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A (more) systematic exploration of the trade effect of product-specific rules of origin

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  • Julien Gourdon
  • Karin Gourdon
  • Jaime de Melo

Abstract

Rules of Origin (RoO) are critical components of Preferential Trade Agreements (PTAs). They are designed to stop products coming into a PTA through the partner that applies the lowest tariff – a phenomenon known as trade deflection. While RoO are necessary, complex RoO may undo the benefits of trade agreements. Using a novel database of RoO, this paper evaluates the incidence and restrictiveness of different types of Product-Specific Rules of Origin (PSRs) across 128 reciprocal PTAs for the period 1990 - 2015. Results, based on a structural gravity model controlling for confounding factors, display wide heterogeneity across different categories of PSRs attached to preferential margins, with more flexible PSRs associated with a significantly stronger trade effect compared to more restrictive ones where exporters do not have a choice among PSRs or have to satisfy multiple PSRs. A simulation exercise reveals that a radical simplification reform leading to the adoption of flexible PSRs providing alternative choices to prove origin would have increased global trade under PTAs on average by between 2.7 and 4 percent during the sample period.

Suggested Citation

  • Julien Gourdon & Karin Gourdon & Jaime de Melo, 2023. "A (more) systematic exploration of the trade effect of product-specific rules of origin," RSCAS Working Papers 2023/26, European University Institute.
    • Handle: RePEc:rsc:rsceui:2023/26
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    References listed on IDEAS

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    1. Gourdon, Julien & Gourdon, Karin & de Melo, Jaime, 2023. "A (More) Systematic Exploration of the Trade Effect of Product-Specific Rules of Origin," World Trade Review, Cambridge University Press, vol. 22(3-4), pages 421-435, October.

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    More about this item

    Keywords

    Rules of origin; Product-specific rules of origin; Regime-wide rules of origin; compliance costs;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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