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Protecting Free Trade: The Political Economy of Rules of Origin

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  • Chase, Kerry A.

Abstract

The design of rules of origin in free trade agreements (FTAs) arouses spirited lobbying campaigns that mostly escape public attention. This article argues that the domestic groups generally most favorable to FTAs differ in their preferences over rules of origin: industries with large returns to scale favor strict rules of origin to gain scale economies in an FTA, while industries with multinational supply chains prefer lenient rules of origin to accommodate offshore procurement. An econometric analysis of rules of origin in the North American Free Trade Agreement (NAFTA) finds tougher rules of origin the higher the external trade protection and the larger the returns to scale, and more permissive rules of origin the greater the involvement in foreign sourcing. The results suggest that rules of origin may be critical to building domestic coalitions for FTAs. Industry preferences toward rules of origin therefore have important implications for the politics of FTA ratification.

Suggested Citation

  • Chase, Kerry A., 2008. "Protecting Free Trade: The Political Economy of Rules of Origin," International Organization, Cambridge University Press, vol. 62(3), pages 507-530, July.
    • Handle: RePEc:cup:intorg:v:62:y:2008:i:03:p:507-530_08
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    Cited by:

    1. Lukaszuk, Piotr & Legge, Stefan, 2019. "Which Factors Determine the Utilization of Preferential Tariff Rates?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203639, Verein für Socialpolitik / German Economic Association.
    2. Paola Conconi & Manuel García-Santana & Laura Puccio & Roberto Venturini, 2018. "From Final Goods to Inputs: The Protectionist Effect of Rules of Origin," American Economic Review, American Economic Association, vol. 108(8), pages 2335-2365, August.
    3. Hayakawa, Kazunobu & Mukunoki,Hiroshi & Kimura,Fukunari & Urata,Shujiro, 2023. "Determinants of the rules of origin in regional trade agreements in Asia," IDE Discussion Papers 882, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Antonio Postigo, 2014. "Liberalisation and Protection under Overlapping Free Trade Agreements: Dynamic Interplay between Free Trade Agreements and Investment," The World Economy, Wiley Blackwell, vol. 37(11), pages 1612-1633, November.
    5. Bernard Hoekman & Stefano Inama, 2017. "Rules of Origin as Non-Tariff Measures: Towards Greater Regulatory Convergence," RSCAS Working Papers 2017/45, European University Institute.
    6. Postigo, Antonio, 2014. "Liberalisation and Protection under Overlapping Free Trade Agreements: Dynamic Interplay between Free Trade Agreements and Investment," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 37(11), pages 1612-1633.
    7. İpek Çınar & Robert Gulotty, 2022. "Negotiating exclusion: Regulatory barriers in preferential trade agreements," Economics and Politics, Wiley Blackwell, vol. 34(1), pages 192-220, March.

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