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Rules of origin for preferential trading arrangements : implications for the ASEAN Free Trade Area of EU and U.S. experience

  • Cadot, Olivier
  • de Melo, Jaime
  • Portugal-Perez, Alberto

With free trade areas (FTAs) undernegotiation between Japan and the ASEAN Free Trade Area (AFTA) members and between the Republic of Korea and AFTA members, preferential market access will become more important in Asian regionalism. Protectionist pressures will likely increase through rules of origin, the natural outlet for these pressures. Based on the experience of the European Union and the United States with rules of origin, the authors argue that, should these FTAs follow in the footsteps of the EU and the U.S. and adopt similar rules of origin, trading partners in the region would incur unnecessary costs. Using EU trade under the Generalized System of Preferences with Africa, Caribbean, and Pacific partners, the authors estimate how the use of preferences would likely change if AFTA were to veer away from its current uniform rules of origin requiring a 40 percent local content rate. Depending on the sample used, a 10 percentage point reduction in the local value content requirement is estimated to increase the utilization rate of preferences by between 2.5 and 8.2 percentage points.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4016.

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Date of creation: 01 Sep 2006
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Handle: RePEc:wbk:wbrwps:4016
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  1. Avinash K. Dixit & Gene M. Grossman, 1981. "Trade and Protection with Multistage Production," NBER Working Papers 0794, National Bureau of Economic Research, Inc.
  2. José Anson & Olivier Cadot & Antoni Estevadeordal & Jaime De Melo & Akiko Suwa-Eisenmann & Bolormaa Tumurchudur, 2005. "Rules of origin in North-South preferential trading arrangements with an application to NAFTA," Working Papers 156782, Institut National de la Recherche Agronomique, France.
  3. Dayaratna, Banda O.G. & Whalley, John, 2005. "Beyond Goods and Services: Competition Policy, Investment, Mutual Recognition, Movement of Persons, and Broader Cooperation Provisions of Recent FTAs Involving ASEAN Countries," Working Papers 24153, Canadian Agricultural Trade Policy Research Network.
  4. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
  5. Marcelo Olarreaga & Çaglar Özden, 2005. "AGOA and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access?," The World Economy, Wiley Blackwell, vol. 28(1), pages 63-77, 01.
  6. Miriam Manchin, 2006. "Preference Utilisation and Tariff Reduction in EU Imports from ACP Countries," The World Economy, Wiley Blackwell, vol. 29(9), pages 1243-1266, 09.
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