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Rules of Origin as Export Subsidies

Author

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

Abstract

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.

Suggested Citation

  • Cadot, Olivier & Estevadeordal, Antoni & Suwa Eisenmann, Akiko, 2005. "Rules of Origin as Export Subsidies," CEPR Discussion Papers 4999, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4999
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    References listed on IDEAS

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    1. 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, August.
    2. 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.
    3. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-690, September.
    4. 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.
    5. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
    6. 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.
    7. 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.
    8. 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.
    9. Avinash K. Dixit & Gene M. Grossman, 1982. "Trade and Protection with Multistage Production," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 583-594.
    10. Hanson, Gordon H, 1996. "Localization Economies, Vertical Organization, and Trade," American Economic Review, American Economic Association, vol. 86(5), pages 1266-1278, December.
    11. Rupa Duttagupta & Arvind Panagariya, 2007. "Free Trade Areas And Rules Of Origin: Economics And Politics," Economics and Politics, Wiley Blackwell, vol. 19(2), pages 169-190, July.
    12. Peter L. Rodriguez, 2001. "Rules of Origin with Multistage Production," The World Economy, Wiley Blackwell, vol. 24(2), pages 201-220, February.
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    Citations

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    Cited by:

    1. Portugal-Perez, Alberto, 2009. "Assessing the impact of political economy factors on rules of origin under NAFTA," Policy Research Working Paper Series 4848, The World Bank.
    2. Rupa Duttagupta & Arvind Panagariya, 2007. "Free Trade Areas And Rules Of Origin: Economics And Politics," Economics and Politics, Wiley Blackwell, vol. 19(2), pages 169-190, July.
    3. Kevin Gallagher, 2011. "Trading Away Stability and Growth: United States Trade Agreements in Latin America," Working Papers wp266, Political Economy Research Institute, University of Massachusetts at Amherst.
    4. Davies, Ronald B., 2013. "The silver lining of red tape," Journal of Public Economics, Elsevier, vol. 101(C), pages 68-76.
    5. Roberta Piermartini & Patrick Low & Jurgen Richtering, 2005. "Multilateral Solutions to the Erosion of Non-Reciprocal Preferences in NAMA," Working Papers id:289, eSocialSciences.
    6. Biswajit Nag & Debdeep De, 2011. "Rules of origin and development of regional production network in Asia: case studies of selected industries," Working Papers 10111, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    7. Michael Ferrantino, 2006. "Quantifying the Trade and Economic Effects of Non-Tariff Measures," OECD Trade Policy Papers 28, OECD Publishing.

    More about this item

    Keywords

    NAFTA; regional integration; rules of Origin;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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