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Firm behaviour and market access in a Free Trade Area with rules of origin

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Author Info
Jiandong Ju
Kala Krishna

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Abstract

We study a Free Trade Area with Rules of Origin and show that there are two distinct regimes. Comparative statics results for the two regimes are exact opposites and a regime switch occurs when become restrictive enough. Consequently, imports into the of the intermediate good first fall and then rise while the opposite pattern occurs for imports of the final good and for the price of the domestic input. We also show that tighter have opposite effects on the well-being of final versus intermediate good producers and producers inside versus outside the FTA.

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File URL: http://economics.ca/cgi/xms?jab=v38n1/16.pdf
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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 38 (2005)
Issue (Month): 1 (February)
Pages: 290-308
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Handle: RePEc:cje:issued:v:38:y:2005:i:1:p:290-308

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F15 - International Economics - - Trade - - - Economic Integration

References listed on IDEAS
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. Ju, J. & Krishna, K., 1996. "market Access and Welfare Effects of Free Trade Areas without Rules of origin," Papers 2-96-1, Pennsylvania State - Department of Economics.
    Other versions:
  2. repec:fth:coluec:9596-04 is not listed on IDEAS
  3. Bond, Eric W. & Syropoulos, Constantinos, 1996. "The size of trading blocs Market power and world welfare effects," Journal of International Economics, Elsevier, vol. 40(3-4), pages 411-437, May. [Downloadable!] (restricted)
  4. Lopez, Ramon E. & Rodrik, Dani, 1990. "Trade restrictions with imported intermediate inputs : When does the trade balance improve?," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 329-338, November. [Downloadable!] (restricted)
    Other versions:
  5. Kyle Bagwell & Richard W. Staiger, 1998. "The Simple Economics of Labor Standards and the GATT," NBER Working Papers 6604, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. 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)
  7. Paul Krugman, 1989. "Is Bilateralism Bad?," NBER Working Papers 2972, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Pravin Krishna, 1998. "Regionalism And Multilateralism: A Political Economy Approach," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 227-250, February. [Downloadable!] (restricted)
    Other versions:
  9. Carsten Kowalczyk, 1990. "Welfare and Customs Unions," NBER Working Papers 3476, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Richardson, Martin, 1995. "Tariff revenue competition in a free trade area," European Economic Review, Elsevier, vol. 39(7), pages 1429-1437, August. [Downloadable!] (restricted)
  11. Lopez, Ramon & Panagariya, Arvind, 1992. "On the Theory of Piecemeal Tariff Reform: The Case of Pure Imported Intermediate Inputs," American Economic Review, American Economic Association, vol. 82(3), pages 615-25, June. [Downloadable!] (restricted)
  12. repec:att:wimass:1919989 is not listed on IDEAS
  13. Anne O. Krueger, 1995. "Free Trade Agreements versus Customs Unions," NBER Working Papers 5084, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Anderson, James E & Neary, J Peter, 1994. "Measuring the Restrictiveness of Trade Policy," World Bank Economic Review, Oxford University Press, vol. 8(2), pages 151-69, May.
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  15. Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-19, September. [Downloadable!] (restricted)
Full references

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. Arvind Panagariya, 2003. "South Asia: Does Preferential Trade Liberalization Make Sense?," International Trade 0309011, EconWPA. [Downloadable!]
    Other versions:
  2. Philippa Dee, 2005. "The Australia–US Free Trade Agreement: An Assessment," Trade Working Papers 611, East Asian Bureau of Economic Research. [Downloadable!]
  3. AUGIER Patricia & GAZIOREK Michael & LAITONG Charles, 2004. "The Impact of Rules of Origin On Trade Flows," International Trade 0404001, EconWPA. [Downloadable!]
  4. Arvind Panagariya & Rupa Dutta Gupta, 2003. "Free Trade Areas and Rules of Origin: Economics and Politics," International Trade 0308006, EconWPA. [Downloadable!]
    Other versions:
  5. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Jose Anson & Olivier Cadot & Antoni Estevadeordal & Jaime de Melo & Akiko Suwa-Eisenmann & Bolorma Tumurchudur, 2004. "Rules of origin in north-south preferential trading arrangements with an application to NAFTA," Research Unit Working Papers 0406, Laboratoire d'Economie Appliquee, INRA. [Downloadable!]
    Other versions:
  7. Patricia Augier & Michael Gasiorek & Charles Lai-Tong, 2007. "Multilateralising Regionalism: Relaxing the Rules of Origin Or Can Those Pecs Be Flexed?," CARIS Working Papers 03, Centre for the Analysis of Regional Integration at Sussex, University of Sussex. [Downloadable!]
  8. Cadot, Olivier & Estevadeordal, Antoni & Suwa Eisenmann, Akiko, 2005. "Rules of Origin as Export Subsidies," CEPR Discussion Papers 4999, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  9. Svetlana Demidova & Kala Krishna, 2007. "Firm Heterogeneity and Firm Behavior with Conditional Policies," NBER Working Papers 12950, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Francois, Joseph, 2005. "Preferential Trade Arrangements and the Pattern of Production and Trade when Inputs are Differentiated," CEPR Discussion Papers 5144, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  11. Kala Krishna, 2005. "Conditional Policies in General Equilibrium," NBER Working Papers 11283, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Svetlana Demidova & Hiau Looi Kee & Kala Krishna, 2006. "Do Trade Policy Differences Induce Sorting? Theory and Evidence from Bangladeshi Apparel Exporters," NBER Working Papers 12725, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Cadot, Olivier & de Melo, Jaime, 2007. "Why OECD Countries should Reform Rules of Origin," CEPR Discussion Papers 6172, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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