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Trade-creating regime-wide rules of origin: a quantitative analysis

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  • Sangkyom Kim
  • Innwon Park
  • Soonchan Park

Abstract

Regime-wide rules of origin (ROO), such as diagonal cumulation, de minimis and self-certification requirement, can be applied to reduce additional administrative and compliance costs for verifying restrictive ROO. However, empirical evidence related to the trade effect of various regime-wide ROOs is very few. We quantitatively investigate the trade effect of regime-wide ROOs by estimating the modified gravity equation with panel data on 36 238 country pairs covering 151 countries for 16 years from 1990 to 2005 at 5 year intervals. From our empirical experiments, we find that implementation of regime-wide ROOs such as diagonal cumulation and de minimis generate more trade between members of free trade agreements (FTAs). However, we also find that certification requirement does not produce positive trade effects. In addition, we confirm the effectiveness of the Poisson pseudo-maximum likelihood (PPML) estimator dealing with the zero trade issue and the presence of heteroscedasticity compared to the traditional log-linearized model estimation.

Suggested Citation

  • Sangkyom Kim & Innwon Park & Soonchan Park, 2013. "Trade-creating regime-wide rules of origin: a quantitative analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 20(11), pages 1056-1061, July.
    • Handle: RePEc:taf:apeclt:v:20:y:2013:i:11:p:1056-1061
    DOI: 10.1080/13504851.2013.781259
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    References listed on IDEAS

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    1. Antoni Estevadeordal & Kati Suominen & Jeremy Harris & José Ernesto López Córdova, 2008. "Gatekeepers of Global Commerce: Rules of Origin and International Economic Integration," IDB Publications (Books), Inter-American Development Bank, number 16558, February.
    2. 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.
    3. Pamela Bombarda & Elisa Gamberoni, 2013. "Firm Heterogeneity, Rules Of Origin, And Rules Of Cumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(1), pages 307-328, February.
    4. Harris, Jeremy, 2008. "Rules of Origin for Development: From GSP to Global Free Trade," IDB Publications (Working Papers) 2492, Inter-American Development Bank.
    5. Estevadeordal, Antoni & Suominen, Kati & Harris, Jeremy & López Córdova, José Ernesto, 2008. "Gatekeepers of Global Commerce: Rules of Origin and International Economic Integration," IDB Publications (Books), Inter-American Development Bank, number 262, May.
    6. repec:idb:brikps:16558 is not listed on IDEAS
    7. Jeremy Harris, 2008. "Rules of Origin for Development: From GSP to Global Free Trade," IDB Publications (Working Papers) 9290, Inter-American Development Bank.
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    Cited by:

    1. Doan, Thang N. & Xing, Yuqing, 2018. "Trade efficiency, free trade agreements and rules of origin," Journal of Asian Economics, Elsevier, vol. 55(C), pages 33-41.
    2. Sung Hee Lee & Kun Soo Park & Yong Won Seo, 2016. "Multinational Firm’s Production Decisions under Overlapping Free Trade Agreements: Rule of Origin Requirements and Environmental Regulation," Sustainability, MDPI, vol. 9(1), pages 1-16, December.
    3. Timsina, Krishna P. & Culas, Richard J., 2020. "Impacts of Australia’s free trade agreements on trade in agricultural products: an aggregative and disaggregative analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(3), July.

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