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Determinants of FTA Utilization for Japan's Imports: Preferential margins and restrictiveness of rules of origin

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  • ANDO Mitsuyo
  • URATA Shujiro

Abstract

This paper examines determinants of free trade agreement (FTA) utilization for Japan's imports in 2015, focusing on preferential margins and restrictiveness of rules of origin (ROOs). First, the paper descriptively investigates features of FTA utilization for Japan's imports, using finely disaggregated data that allow us to identify imports under each FTA scheme. The paper also investigates features of ROOs in Japan's 12 FTAs by FTA and by product. We then focus on preferential margins and ROOs' restrictiveness to quantitatively analyze the determinants of FTA utilization on Japan's imports, considering most-favored-nation (MFN) tariffs and non-tariff measures (NTMs). Our quantitative analysis demonstrates that restrictive ROOs in Japan's FTAs lower the FTA utilization rate, while preferential margins raise it. In addition, we reveal that the effects of ROOs differ by type of ROO. In particular, negative effects are notably larger for "change-in-tariff classification (CTC) and value-added (VA) rules", which require satisfying both CTC and VA rules, compared with the simple "CTC rule" or the selective "CTC or VA rule." Also, among CTC rules, the magnitude of negative effects tends to be larger for "change-in-chapter (CC) rule" than "change-in-heading (CH) rule". Our results suggest that restrictive ROOs impede trade, and thus it is important to apply user-friendly ROOs with less restrictiveness to promote FTA utilization.

Suggested Citation

  • ANDO Mitsuyo & URATA Shujiro, 2018. "Determinants of FTA Utilization for Japan's Imports: Preferential margins and restrictiveness of rules of origin," Discussion papers 18078, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:18078
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    References listed on IDEAS

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    1. Olivier Cadot & Lili Yan Ing, 2016. "How Restrictive Are ASEAN's Rules of Origin?," Asian Economic Papers, MIT Press, vol. 15(3), pages 115-134, Fall.
    2. Hayakawa, Kazunobu, 2014. "Impact of diagonal cumulation rule on FTA utilization: Evidence from bilateral and multilateral FTAs between Japan and Thailand," Journal of the Japanese and International Economies, Elsevier, vol. 32(C), pages 1-16.
    3. Kazunobu Hayakawa & Nuttawut Laksanapanyakul & Taiyo Yoshimi, 2021. "Tariff scheme choice," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(2), pages 323-346, May.
    4. 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.
    5. Hayakawa, Kazunobu & Kim, Hansung & Lee, Hyun-Hoon, 2014. "Determinants on utilization of the Korea–ASEAN free trade agreement: margin effect, scale effect, and ROO effect," World Trade Review, Cambridge University Press, vol. 13(3), pages 499-515, July.
    6. 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.
    7. repec:idb:brikps:16558 is not listed on IDEAS
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    Cited by:

    1. ANDO Mitsuyo & URATA Shujiro & YAMANOUCHI Kenta, 2022. "Effects of Product-Specific Rules of Origin on Trade in Free Trade Agreements: Evidence from the cases of Japan," Discussion papers 22035, Research Institute of Economy, Trade and Industry (RIETI).

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