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Multilateralising Regionalism: Relaxing the Rules of Origin Or Can Those Pecs Be Flexed?

  • Patricia Augier
  • Michael Gasiorek


  • Charles Lai-Tong

    (Centre for the Analysis of Regional Integration at Sussex, Department of Economics, University of Sussex)

In this paper we first explain why rules of origin are a necessary feature of preferential trading arrangements, but why they also serve to distort trade and can therefore be used for protectionist purposes, and why they have a powerful natural impetus towards strengthening the spaghetti bowl effect in international trade. Secondly, we then examine the impact of the relaxation of the potential constraining impact of rules of origin in the European context which was achieved through the introduction of the Pan-European Cumulation system (PECS). We provide empirical evidence at both the aggregate and sectoral level which reveals the positive impact of the relaxation of rules of origin via the introduction of “diagonal cumulation” arrangements between the EU and its’ trading partners. Thirdly, the discussion turns to a consideration of appropriate policy options designed both to minimise the spaghetti bowl effect, and to maximise the benefits from regionalism for developing countries.

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Paper provided by Centre for the Analysis of Regional Integration at Sussex, University of Sussex in its series CARIS Working Papers with number 03.

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Length: 28 pages
Date of creation: Sep 2007
Date of revision:
Handle: RePEc:ari:wpaper:03
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  12. Panagariya, Arvind & Krishna, Pravin, 2002. "On necessarily welfare-enhancing free trade areas," Journal of International Economics, Elsevier, vol. 57(2), pages 353-367, August.
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  14. Deardorff, Alan V, 2001. "International Provision of Trade Services, Trade, and Fragmentation," Review of International Economics, Wiley Blackwell, vol. 9(2), pages 233-48, May.
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  18. I-Hui Cheng & Howard J. Wall, 2004. "Controlling for heterogeneity in gravity models of trade and integration," Working Papers 1999-010, Federal Reserve Bank of St. Louis.
  19. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
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  22. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
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