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Toward a North American customs union: Rules of origin liberalization matters more than a common external tariff for Canada


  • Georges, Patrick


This paper shows that the general equilibrium impacts on Canadian GDP and welfare, of liberalizing NAFTA Rules of Origin (ROO), largely dominate the small effects of adopting a Common North American External Tariff (CET). Therefore, proposals for a North American CU should not be dismissed solely on the basis that a CET would marginally affect Canada while the negotiation process with the U.S. would be long and difficult--ROO liberalization matters more than a CET for Canada.

Suggested Citation

  • Georges, Patrick, 2008. "Toward a North American customs union: Rules of origin liberalization matters more than a common external tariff for Canada," The North American Journal of Economics and Finance, Elsevier, vol. 19(3), pages 304-318, December.
  • Handle: RePEc:eee:ecofin:v:19:y:2008:i:3:p:304-318

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    References listed on IDEAS

    1. 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, August.
    2. Joseph Francois, 2005. "Preferential Trade Arrangements and the Pattern of Production and Trade when Inputs are Differentiated," The Institute for International Integration Studies Discussion Paper Series iiisdp86, IIIS.
    3. Anne O. Krueger, 1993. "Free Trade Agreements as Protectionist Devices: Rules of Origin," NBER Working Papers 4352, 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. Krueger, Anne O., 1997. "Free trade agreements versus customs unions," Journal of Development Economics, Elsevier, vol. 54(1), pages 169-187, October.
    6. Mercenier, Jean, 1995. "Nonuniqueness of Solutions in Applied General Equilibrium Models with Scale Economies and Imperfect Competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(1), pages 161-177, June.
    7. Kala Krishna & Anne Krueger, 1995. "Implementing Free Trade Areas: Rules of Origin and Hidden Protection," NBER Working Papers 4983, National Bureau of Economic Research, Inc.
    8. Drusilla K. Brown & Alan V. Deardorff & Robert M Stern, 2001. "Impacts on NAFTA Members of Multilateral and Regional Trading Arrangements and Initiatives and Harmonization of NAFTA's External Tariffs," Working Papers 471, Research Seminar in International Economics, University of Michigan.
    9. 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.
    10. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, January.
    11. Panagariya, Arvind & Krishna, Pravin, 2002. "On necessarily welfare-enhancing free trade areas," Journal of International Economics, Elsevier, vol. 57(2), pages 353-367, August.
    12. 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.
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    Cited by:

    1. Patrick Georges, 2012. "Trade Diversification Away from the U.S. or North American Customs Union? A Review of Canada’s Trade Policy Options," Working Papers 1205E, University of Ottawa, Department of Economics.

    More about this item


    NAFTA Customs union Rules of origin Common external tariff Computable general equilibrium;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration


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