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A (More) Systematic Exploration of the Trade Effect of Product-Specific Rules of Origin

Author

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  • Gourdon, Julien
  • Gourdon, Karin
  • de Melo, Jaime

Abstract

Rules of Origin (RoO) are critical components of Preferential Trade Agreements (PTAs). They are designed to stop products coming into a PTA through the partner that applies the lowest tariff – a phenomenon known as trade deflection. While RoO are necessary, complex RoO may undo the benefits of trade agreements. Using a novel database of RoO, this paper evaluates the incidence and restrictiveness of different types of Product-Specific Rules of Origin (PSRs) across 128 reciprocal PTAs for the period 1990–2015. Results, based on a structural gravity model controlling for confounding factors, display wide heterogeneity across different categories of PSRs attached to preferential margins, with more flexible PSRs associated with a significantly stronger trade effect compared to more restrictive ones where exporters do not have a choice among PSRs or have to satisfy multiple PSRs. A simulation exercise reveals that a radical simplification reform leading to the adoption of flexible PSRs providing alternative choices to prove origin would have increased global trade under PTAs on average by between 2.7 and 4% during the sample period.

Suggested Citation

  • Gourdon, Julien & Gourdon, Karin & de Melo, Jaime, 2023. "A (More) Systematic Exploration of the Trade Effect of Product-Specific Rules of Origin," World Trade Review, Cambridge University Press, vol. 22(3-4), pages 421-435, October.
    • Handle: RePEc:cup:wotrrv:v:22:y:2023:i:3-4:p:421-435_12
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    2. Gourdon, Julien & Gourdon, Karin & de Melo, Jaime, 2023. "A (More) Systematic Exploration of the Trade Effect of Product-Specific Rules of Origin," World Trade Review, Cambridge University Press, vol. 22(3-4), pages 421-435, October.
    3. Kaleb Abreha & Raymond Robertson, 2023. "Heterogeneous trade agreements and adverse implications of restrictive rules of origin: Evidence from apparel trade," The World Economy, Wiley Blackwell, vol. 46(12), pages 3482-3510, December.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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