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Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA

Author

Listed:
  • Anton Anson

    (HEC Lausanne - Faculté des Hautes Etudes Commerciales (HEC Lausanne))

  • Olivier Cadot

    (Institut d'Economie Appliquée - UNIL - Université de Lausanne)

  • Antoni Estevadeordal

    (IDB - Inter-American Development Bank - Inter-American Development Bank)

  • Jaime De Melo

    (UNIGE - Université de Genève)

  • Akiko Suwa-Eisenmann

    (LEA - Laboratoire d'Economie Appliquée - INRA - Institut National de la Recherche Agronomique)

  • Bolormaa Tumurchudur

    (HEC Lausanne - Faculté des Hautes Etudes Commerciales (HEC Lausanne))

Abstract

All preferential trading agreements (PTAs) short of a customs union use rules of origin (ROO) to prevent trade deflection. ROO raise production costs and create administrative costs. This paper argues that in the case of the recent wave of North-South PTAs, the presence of ROO virtually limits the market access that these PTAs confer to the Southern partners. In the case of NAFTA, we find average compliance costs around 6% in ad valorem equivalent, undoing the tariff preference (4% on average) for a large number of tariff lines. Administrative costs amount to 47% of the preference margin. These findings are coherent with the view that North-South PTAs could well be viewed like a principal-agent problem in which the Southern partners are just about left on their participation constraint.

Suggested Citation

  • Anton 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," Post-Print halshs-00849586, HAL.
  • Handle: RePEc:hal:journl:halshs-00849586 DOI: 10.1111/j.1467-9396.2005.00520.x Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00849586
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    References listed on IDEAS

    as
    1. Paul Brenton & Miriam Manchin, 2003. "Making EU Trade Agreements Work: The Role of Rules of Origin," The World Economy, Wiley Blackwell, vol. 26(5), pages 755-769, May.
    2. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    3. 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.
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    More about this item

    Keywords

    Preferential trading agreements (PTAs);

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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