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

Tunisia - 17 February 2018

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.

Author(s): Leila Baghdadi, Hendrik W. Kruse, Inma Martinez-Zarzoso