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Free Trade Agreements as Protectionist Devices: Rules of Origin

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Author Info
Anne O. Krueger
Abstract

In this paper it is argued that there is an important protectionist bias inherent in free trade agreements which is not present in custom unions. In any customs union or free trade agreement, one of the critical issues concerns "rules of origin." In a free trade agreement rules of origin have an important function because, without one, each imported commodity would enter through the country with the lowest tariff on each commodity. The criterion for duty-free treatment is important in determining the economic effects of the rule of origin. It is shown that rules of origin in fact extend the protection accorded by each country to producers in other free trade agreement member countries. As such, rules of origin can constitute a source of bias toward economic inefficiency in free trade agreements in a way they cannot do with customs unions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4352.

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Date of creation: May 1993
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Handle: RePEc:nbr:nberwo:4352

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F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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  1. Grossman, Gene M, 1981. "The Theory of Domestic Content Protection and Content Preference," The Quarterly Journal of Economics, MIT Press, vol. 96(4), pages 583-603, November. [Downloadable!] (restricted)
  2. Lawrence H. Summers, 1991. "Regionalism and the world trading system," Proceedings, Federal Reserve Bank of Kansas City, pages 295-301.
  3. Hoekman, Bernard M. & Leidy, Michael P., 1992. "Cascading contingent protection," European Economic Review, Elsevier, vol. 36(4), pages 883-892, May. [Downloadable!] (restricted)
  4. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February. [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!]
    Other versions:
  2. Braga, Carlos A. Primo & Safadi, Raed & Yeats, Alexander, 1994. "NAFTA's Implications for EastAsian exports," Policy Research Working Paper Series 1351, The World Bank. [Downloadable!]
  3. Kyle Bagwell & Robert W. Staiger, 1993. "Multilateral Tariff Cooperation during the Formation of Customs Unions," NBER Working Papers 4543, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. 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. [Downloadable!] (restricted)
  5. Mattoo, Aaditya & Roy, Devesh & Subramanian, Arvind, 2002. "The Africa Growth and Opportunity Act and its rules of origin : generosity undermined?," Policy Research Working Paper Series 2908, The World Bank. [Downloadable!]
    Other versions:
  6. Richard Baldwin, 2007. "Multilateralising Regionalism: Sphagetti Bowls as building Blocs on the Path to Global Free Trade," Working Papers id:1231, esocialsciences.com. [Downloadable!]
    Other versions:
  7. W. Sawyer, 2001. "NAFTA as a Means of Raising Rivals' Costs: A Comment," Review of Industrial Organization, Springer, vol. 18(1), pages 127-131, February. [Downloadable!] (restricted)
  8. Medalla, Erlinda, 2008. "Rules of Origin: Regimes in East Asia and Recommendations for Best Practice," Discussion Papers DP 2008-19, Philippine Institute for Development Studies. [Downloadable!]
  9. Gene M. Grossman & Elhanan Helpman, 1993. "The Politics of Free Trade Agreements," NBER Working Papers 4597, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Lazaro, Dorothea C. & Medalla, Erlinda, 2006. "Rules of Origin: Evolving Best Practices for RTAs/FTAs," Discussion Papers DP 2006-01, Philippine Institute for Development Studies. [Downloadable!]
  11. Busse, Matthias & Huth, Matthias & Koopmann, Georg, 2000. "Preferential Trade Agreements: The Case of EU-Mexico," Discussion Paper Series 26269, Hamburg Institute of International Economics. [Downloadable!]
  12. Kyle Bagwell & Robert Staiger, 1994. "Multilateral Tariff Cooperation During the Formation of Regional Free Trade Areas," International Trade 9410001, EconWPA. [Downloadable!]
    Other versions:
  13. Kyoji Fukao & Toshihiro Okubo & Robert M. Stern, 2002. "An Econometric Analysis of Trade Diversion under NAFTA," Discussion papers 02011, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
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  14. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Arvind Panagariya, 2003. "The Regionalism Debate: An Overview," International Trade 0309007, EconWPA. [Downloadable!]
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  16. Inkyo CHEONG & Jungran CHO, 2007. "Market Access in FTAs: Assessment Based on Rules of Origin and Agricultural Trade Liberalization," Discussion papers 07016, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  17. Dinopoulos, Elias & Livanis, Grigorios & West, Carol, 2005. "How Cool is C.O.O.L.?," Working Papers 15658, University of Florida, International Agricultural Trade and Policy Center. [Downloadable!]
  18. David Orden, 1994. "Agricultural Interest Groups and the North American Free Trade Agreement," NBER Working Papers 4790, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  19. Medalla, Erlinda & Supperamaniam, M., 2008. "Suggested Rules of Origin Regime for EAFTA," Discussion Papers DP 2008-22, Philippine Institute for Development Studies. [Downloadable!]
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