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Multilateralising Regionalism: Relaxing the Rules of Origin Or Can Those Pecs Be Flexed?

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Author Info

  • Patricia Augier
  • Michael Gasiorek

    ()

  • Charles Lai-Tong

    (Centre for the Analysis of Regional Integration at Sussex, Department of Economics, University of Sussex)

Abstract

In this paper we first explain why rules of origin are a necessary feature of preferential trading arrangements, but why they also serve to distort trade and can therefore be used for protectionist purposes, and why they have a powerful natural impetus towards strengthening the spaghetti bowl effect in international trade. Secondly, we then examine the impact of the relaxation of the potential constraining impact of rules of origin in the European context which was achieved through the introduction of the Pan-European Cumulation system (PECS). We provide empirical evidence at both the aggregate and sectoral level which reveals the positive impact of the relaxation of rules of origin via the introduction of “diagonal cumulation” arrangements between the EU and its’ trading partners. Thirdly, the discussion turns to a consideration of appropriate policy options designed both to minimise the spaghetti bowl effect, and to maximise the benefits from regionalism for developing countries.

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Bibliographic Info

Paper provided by Centre for the Analysis of Regional Integration at Sussex, University of Sussex in its series CARIS Working Papers with number 03.

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Length: 28 pages
Date of creation: Sep 2007
Date of revision:
Handle: RePEc:ari:wpaper:03

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Web page: http://www.sussex.ac.uk/Units/caris/
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Related research

Keywords: Regionalism; Rules of Origin; Trade;

References

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  1. José Anson & Olivier Cadot & Antoni Estevadeordal & Jaime de Melo & Akiko Suwa-Eisenmann & Bolormaa Tumurchudur, 2005. "Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 501-517, 08.
  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.
  3. 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.
  4. Rod Falvey & Geoff Reed, . "Rules of Origin as Commercial Policy Instruments," EPRU Working Paper Series 97-20, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  5. Patricia Augier & Michael Gasiorek & Charles Lai-Tong, 2004. "Rules of Origin and the EU-Med Partnership: The Case of Textiles," The World Economy, Wiley Blackwell, vol. 27(9), pages 1449-1473, 09.
  6. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
  7. Sapir, André, 1997. "The Political Economy of EC Regionalism," CEPR Discussion Papers 1739, C.E.P.R. Discussion Papers.
  8. Jiandong Ju & Kala Krishna, . "Market Access and Welfare Effects of Free Trade Areas without Rules of Origin," EPRU Working Paper Series 96-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  9. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
  10. Deardorff, Alan V., 2001. "International provision of trade services, trade, and fragmentation," Policy Research Working Paper Series 2548, The World Bank.
  11. Soloaga, Isidro & Winters, L. Alan, 1999. "How has regionalism in the 1990s affected trade?," Policy Research Working Paper Series 2156, The World Bank.
  12. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  13. Rod Falvey & Geoff Reed, 1998. "Economic effects of rules of origin," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(2), pages 209-229, June.
  14. 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.
  15. Alan V. Deardorff, 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Working Papers 5377, National Bureau of Economic Research, Inc.
  16. P. J. Lloyd, 1993. "A Tariff Substitute for Rules of Origin in Free Trade Areas," The World Economy, Wiley Blackwell, vol. 16(6), pages 699-712, November.
  17. Arvind Panagariya & Rupa Duttagupta, 2003. "Free Trade Areas and Rules of Origin," IMF Working Papers 03/229, International Monetary Fund.
  18. Paul Brenton & Miriam Manchin, 2002. "Making EU Trade Agreements Work: The Role of Rules of Origin," International Trade 0203003, EconWPA.
  19. Panagariya, Arvind & Krishna, Pravin, 2002. "On necessarily welfare-enhancing free trade areas," Journal of International Economics, Elsevier, vol. 57(2), pages 353-367, August.
  20. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  21. Ronald W. Jones & Sugata Marjit, 2001. "The Role of International Fragmentation in the Development Process," American Economic Review, American Economic Association, vol. 91(2), pages 363-366, May.
  22. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Wiley Blackwell, vol. 20(3), pages 363-368, 05.
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Citations

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Cited by:
  1. 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, 02.
  2. Innwon Park & Soonchan Park, 2011. "Best practices for regional trade agreements," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(2), pages 249-268, June.
  3. Patrick Georges, 2009. "Dispensing with NAFTA Rules of Origin? Some Policy Options for Canada," Working Papers 0904E, University of Ottawa, Department of Economics.
  4. Park, Innwon & Park, Soonchan, 2009. "Consolidation and Harmonization of Regional Trade Agreements (RTAs): A Path Toward Global Free Trade," MPRA Paper 14217, University Library of Munich, Germany, revised 23 Mar 2009.

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