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From Final Goods to Inputs: the Protectionist Effect of Rules of Origin

Listed author(s):
  • Paola Conconi
  • Manuel Garcia-Santana
  • Laura Puccio
  • Roberto Venturini

Recent decades have witnessed a surge of trade in intermediate goods and a proliferation of free trade agreements (FTAs). FTAs use rules of origin (RoO) to distinguish goods originating from member countries from those originating from third countries. In this paper, we show that the sourcing restrictions embedded in RoO greatly distort trade in intermediaries. We focus on the North American Free Trade Agreement (NAFTA), the world's largest FTA, and construct a unique dataset that allows us to map the input-output linkages in its RoO. Using a difference-in-differences approach, we find that RoO on final goods reduced imports of intermediate goods from third countries by around 30 percentage points. Even if external tariffs are unchanged, FTAs may thus violate multilateral trade rules, by substantially increasing the level of protection faced by non-members.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number ECARES 2016-04.

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Length: 39 p.
Date of creation: Jan 2016
Publication status: Published by:
Handle: RePEc:eca:wpaper:2013/225345
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  1. Pol Antras & Davin Chor & Thibault Fally & Russell Hillberry, 2012. "Measuring the Upstreamness of Production and Trade Flows," American Economic Review, American Economic Association, vol. 102(3), pages 412-416, May.
  2. Bown, Chad P. & Crowley, Meredith A., 2006. "Policy externalities: How US antidumping affects Japanese exports to the EU," European Journal of Political Economy, Elsevier, vol. 22(3), pages 696-714, September.
  3. Timothy J. Kehoe & Kim J. Ruhl, 2013. "How Important Is the New Goods Margin in International Trade?," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 358-392.
  4. Pamela Bombarda & Elisa Gamberoni, 2013. "Firm Heterogeneity, Rules Of Origin, And Rules Of Cumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(1), pages 307-328, 02.
  5. Pol Antràs & Teresa C. Fort & Felix Tintelnot, 2014. "The Margins of Global Sourcing: Theory and Evidence from U.S. Firms," NBER Working Papers 20772, National Bureau of Economic Research, Inc.
  6. Olivier Cadot & Antoni Estevadeordal & Akiko Suwa-Eisenmann & Thierry Verdier, 2006. "The Origin of Goods: Rules of Origin in Regional Trade Agreements," Post-Print halshs-00754856, HAL.
  7. Sébastien Miroudot & Rainer Lanz & Alexandros Ragoussis, 2009. "Trade in Intermediate Goods and Services," OECD Trade Policy Papers 93, OECD Publishing.
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