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Rules of origin and regional upstream competition

Author

Listed:
  • Kazuhiro Takauchi

    (Kansai University)

  • Tomomichi Mizuno

    (Kobe University)

  • Qing Hu

    (Kansai University)

Abstract

To enjoy the preferential access of a free trade area (FTA), rules of origin (ROO) of the FTA defines how much to use regional contents. Hence, ROO defines the inter-firm transactions among upstream and downstream firms. We show asymmetric multiple equilibria in the downstream market "one firm meets ROO while the other does not" can appear for the effect of regional upstream competition. Importantly, our results, which correspond the real situation, maximizes consumer and total surpluses in the final-good importer. Hence, if the practitioner in the country concerned promoting utilization of the FTA, it may backfire.

Suggested Citation

  • Kazuhiro Takauchi & Tomomichi Mizuno & Qing Hu, 2025. "Rules of origin and regional upstream competition," Discussion Papers 2519, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:2519
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    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2025/2519.pdf
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