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Diagonal Cumulation and Sourcing Decisions

Author

Listed:
  • Pamela Bombarda
  • Elisa Gamberoni

    (Université de Cergy-Pontoise, THEMA)

Abstract

Free trade agreements (FTAs) are characterized by rules of origin (RoO) and cumula- tion. These rules define which intermediate goods allow a final product to qualify for preferential access. Recent literature shows that RoO led to a reduction in imports of intermediate goods from third countries relative to partners. We consider the impact of the Pan-European Cumulation System (PECS), which provided the possibility of cumulating stages of production across European Union's FTA peripheral partners. We find that PECS reshaped regional supply chains by increasing imports of inter- mediates among these peripheral countries relative to both the European Union (EU) and third countries. We also find that PECS reinforced their value chain links with third countries relative to the EU, contributing to multilateralize regionalism.

Suggested Citation

  • Pamela Bombarda & Elisa Gamberoni, 2020. "Diagonal Cumulation and Sourcing Decisions," THEMA Working Papers 2020-03, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  • Handle: RePEc:ema:worpap:2020-03
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    Keywords

    Intermediate Trade; rules of origin; diagonal cumulation; PECS; input-output tables.;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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