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

Author

Listed:
  • Paola Conconi
  • Manuel Garcia-Santana
  • Laura Puccio
  • Roberto Venturini

Abstract

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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Suggested Citation

  • Paola Conconi & Manuel Garcia-Santana & Laura Puccio & Roberto Venturini, 2016. "From Final Goods to Inputs: the Protectionist Effect of Rules of Origin," Working Papers ECARES ECARES 2016-04, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2013/225345
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    References listed on IDEAS

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    Cited by:

    1. Conconi, Paola & Schepel, Harm, 2017. "Argentina–Import Measures: How a Porsche is worth Peanuts," World Trade Review, Cambridge University Press, vol. 16(02), pages 349-369, April.
    2. Jaime DE MELO & Ben SHEPHERD, 2018. "The Economics of Non-Tariff Measures: A Primer," Working Papers P212, FERDI.
    3. Teti, Feodora & Felbermayr, Gabriel & Yalcin, Erdal, 2017. "Free Trade Agreements, Customs Unions In Disguise?," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168243, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    trade agreements; rules of origin; input-output linkages;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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