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Rules of origin in north-south preferential trading arrangements with an application to NAFTA

Author

Listed:
  • Jose Anson
  • Olivier Cadot
  • Antoni Estevadeordal
  • Jaime de Melo
  • Akiko Suwa-Eisenmann
  • Bolorma Tumurchudur

Abstract

All preferential trading agreements (PTAs) short of a customs union use rules of origin (ROO) to prevent trade deflection. ROO raise production costs and create administrative costs. This paper argues that in the case of the recent wave of North-South PTAs, the presence of ROO virtually limits the market access that these PTAs confer to the Southern partners. In the case of NAFTA, we find average compliance costs around 6% in ad valorem equivalent, undoing the tariff preference (4% on average) for a large number of tariff lines. Administrative costs amount to 47% of the preference margin. These findings are coherent with the view that North-South PTAs could well be viewed like a principal-agent problem in which the Southern partners are just about left on their participation constraint.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Jose Anson & Olivier Cadot & Antoni Estevadeordal & Jaime de Melo & Akiko Suwa-Eisenmann & Bolorma Tumurchudur, 2004. "Rules of origin in north-south preferential trading arrangements with an application to NAFTA," Research Unit Working Papers 0406, Laboratoire d'Economie Appliquee, INRA.
    • Handle: RePEc:lea:leawpi:0406
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    References listed on IDEAS

    as
    1. Paul Brenton & Miriam Manchin, 2014. "Making EU Trade Agreements Work: The Role of Rules of Origin," World Scientific Book Chapters, in: INTERNATIONAL TRADE, DISTRIBUTION AND DEVELOPMENT Empirical Studies of Trade Policies, chapter 14, pages 299-313, World Scientific Publishing Co. Pte. Ltd..
    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. Patricia Augier & Michael Gasiorek & Charles Lai Tong, 2005. "The impact of rules of origin on trade flows [‘Rules of origin and the EU-Med partnership: the case of textiles’]," Economic Policy, CEPR;CES;MSH, vol. 20(43), pages 568-624.
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    5. Rod Falvey & Geoff Reed, 1998. "Economic effects of rules of origin," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(2), pages 209-229, June.
    6. Aaditya Mattoo & Devesh Roy & Arvind Subramanian, 2003. "The Africa Growth and Opportunity Act and its Rules of Origin: Generosity Undermined?," The World Economy, Wiley Blackwell, vol. 26(6), pages 829-851, June.
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    More about this item

    Keywords

    rules of origin; FTA; NAFTA;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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