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Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA

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Author Info
José Anson
Olivier Cadot
Antoni Estevadeordal
Jaime de Melo
Akiko Suwa-Eisenmann
Bolormaa Tumurchudur

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Abstract

All preferential trading agreements (PTAs) short of a customs union use rules of origin (ROO) to prevent trade deflection. ROO raise production costs and create administrative costs. This paper argues that in the case of the recent wave of North-South PTAs, the presence of ROO virtually limits the market access that these PTAs confer to the Southern partners. In the case of NAFTA, we find average compliance costs around 6% in ad valorem equivalent, undoing the tariff preference (4% on average) for a large number of tariff lines. Administrative costs amount to 47% of the preference margin. These findings are coherent with the view that North-South PTAs could well be viewed like a principal-agent problem in which the Southern partners are just about left on their participation constraint. Copyright Blackwell Publishing Ltd 2005..

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File URL: http://www.blackwell-synergy.com/links/doi/10.1111/j.1467-9396.2005.00520.x
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Publisher Info
Article provided by Blackwell Publishing in its journal Review of International Economics.

Volume (Year): 13 (2005)
Issue (Month): 3 (08)
Pages: 501-517
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Handle: RePEc:bla:reviec:v:13:y:2005:i:3:p:501-517

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References listed on IDEAS
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  1. Paul Brenton & Miriam Manchin, 2003. "Making EU Trade Agreements Work: The Role of Rules of Origin," The World Economy, Blackwell Publishing, vol. 26(5), pages 755-769, 05. [Downloadable!] (restricted)
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  2. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March. [Downloadable!]
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  3. Kala Krishna & Anne Krueger, 1995. "Implementing Free Trade Areas: Rules of Origin and Hidden Protection," NBER Working Papers 4983, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. AUGIER Patricia & GAZIOREK Michael & LAITONG Charles, 2004. "The Impact of Rules of Origin On Trade Flows," International Trade 0404001, EconWPA. [Downloadable!]
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  5. Jiandong Ju & Kala Krishna, 1998. "Firm Behavior and Market Access in a Free Trade Area with Rules of Origin," NBER Working Papers 6857, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Ju, Jiandong & Krishna, Kala, 2002. "Regulations, regime switches and non-monotonicity when non-compliance is an option: an application to content protection and preference," Economics Letters, Elsevier, vol. 77(3), pages 315-321, November. [Downloadable!] (restricted)
  7. Mattoo, Aaditya & Roy, Devesh & Subramanian, Arvind, 2002. "The Africa Growth and Opportunity Act and its rules of origin : generosity undermined?," Policy Research Working Paper Series 2908, The World Bank. [Downloadable!]
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  8. Arvind Panagariya & Rupa Duttagupta, 2003. "Free Trade Areas and Rules of Origin: Economics and Politics," IMF Working Papers 03/229, International Monetary Fund. [Downloadable!]
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  9. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. repec:rus:hseeco:121644 is not listed on IDEAS
  11. Olivier Cadot & Jaime de Melo & Antoni Estevadeordal & Akiko Suwa-Eisenmann & Bolormaa Tumurchudur, 2002. "Assessing the effect of NAFTA's rules of origin," Research Unit Working Papers 0306, Laboratoire d'Economie Appliquee, INRA. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pamela Bombarda, Elisa Gamberoni, 2008. "Firm Heterogeneity, Rules of Origin and Rules of Cumulation," HEI Working Papers 09-2008, Economics Section, The Graduate Institute of International Studies. [Downloadable!]
  2. Cadot, Olivier & de Melo, Jaime & Portugal-Perez, Alberto, 2006. "Rules of origin for preferential trading arrangements : implications for the ASEAN Free Trade Area of EU and U.S. experience," Policy Research Working Paper Series 4016, The World Bank. [Downloadable!]
  3. Cadot, Olivier & Carrère, Céline & de Melo, Jaime & Portugal-Pérez, Alberto, 2005. "How Much Market Access in FTAs? Textiles Under NAFTA," CEPR Discussion Papers 5264, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Medalla, Erlinda, 2008. "Rules of Origin: Regimes in East Asia and Recommendations for Best Practice," Discussion Papers DP 2008-19, Philippine Institute for Development Studies. [Downloadable!]
  5. Lazaro, Dorothea C. & Medalla, Erlinda, 2006. "Rules of Origin: Evolving Best Practices for RTAs/FTAs," Discussion Papers DP 2006-01, Philippine Institute for Development Studies. [Downloadable!]
  6. Jorge Toro & Gloria Alonso & Pilar Esguerra & Daira Garrido, 2006. "El Impacto Del Tratado Del Libre Comercio Con Estados Unidos (Tlc) En La Balanza De Pagos Hasta 2010," BORRADORES DE ECONOMIA 002511, BANCO DE LA REPÚBLICA. [Downloadable!]
  7. Olivier Cadot & Antoni Estevadeordal & Akiko Suwa-Eisenmann, 2004. "Rules of origin as export subsidies," Research Unit Working Papers 0405, Laboratoire d'Economie Appliquee, INRA. [Downloadable!]
    Other versions:
  8. Manchin, Miriam, 2005. "Preference utilization and tariff reduction in European Union imports from African, Caribbean, and Pacific countries," Policy Research Working Paper Series 3688, The World Bank. [Downloadable!]
  9. Cadot, Olivier & Carrère, Céline & de Melo, Jaime & Tumurchudur, Bolormaa, 2005. "Product Specific Rules of Origin in EU and US Preferential Trading Agreements: An Assessment," CEPR Discussion Papers 4998, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  10. Medvedev, Denis, 2006. "Preferential trade agreements and their role in world trade," Policy Research Working Paper Series 4038, The World Bank. [Downloadable!]
  11. Antoine Bouet & Lionel Fontagne & Sebastien Jean, 2005. "Is Erosion of Tariff Preferences a Serious Concern?," Working Papers 2005-14, CEPII research center. [Downloadable!]
  12. Medalla, Erlinda & Supperamaniam, M., 2008. "Suggested Rules of Origin Regime for EAFTA," Discussion Papers DP 2008-22, Philippine Institute for Development Studies. [Downloadable!]
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