents, giving competitors carte blanche to copy formulas--sometimes even before the U.S. maker can come out with the finished product.