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Dispensing with NAFTA Rules of Origin? Some Policy Options for Canada

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  • Patrick Georges

    ()
    (Department of Economics, University of Ottawa)

Abstract

Increased market access from Free Trade Agreements (FTAs) promised by policy makers is often diluted by preferential rules of origin (ROO). This paper discusses two policy options one direct, and one indirect -- with regard to limiting the impact of NAFTA ROO on trade, and illustrates the impact on GDP and welfare of these options using a computable general equilibrium methodology. The first (direct) option, moving toward a North American Customs Union (CU) instead of the current NAFTA, would basically eliminate the need for preferential ROO among members of the CU. The second (indirect) policy option is to pursue multilateral trade negotiations and reduce MFN tariffs towards zero. In this context, NAFTA ROO would lack both relevance and impact, even if they remained on the books, because tariff preference utilization among NAFTA members would virtually disappear. The current stalemate at the WTO Doha round suggests that a North American CU remains a serious policy option. However, the erosion of NAFTA tariff preferences since the phase-in of the Uruguay round has also reduced the distortionary impacts of NAFTA ROO, somewhat limiting the gains that a CU could bring.

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Bibliographic Info

Paper provided by University of Ottawa, Department of Economics in its series Working Papers with number 0904E.

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Length: 40 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:ott:wpaper:0904e

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Related research

Keywords: Trade Agreement; Customs Union; Rules of Origin; Multilateral Free Trade Computable General Equilibrium Modeling;

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References

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  1. Richard Pomfret, 2007. "Is Regionalism an Increasing Feature of the World Economy?," The World Economy, Wiley Blackwell, vol. 30(6), pages 923-947, 06.
  2. 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.
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  6. Anne O. Krueger, 1993. "Free Trade Agreements as Protectionist Devices: Rules of Origin," NBER Working Papers 4352, National Bureau of Economic Research, Inc.
  7. 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.
  8. William B.P. Robson, 2007. "Stuck on a Spoke: Proliferating Bilateral Trade Deals are a Dangerous Game for Canada," e-briefs 47, C.D. Howe Institute.
  9. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
  10. Anson, José & Cadot, Olivier & de Melo, Jaime & Estevadeordal, Antoni & Suwa Eisenmann, Akiko & Tumurchudur, Bolormaa, 2003. "Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA," CEPR Discussion Papers 4166, C.E.P.R. Discussion Papers.
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  12. Karl Meilke & James Rude & Steven Zahniser, 2008. "Is 'NAFTA Plus' an Option in the North American Agrifood Sector?," The World Economy, Wiley Blackwell, vol. 31(7), pages 925-946, 07.
  13. Ghosh, Madanmohan & Rao, Someshwar, 2005. "A Canada-U.S. customs union: Potential economic impacts in NAFTA countries," Journal of Policy Modeling, Elsevier, vol. 27(7), pages 805-827, October.
  14. Cadot, Olivier & Estevadeordal, Antoni & Suwa-Eisenmann, Akiko & Verdier, Thierry (ed.), 2006. "The Origin of Goods: Rules of Origin in Regional Trade Agreements," OUP Catalogue, Oxford University Press, number 9780199290482.
  15. Olivier Cadot & Jaime de Melo & Antoni Estevadeordal & Akiko Suwa-Eisenmann & Bolormaa Tumurchudur, 2002. "Assessing the effect of NAFTA's rules of origin," Research Unit Working Papers 0306, Laboratoire d'Economie Appliquee, INRA.
  16. Patrick Georges, 2008. "Liberalizing NAFTA Rules of Origin: A Dynamic CGE Analysis," Review of International Economics, Wiley Blackwell, vol. 16(4), pages 672-691, 09.
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Cited by:
  1. Patrick Georges & Marcel Mérette & Aylin Seckin§, 2009. "Should Canada Diversify its Trade Pattern? An Overlapping- Generations CGE Analysis of Trade and Ageing," Working Papers 0906E, University of Ottawa, Department of Economics.

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