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Liberalizing NAFTA Rules of Origin: A Dynamic CGE Analysis

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  • Patrick Georges

Abstract

Most computable general-equilibrium (CGE) studies assessing the welfare impact of moving from a North American Free Trade Agreement (NAFTA) to a deeper form of integration, for example a customs union (CU), typically proxy the integration as the adoption of a common external tariff toward the rest of the world. However, a CU is also an arrangement that allows for the elimination of FTAs' preferential rules of origin (ROO), which is typically not captured in CGE studies. This paper addresses the issue using a multicountry, multisector dynamic CGE model. Although the removal of distortionary ROO is likely to lower the unit costs of production within North America, it may also deteriorate North American terms of trade with the rest of the world. Thus, the net effect of the removal of NAFTA ROO on welfare is ambiguous and is an empirical issue. Copyright � 2008 The Author. Journal compilation � 2008 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 16 (2008)
Issue (Month): 4 (09)
Pages: 672-691

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Handle: RePEc:bla:reviec:v:16:y:2008:i:4:p:672-691

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Cited by:
  1. Laura da Costa Ferré, 2009. "Diagonal Cumulation of Rules of Origin in South America," Documentos de Trabajo (working papers) 3009, Department of Economics - dECON.
  2. Patrick Georges, 2009. "Dispensing with NAFTA Rules of Origin? Some Policy Options for Canada," Working Papers 0904E, University of Ottawa, Department of Economics.
  3. Patrick Georges, 2012. "Trade Diversification Away from the U.S. or North American Customs Union? A Review of Canada’s Trade Policy Options," Working Papers 1205E, University of Ottawa, Department of Economics.

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