Estimated Effect of Possible Latin American Common External Tariffs on U.S. Exports to Latin America
TWO ALTERNATIVE ESTIMATES of average common external tariff levels for a Latin American common market are used to calculate the effect of the establishment of a common tariff on U.S. exports. One assumes an average tariff equal to 101 percent, or the average level of seven countries' individual tariffs in the early 1960s. That average is based on the unweighted arithmetic mean of estimated nominal tariffs of seven countries that accounted for about two-thirds of Latin American imports from the United States in the mid-1960s ( Venezuela is the only major importer for which tariff data are not available). The other estimate assumes an average tariff level equal to 50 percent or half the unweighted arithmetic mean of the individual country tariffs in the early 1960s (see Table 14).
The estimates are derived from the percentage difference between a country's existing tariff and the common external tariff multiplied by the sum of the average demand and supply elasticities1. for the economy; the sum of the elasticities is weighted by an indicator that measures the production of the economy in relation to imports from the United States. Because of the assumed elasticities, a downward adjustment of tariffs would result in an increase in consumption of imports (the magnitude is determined____________________