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Rules of origin for preferential trading arrangements : implications for the ASEAN Free Trade Area of EU and U.S. experience

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Author Info

  • Cadot, Olivier
  • de Melo, Jaime
  • Portugal-Perez, Alberto

Abstract

With free trade areas (FTAs) undernegotiation between Japan and the ASEAN Free Trade Area (AFTA) members and between the Republic of Korea and AFTA members, preferential market access will become more important in Asian regionalism. Protectionist pressures will likely increase through rules of origin, the natural outlet for these pressures. Based on the experience of the European Union and the United States with rules of origin, the authors argue that, should these FTAs follow in the footsteps of the EU and the U.S. and adopt similar rules of origin, trading partners in the region would incur unnecessary costs. Using EU trade under the Generalized System of Preferences with Africa, Caribbean, and Pacific partners, the authors estimate how the use of preferences would likely change if AFTA were to veer away from its current uniform rules of origin requiring a 40 percent local content rate. Depending on the sample used, a 10 percentage point reduction in the local value content requirement is estimated to increase the utilization rate of preferences by between 2.5 and 8.2 percentage points.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4016.

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Date of creation: 01 Sep 2006
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Handle: RePEc:wbk:wbrwps:4016

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Keywords: Free Trade; Rules of Origin; Trade and Regional Integration; Economic Theory&Research; Trade Policy;

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References

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  1. Miriam Manchin, 2004. "Preference Utilisation and Tariff Reduction in EU Imports from ACP Countries," Tinbergen Institute Discussion Papers 04-132/2, Tinbergen Institute.
  2. José Anson & Olivier Cadot & Antoni Estevadeordal & Jaime de Melo & Akiko Suwa-Eisenmann & Bolormaa Tumurchudur, 2005. "Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 501-517, 08.
  3. Avinash K. Dixit & Gene M. Grossman, 1981. "Trade and Protection with Multistage Production," NBER Working Papers 0794, National Bureau of Economic Research, Inc.
  4. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
  5. Dayaratna, Banda O.G. & Whalley, John, 2005. "Beyond Goods and Services: Competition Policy, Investment, Mutual Recognition, Movement of Persons, and Broader Cooperation Provisions of Recent FTAs Involving ASEAN Countries," Working Papers 24153, Canadian Agricultural Trade Policy Research Network.
  6. Marcelo Olarreaga & Çaglar Özden, 2005. "AGOA and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access?," The World Economy, Wiley Blackwell, vol. 28(1), pages 63-77, 01.
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Cited by:
  1. DeMaria, Federica & Drogue, Sophie & Matthews, Alan, 2008. "Agro-Food Preferences in the EU's GSP Scheme: An Analysis of Changes between 2004 and 2006," Working Papers 6151, TRADEAG - Agricultural Trade Agreements.
  2. Portugal-Perez, Alberto & Wilson, John S., 2008. "Why trade facilitation matters to Africa ?," Policy Research Working Paper Series 4719, The World Bank.
  3. Innwon Park & Soonchan Park, 2011. "Best practices for regional trade agreements," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(2), pages 249-268, June.
  4. Ram Upendra Das, 2010. "Rules of Origin under Regional Trade Agreements," Trade Working Papers 22791, East Asian Bureau of Economic Research.
  5. Masahiro Kawai & Ganeshan Wignaraja, 2009. "The Asian “Noodle Bowl”:Is It Serious for Business?," Working Papers id:1936, eSocialSciences.

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