The Origin of Goods: Rules of Origin in Regional Trade Agreements

The dark side of preferential trade agreements, Rules of Origin (RoO) are used to determine the eligibility of goods to preferential treatment. Ostensibly meant to prevent the trans-shipment of imported products across Free Trade Agreement borders after superficial screwdriver assembly, they act in reality as complex and opaque trade barriers. This book provides evidence strongly suggesting that they do so by intent rather than accidentally---in other words, that RoOs are policy. Part one draws insights about the effects of RoOs on cross-border trade and outsourcing from recent economic theory. Part two reviews the evidence on RoOs in preferential agreements around the world, putting together the most comprehensive dataset on RoOs to date. Part three explores their "political economy"---how special interests have shaped them and continue to do so. Part four provides econometric evidence on their costs for exporters and consequent effects on trade flows. Finally, part five explores how they affect trade in the developing world where they spread rapidly and have the potential to do most harm. Beyond the collection of new evidence and its interpretation in light of recent theory, the book's overall message for the policy community is that RoOs are a potentially powerful and new barrier to trade. Rather than being relegated to closed-door technical meetings, their design should hold center-stage in trade negotiations. Contributors to this volume - Olivier Cadot, University of Lausanne and CEPR Antoni Estevadeordal, Inter-American Development Bank Akiko Suwa, DELTA/INRA Thierry Verdier, DELTA and CEPR Kala Krishna, Pennsylvania State University and NBER Matthias Thoenig, CERAS and CNRS Kati Suominen, IDB Americo Beviglia-Zampetti, UNCTAD Pierre Sauve, Institut d'Etudes Politiques I.M. Destler, University of Maryland and Institute for International Economics Celine Carrere, University of Auvergne Jaime de Melo, University of Geneva Pablo Sanguinetti, UTDT E. Bianchi, IPECI Joseph Francois, Tinbergen Institute and CEPR Hennie Erasmus, SADC Secretariat Frank Flatters, Queen's University Robert Kirk, The Services Group Paul Brenton, World Bank Takako Ikezuki, World Bank