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Rules of origin as export subsidies

  • Olivier Cadot
  • Antoni Estevadeordal
  • Akiko Suwa-Eisenmann


The paper estimates the effect of NAFTA’s rules of origin (ROO) on Mexican access to the US market treating explicitly the endogenous determination of ROOs. The first equation determines Mexico’s NAFTA (preferential) exports to the US as a function of tariff preference and Estevadeordal’s qualitative ROO index. The second equation determines ROO strictness on the basis of a Grossman-Helpman model identifying channels through which lobbying by US intermediate-good producers leads to deep preferences and stiff rules of origin in downstream sectors. The estimates suggest that the creation of a captive market for upstream intermediate-good producers is indeed one of their political determinants.

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Paper provided by Laboratoire d'Economie Appliquee, INRA in its series Research Unit Working Papers with number 0405.

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Length: 27 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:lea:leawpi:0405
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  1. Stephen Ansolabehere & John M. de Figueiredo & James M. Snyder, 2003. "Why Is There So Little Money in Politics?," NBER Working Papers 9409, National Bureau of Economic Research, Inc.
  2. Grossman, G.M. & Helpman, E., 1993. "The Politics of Free Trade Agreements," Papers 14-93, Tel Aviv.
  3. Dixit, Avinash K & Grossman, Gene M, 1982. "Trade and Protection with Multistage Production," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 583-94, October.
  4. 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.
  5. Gordon H. Hanson, 1994. "Localization Economies, Vertical Organization and Trade," NBER Working Papers 4744, National Bureau of Economic Research, Inc.
  6. Arvind Panagariya & Rupa Dutta Gupta, 2003. "Free Trade Areas and Rules of Origin: Economics and Politics," International Trade 0308006, EconWPA.
  7. Kala Krishna & Anne Krueger, 1995. "Implementing Free Trade Areas: Rules of Origin and Hidden Protection," NBER Working Papers 4983, National Bureau of Economic Research, Inc.
  8. Rod Falvey & Geoff Reed,, . "Economic Effects of Rules of Origin," Discussion Papers 97/21, University of Nottingham, CREDIT.
  9. Anson, José & Cadot, Olivier & de Melo, Jaime & Estevadeordal, Antoni & Suwa Eisenmann, Akiko & Tumurchudur, Bolormaa, 2003. "Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA," CEPR Discussion Papers 4166, C.E.P.R. Discussion Papers.
  10. Peter L. Rodriguez, 2001. "Rules of Origin with Multistage Production," The World Economy, Wiley Blackwell, vol. 24(2), pages 201-220, 02.
  11. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
  12. P. J. Lloyd, 1993. "A Tariff Substitute for Rules of Origin in Free Trade Areas," The World Economy, Wiley Blackwell, vol. 16(6), pages 699-712, November.
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