How Does the Reform of Rules of Origin Affect Firm Performance in Importing Countries?

This study empirically examined the economic impacts of reform in Japan's generalized system of preferences regarding firm performance. Specifically, we considered the relaxation of the rules of origin (RoOs) for knitted apparel in 2011 and 2015. We conducted difference-in-differences analysis by defining the knitted apparel industry as a treatment group and the woven apparel industry as a control group. First, we demonstrate that Japan's total imports of knitted apparel products did not experience a greater increase than that of woven apparel products. However, imports of knitted apparel products from least developed countries increased significantly. Second, on average, the two RoO reforms did not significantly change the shipment values of knitted apparel producers. However, we identified significant results for knitted apparel producers in the lower price range. While the first relaxation in 2011 reduced their production quantity and raised their unit prices, the second relaxation in 2015 reduced their shipment value through a reduction in production quantity.