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Market Access and Welfare Effects of Free Trade Areas without Rules of Origin

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Author Info
Jiandong Ju
Kala Krishna

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Abstract

The market access and welfare effects of Free Trade Areas (FTAs) without Rules of Origin (ROOs) are studied. We consider the final and intermediate goods markets and their interlinkage. The FTA weakly reduces all tariffs and prices within the FTA. This raises quantity demanded and reduces quantity supplied for both the final and intermediate goods, thereby raising imports. This is the classic trade creation effect and is welfare improving. We identify two additional effects which work in the opposite direction and identify conditions under which these welfare reducing, import reducing effects dominate.

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Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 96-03.

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Handle: RePEc:kud:epruwp:96-03

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. Lopez, Ramon & Rodrik, Dani, 1989. "Trade restrictions with imported intermediate inputs : when does the trade balance improve?," Policy Research Working Paper Series 174, The World Bank. [Downloadable!]
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  3. Carsten Kowalczyk, 1990. "Welfare and Customs Unions," NBER Working Papers 3476, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Lopez, Ramon & Panagariya, Arvind, 1992. "On the Theory of Piecemeal Tariff Reform: The Case of Pure Imported Intermediate Inputs," American Economic Review, American Economic Association, vol. 82(3), pages 615-25, June. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. AUGIER Patricia & GAZIOREK Michael & LAITONG Charles, 2004. "The Impact of Rules of Origin On Trade Flows," International Trade 0404001, EconWPA. [Downloadable!]
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  2. Jiandong Ju & Kala Krishna, 1997. "Market Access and Welfare Effects of Piecemeal Policy Reform," NBER Working Papers 6294, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. 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. [Downloadable!]
  4. 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. [Downloadable!] (restricted)
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  5. Uttam Kumar Deb, 2006. "Rules of Origin and Non-Tariff Barriers in Agricultural Trade: Perspectives from Bangladesh and Cambodia," Working Papers 1206, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada.. [Downloadable!]
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