IDEAS home Printed from https://ideas.repec.org/p/koe/wpaper/1013.html
   My bibliography  Save this paper

Rules of Origin and Strategic Choice of Compliance

Author

Listed:
  • Kazuhiro Takauchi

    () (Graduate School of Economics, Kobe University)

Abstract

We consider exporters' strategic choice of whether to comply with rules of origin (ROO) in a free trade area (FTA). While the existing literature of ROO considers models of perfect or monopolistic competition, we consider an oligopolistic trade model. Our model consists of three final-good producers - one in an importing country and two in an exporting country - and one intermediategood producer, which is in the importing country and has monopoly power. We show that, within the range of parameter values for which some exporters comply with ROO, the content rate affects the output of the final-good producer in the importing country and the country's social welfare in an U-shaped fashion. The content rate levels that allow the coexistence of compliers and non-compliers minimize social welfare.

Suggested Citation

  • Kazuhiro Takauchi, 2010. "Rules of Origin and Strategic Choice of Compliance," Discussion Papers 1013, Graduate School of Economics, Kobe University.
  • Handle: RePEc:koe:wpaper:1013
    as

    Download full text from publisher

    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2010/1013.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    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. A. Mukherjee & U. Broll & S. Mukherjee, 2008. "Unionized labor market and licensing by a monopolist," Journal of Economics, Springer, vol. 93(1), pages 59-79, February.
    3. Kazunobu Hayakawa & Daisuke Hiratsuka & Kohei Shiino & Seiya Sukegawa, 2013. "Who Uses Free Trade Agreements?," Asian Economic Journal, East Asian Economic Association, vol. 27(3), pages 245-264, September.
    4. Lopez-de-Silanes, Florencio & Markusen, James R. & Rutherford, Thomas F., 1996. "Trade policy subtleties with multinational firms," European Economic Review, Elsevier, vol. 40(8), pages 1605-1627, November.
    5. Lahiri, Sajal & Ono, Yoshiyasu, 1998. "Foreign Direct Investment, Local Content Requirement, and Profit Taxation," Economic Journal, Royal Economic Society, vol. 108(447), pages 444-457, March.
    6. Demidova, Svetlana & Krishna, Kala, 2008. "Firm heterogeneity and firm behavior with conditional policies," Economics Letters, Elsevier, vol. 98(2), pages 122-128, February.
    7. Rod Falvey & Geoff Reed, 2002. "Rules of Origin as Commercial Policy Instruments," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 393-408, May.
    8. Sajal Lahiri & Yoshiyasu Ono, 2003. "Export-Oriented Foreign Direct Investment and Local Content Requirement," Pacific Economic Review, Wiley Blackwell, vol. 8(1), pages 1-14, January.
    9. 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.
    10. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    11. Jota Ishikawa & Hiroshi Mukunoki & Yoshihiro Mizoguchi, 2007. "Economic Integration And Rules Of Origin Under International Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 185-210, February.
    12. 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.
    13. Arijit Mukherjee & Udo Broll & Soma Mukherjee, 2009. "The welfare effects of entry: the role of the input market," Journal of Economics, Springer, vol. 98(3), pages 189-201, December.
    14. Mizuno, Tomomichi & Takauchi, Kazuhiro, 2013. "Rules of origin and uncertain cost of compliance," MPRA Paper 44431, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Naoto Jinji & Yoshihiro Mizoguchi, 2016. "Optimal Rules of Origin with Asymmetric Compliance Costs under International Duopoly," Journal of Industry, Competition and Trade, Springer, vol. 16(1), pages 1-24, March.
    2. Jinji, Naoto & Mizoguchi, Yoshihiro, 2016. "Rules of origin and technology spillovers from foreign direct investment under international duopoly," Japan and the World Economy, Elsevier, vol. 40(C), pages 47-60.
    3. Sung Hee Lee & Kun Soo Park & Yong Won Seo, 2016. "Multinational Firm’s Production Decisions under Overlapping Free Trade Agreements: Rule of Origin Requirements and Environmental Regulation," Sustainability, MDPI, Open Access Journal, vol. 9(1), pages 1-16, December.

    More about this item

    Keywords

    Rules of origin (ROO); Compliance; Free trade area (FTA);

    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
    • F15 - International Economics - - Trade - - - Economic Integration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:koe:wpaper:1013. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kimiaki Shirahama) or (Rebekah McClure). General contact details of provider: http://edirc.repec.org/data/fekobjp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.