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Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA

  • José Anson
  • Olivier Cadot
  • Antoni Estevadeordal
  • Jaime de Melo
  • Akiko Suwa-Eisenmann
  • Bolormaa Tumurchudur

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. Copyright Blackwell Publishing Ltd 2005..

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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 13 (2005)
Issue (Month): 3 (08)
Pages: 501-517

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Handle: RePEc:bla:reviec:v:13:y:2005:i:3:p:501-517
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  1. Paul Brenton & Miriam Manchin, 2002. "Making EU Trade Agreements Work: The Role of Rules of Origin," International Trade 0203003, EconWPA.
  2. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  3. Rod Falvey & Geoff Reed,, . "Economic Effects of Rules of Origin," Discussion Papers 97/21, University of Nottingham, CREDIT.
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