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Rules of Origin as Export Subsidies

  • Cadot, Olivier
  • Estevadeordal, Antoni
  • Suwa Eisenmann, Akiko

The paper estimates the effect of NAFTA’s rules of origin (ROO) on Mexican access to the US market treating explicitly the endogenous determination of ROOs. The first equation determines Mexico’s NAFTA (preferential) exports to the US as a function of tariff preference and Estevadeordal’s qualitative ROO index. The second equation determines ROO strictness on the basis of a Grossman-Helpman model identifying channels through which lobbying by US intermediate-good producers leads to deep preferences and stiff rules of origin in downstream sectors. The estimates suggest that the creation of a captive market for upstream intermediate-good producers is indeed one of their political determinants.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4999.

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Date of creation: Apr 2005
Date of revision:
Handle: RePEc:cpr:ceprdp:4999
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  1. Grossman, G.M. & Helpman, E., 1993. "The Politics of Free Trade Agreements," Papers 14-93, Tel Aviv.
  2. Arvind Panagariya & Rupa Dutta Gupta, 2003. "Free Trade Areas and Rules of Origin: Economics and Politics," International Trade 0308006, EconWPA.
  3. Jiandong Ju & Kala Krishna, 1998. "Firm Behavior and Market Access in a Free Trade Area with Rules of Origin," NBER Working Papers 6857, National Bureau of Economic Research, Inc.
  4. Peter L. Rodriguez, 2001. "Rules of Origin with Multistage Production," The World Economy, Wiley Blackwell, vol. 24(2), pages 201-220, 02.
  5. P. J. Lloyd, 1993. "A Tariff Substitute for Rules of Origin in Free Trade Areas," The World Economy, Wiley Blackwell, vol. 16(6), pages 699-712, November.
  6. Hanson, Gordon H, 1996. "Localization Economies, Vertical Organization, and Trade," American Economic Review, American Economic Association, vol. 86(5), pages 1266-78, December.
  7. Stephen Ansolabehere & John M. de Figueiredo & James M. Snyder, 2003. "Why Is There So Little Money in Politics?," NBER Working Papers 9409, National Bureau of Economic Research, Inc.
  8. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
  9. Avinash K. Dixit & Gene M. Grossman, 1981. "Trade and Protection with Multistage Production," NBER Working Papers 0794, National Bureau of Economic Research, Inc.
  10. 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, 08.
  11. 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.
  12. Rod Falvey & Geoff Reed, 1998. "Economic effects of rules of origin," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(2), pages 209-229, June.
  13. repec:oup:restud:v:49:y:1982:i:4:p:583-94 is not listed on IDEAS
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