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Economic Integration and Rules of Origin Under International Oligopoly

In: Strategic Trade Policy

Author

Listed:
  • Jota Ishikawa
  • Hiroshi Mukunoki
  • Yoshihiro Mizoguchi

Abstract

Free trade agreements (FTAs) have rules of origin (ROOs) to prevent tariff circumvention by firms of nonmember countries. This chapter points out that in imperfectly competitive markets, ROOs have another role overlooked in the existing literature. Instead of focusing on the impacts of ROOs in the intermediate-good markets, we draw our attention to the final-good markets to examine the effects of ROOs. We find that under some conditions, ROOs benefit both firms at the expense of consumers. Under some other conditions, ROOs benefit the firm producing outside the FTA and hurt the firm producing inside the FTA.

Suggested Citation

  • Jota Ishikawa & Hiroshi Mukunoki & Yoshihiro Mizoguchi, 2026. "Economic Integration and Rules of Origin Under International Oligopoly," World Scientific Book Chapters, in: Strategic Trade Policy, chapter 6, pages 115-151, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789819805921_0006
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    2. Hiroshi Mukunoki & Hirofumi Okoshi, 2021. "Tariff elimination versus tax avoidance: free trade agreements and transfer pricing," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(5), pages 1188-1210, October.
    3. Sung Hee Lee & Kun Soo Park & Yong Won Seo, 2016. "Multinational Firm’s Production Decisions under Overlapping Free Trade Agreements: Rule of Origin Requirements and Environmental Regulation," Sustainability, MDPI, vol. 9(1), pages 1-16, December.
    4. Jiandong Ju & Kala Krishna, 2005. "Firm behaviour and market access in a Free Trade Area with rules of origin," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 290-308, February.
    5. Mizuno, Tomomichi & Takauchi, Kazuhiro, 2013. "Rules of origin and uncertain cost of compliance," MPRA Paper 44431, University Library of Munich, Germany.
    6. Hiroshi Mukunoki, 2017. "The welfare effect of a free trade agreement in the presence of foreign direct investment and rules of origin," Review of International Economics, Wiley Blackwell, vol. 25(4), pages 733-759, September.
    7. Jinji, Naoto & Mizoguchi, Yoshihiro, 2016. "Rules of origin and technology spillovers from foreign direct investment under international duopoly," Japan and the World Economy, Elsevier, vol. 40(C), pages 47-60.
    8. Huria, Sugandha, 2020. "Gains from Free Trade Agreements: A Theoretical Analysis," MPRA Paper 109815, University Library of Munich, Germany.
    9. Hiroshi Mukunoki & Hirofumi Okoshi, 2021. "Rules of origin and consumer‐hurting free trade agreements," The World Economy, Wiley Blackwell, vol. 44(8), pages 2303-2318, August.
    10. Naoto Jinji & Yoshihiro Mizoguchi, 2016. "Optimal Rules of Origin with Asymmetric Compliance Costs under International Duopoly," Journal of Industry, Competition and Trade, Springer, vol. 16(1), pages 1-24, March.
    11. Hiroshi MUKONOKI, 2013. "On the Welfare Effect of FTAs in the Presence of FDIs and Rules of Origin," Discussion papers 13053, Research Institute of Economy, Trade and Industry (RIETI).
    12. Jota Ishikawa & Eiji Horiuchi, 2012. "Strategic Foreign Direct Investment in Vertically Related Markets," The Economic Record, The Economic Society of Australia, vol. 88(281), pages 229-242, June.
    13. Chang, Yang-Ming & Xiao, Renfeng, 2015. "Preferential trade agreements between asymmetric countries: Free trade areas (with rules of origin) vs. customs unions," Japan and the World Economy, Elsevier, vol. 33(C), pages 28-43.
    14. Kazuhiro Takauchi, 2014. "Rules of Origin and Strategic Choice of Compliance," Journal of Industry, Competition and Trade, Springer, vol. 14(2), pages 287-302, June.
    15. Hiroshi Mukunoki & Hirofumi Okoshi, 2025. "Wake Not a Sleeping Lion: Free Trade Agreements and Decision Rights in Multinationals," Review of International Economics, Wiley Blackwell, vol. 33(3), pages 505-518, August.

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F1 - International Economics - - Trade
    • F10 - International Economics - - Trade - - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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