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Dispensing with NAFTA Rules of Origin? Some Policy Options for Canada

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  • Patrick Georges

    () (Department of Economics, University of Ottawa)

Abstract

Increased market access from Free Trade Agreements (FTAs) promised by policy makers is often diluted by preferential rules of origin (ROO). This paper discusses two policy options one direct, and one indirect -- with regard to limiting the impact of NAFTA ROO on trade, and illustrates the impact on GDP and welfare of these options using a computable general equilibrium methodology. The first (direct) option, moving toward a North American Customs Union (CU) instead of the current NAFTA, would basically eliminate the need for preferential ROO among members of the CU. The second (indirect) policy option is to pursue multilateral trade negotiations and reduce MFN tariffs towards zero. In this context, NAFTA ROO would lack both relevance and impact, even if they remained on the books, because tariff preference utilization among NAFTA members would virtually disappear. The current stalemate at the WTO Doha round suggests that a North American CU remains a serious policy option. However, the erosion of NAFTA tariff preferences since the phase-in of the Uruguay round has also reduced the distortionary impacts of NAFTA ROO, somewhat limiting the gains that a CU could bring.

Suggested Citation

  • Patrick Georges, 2009. "Dispensing with NAFTA Rules of Origin? Some Policy Options for Canada," Working Papers 0904E, University of Ottawa, Department of Economics.
  • Handle: RePEc:ott:wpaper:0904e
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    File URL: http://sciencessociales.uottawa.ca/economics/sites/socialsciences.uottawa.ca.economics/files/0904E.pdf
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    References listed on IDEAS

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    Cited by:

    1. Patrick GEORGES & Marcel MERETTE & Aylin SECKIN, "undated". "Should Canada Diversify its Trade Pattern? An Overlapping-Generations CGE Analysis of Trade and Ageing," EcoMod2009 21500036, EcoMod.

    More about this item

    Keywords

    Trade Agreement; Customs Union; Rules of Origin; Multilateral Free Trade Computable General Equilibrium Modeling;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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