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Are Different Rules of Origin Equally Costly? Estimates from NAFTA

Author

Listed:
  • Céline CARRERE

    () (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Jaime MELO DE

Abstract

Preferential market access, either in the recent OECD initiatives or in the North-South FTAs require the use of rules of origin (RoO). Recent studies have questioned the extent of market access provided by these preferences. Using data on Mexican exports to the US in 2001, this paper estimates the likely costs of different RoO for final and intermediate goods, and compares these results with those obtained from a synthetic index. Econometric results are plausible (they satisfy the revealed preference criterion that estimated costs of RoO should be less than preference rates when utilization rates of NAFTA preference are significantly positive), and they indicate that changes in tariff classification are more costly for final goods than for intermediate goods. For activities subject to regional value content minima, we carry out illustrative simulations indicating what tariff preference margin would be necessary to compensate for the import content minima. Overall, our cost estimates suggest, that at least in the case of NAFTA, preferential market access was quite small, leading us to speculate that these conclusions may carry over to other North-South preferential schemes.

Suggested Citation

  • Céline CARRERE & Jaime MELO DE, 2004. "Are Different Rules of Origin Equally Costly? Estimates from NAFTA," Working Papers 200412, CERDI.
  • Handle: RePEc:cdi:wpaper:610
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    References listed on IDEAS

    as
    1. Aaditya Mattoo & Devesh Roy & Arvind Subramanian, 2003. "The Africa Growth and Opportunity Act and its Rules of Origin: Generosity Undermined?," The World Economy, Wiley Blackwell, vol. 26(6), pages 829-851, June.
    2. Paul Brenton & Miriam Manchin, 2003. "Making EU Trade Agreements Work: The Role of Rules of Origin," The World Economy, Wiley Blackwell, vol. 26(5), pages 755-769, May.
    3. Patricia Augier & Michael Gasiorek & Charles Lai Tong, 2005. "The impact of rules of origin on trade flows," Economic Policy, CEPR;CES;MSH, vol. 20(43), pages 567-624, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Rules of Origin; Costs; NAFTA.;

    JEL classification:

    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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