Market Access and Welfare Effects of Free Trade Areas without Rules of Origin
The market access and welfare effects of Free Trade Areas (FTAs) without Rules of Origin (ROOs) are studied. We consider both the final and intermediate goods markets and their interlinkage. The FTA weakly reduces all tariffs and prices within the FTA. This raises quantity demanded and reduces quantity supplied for both the final and intermediate goods, thereby raising imports. This is the classic trade creation effect and is welfare improving. We identify two additional effects which work in the opposite direction and identify conditions under which these welfare reducing, import reducing effects dominate.
|Date of creation:||Mar 1996|
|Date of revision:|
|Publication status:||published as Ju, Jiandong and Kala Krishna. "Welfare And Market Access Effects Of Piecemeal Tariff Reform," Journal of International Economics, 2000, v51(2,Aug), 305-316.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Lopez, Ramon & Panagariya, Arvind, 1992. "On the Theory of Piecemeal Tariff Reform: The Case of Pure Imported Intermediate Inputs," American Economic Review, American Economic Association, vol. 82(3), pages 615-25, June.
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Elsevier, vol. 34(1-2), pages 329-338, November.
- Lopez, Ramon & Rodrik, Dani, 1989. "Trade restrictions with imported intermediate inputs : when does the trade balance improve?," Policy Research Working Paper Series 174, The World Bank.
- 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.
- Carsten Kowalczyk, 1990. "Welfare and Customs Unions," NBER Working Papers 3476, National Bureau of Economic Research, Inc.
- Anne O. Krueger, 1995.
"Free Trade Agreements versus Customs Unions,"
NBER Working Papers
5084, National Bureau of Economic Research, Inc.
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