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Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA

Author

Listed:
  • Anson, José
  • Cadot, Olivier
  • de Melo, Jaime
  • Estevadeordal, Antoni
  • Suwa Eisenmann, Akiko
  • Tumurchudur, Bolormaa

Abstract

All preferential trading agreements (PTAs) short of a customs union use Rules of Origin (RoO) to prevent trade deflection. RoO raise production costs and create administrative costs. This Paper argues that in the case of the recent wave of North-South PTAs, the presence of RoO virtually limits the market access that these PTAs confer to the Southern partners. In the case of NAFTA, it is estimated that up to 40% of Mexico’s preferential access to the US market in 2000 (estimated at 5%) was absorbed by RoO-related administrative costs with non-administrative costs for Mexican firms of about 3% US of import value. These findings are coherent with the view that North-South PTAs could well be viewed like a principal-agent problem in which the Southern partners are just about left on their participation constraint.

Suggested Citation

  • Anson, José & Cadot, Olivier & de Melo, Jaime & Estevadeordal, Antoni & Suwa Eisenmann, Akiko & Tumurchudur, Bolormaa, 2003. "Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA," CEPR Discussion Papers 4166, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4166
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    References listed on IDEAS

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    1. Rod Falvey & Geoff Reed, 1998. "Economic effects of rules of origin," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(2), pages 209-229, 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. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    4. 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.
    5. 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.
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    More about this item

    Keywords

    FTAs; NAFTA; rules of origin;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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