Economic effects of rules of origin

Falvey, Rod; Reed, Geoff

doi:10.1007/bf02708093

“…With the apparent aim of preventing trade deflection, rules of origin can be used to protect a domestic industry from unwanted competition based in the partner, even in conditions where trade deflection is unlikely (Falvey and Reed (1998)). Note that in this situation the EU is unlikely to exert pressure on the trade partner for the general liberalisation of tariffs against other trading partners.…”

Section: The Role Of Rules Of Originmentioning

confidence: 99%

Making EU Trade Agreements Work: The Role of Rules of Origin

Brenton

¹

,

Manchin

²

2003

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CEPS Working Documents are published to give an indication of the work within CEPS' various research programmes and to stimulate reactions from other experts in the field Executive SummaryFree trade and preferential trade agreements are a major element in EU foreign policy and are at the forefront of EU policy towards developing countries and neighbouring countries in Europe, including the countries of South-east Europe. For the EU, free trade agreements are a means of increasing economic integration through improved access to the EU market, which is seen as important in achieving other political, foreign policy and security objectives. This entails that a key element of the EU's free trade and preferential trade agreements is the extent to which they deliver improved market access.Information on the implementation of the EU's preferential scheme of access for developing countries, the GSP, shows that only one third of EU imports from developing countries which were eligible for preferences actually entered the EU market with reduced duties. This primarily reflects the treatment of textiles and clothing products, which accounted for over 70 per cent of EU imports from countries covered by the GSP but where the utilisation rate (the ratio of imports receiving preferences to eligible imports) was only 31 per cent. Clothing is of particular importance to developing countries, providing a base for industrialisation and participation in the world economy, and is a major export from many of the Balkans countries. For example, in 1998, almost 84 per cent of total Albanian exports to the EU were eligible for preferential treatment under the GSP yet only 2 per cent of these exports were actually granted preferential access. Similarly, it appears that many of the preferences made available by the EU to Balkans countries in recent years have not been utilised.Understanding the reasons for this failure of preferential trade partners to benefit from GSP preferences and duty reductions on textiles and clothing products is important in assessing the extent to which the free trade provisions of the 'Everything but Arms' agreement and the stabilisation agreements with the Balkans countries will actually deliver improved access to the EU market. If factors which prevented the utilisation of GSP benefits and other preferences remain under these agreements then the direct effect

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“…It is rules of origin, such as those discussed above, which underlie the analyses of Krueger (1995) and Krishna and Krueger (1995) who demonstrate how rules of origin can act as 'hidden protectionism' and induce a switch in demand in free trade partners from low-cost external inputs to higher-cost partner inputs to ensure that final products actually receive duty free access. With the apparent © Blackwell Publishing Ltd 2003 aim of preventing trade deflection, rules of origin can be used to protect a domestic industry from unwanted competition based in the partner, even in conditions where trade deflection is unlikely (Falvey and Reed, 1998). Note that in this situation the EU is unlikely to exert pressure on the trade partner for the general liberalisation of tariffs against other trading partners.…”

Section: B the Role Of Rules Of Originmentioning

confidence: 99%

Making EU Trade Agreements Work: The Role of Rules of Origin

Brenton¹,

Manchin

²

2002

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CEPS Working Documents are published to give an indication of the work within CEPS' various research programmes and to stimulate reactions from other experts in the field Executive SummaryFree trade and preferential trade agreements are a major element in EU foreign policy and are at the forefront of EU policy towards developing countries and neighbouring countries in Europe, including the countries of South-east Europe. For the EU, free trade agreements are a means of increasing economic integration through improved access to the EU market, which is seen as important in achieving other political, foreign policy and security objectives. This entails that a key element of the EU's free trade and preferential trade agreements is the extent to which they deliver improved market access.Information on the implementation of the EU's preferential scheme of access for developing countries, the GSP, shows that only one third of EU imports from developing countries which were eligible for preferences actually entered the EU market with reduced duties. This primarily reflects the treatment of textiles and clothing products, which accounted for over 70 per cent of EU imports from countries covered by the GSP but where the utilisation rate (the ratio of imports receiving preferences to eligible imports) was only 31 per cent. Clothing is of particular importance to developing countries, providing a base for industrialisation and participation in the world economy, and is a major export from many of the Balkans countries. For example, in 1998, almost 84 per cent of total Albanian exports to the EU were eligible for preferential treatment under the GSP yet only 2 per cent of these exports were actually granted preferential access. Similarly, it appears that many of the preferences made available by the EU to Balkans countries in recent years have not been utilised.Understanding the reasons for this failure of preferential trade partners to benefit from GSP preferences and duty reductions on textiles and clothing products is important in assessing the extent to which the free trade provisions of the 'Everything but Arms' agreement and the stabilisation agreements with the Balkans countries will actually deliver improved access to the EU market. If factors which prevented the utilisation of GSP benefits and other preferences remain under these agreements then the direct effect

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“…Cadot et al (2002) provided evidences that ROOs of NAFTA have restricted the chances for market access to NAFTA markets. Krishna and Krueger (1995) and Falvey and Reed (1998) showed that ROOs have strictly increased production costs since ROOs have induced the use of more expensive local intermediate goods, eventually reducing the demand level of intermediate goods of member countries. On the contrary, Rosellon (2000) has shown that the demand of the intermediate goods of member countries is ultimately increased with the strict ROOs.…”

Section: Roos Protective Measuresmentioning

confidence: 98%

Are rules of origin protective measures under preferential trade agreements?

Kim

¹

,

Ha²

2016

Journal of Korea Trade

0

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Purpose – Rules of origin (ROOs) are often cited as major trade barriers even after tariff barriers are removed with the formation of preferential trade agreement (PTA) as shown in a survey result that a large number South Korean firms in the textile industry give up utilizing tariff-free exports to the USA after the bilateral Free Trade Agreement (FTA) due to ROOs. The purpose of this paper is to examine the impact of ROOs on the equilibrium FTA regime and the welfare effects. Design/methodology/approach – The authors determine the impact of ROOs on the equilibrium FTA regime based on an oligopolistic model where there are asymmetry in production technologies of intermediate goods and the capacity of outsourcing intermediate goods. Findings – The authors demonstrate that ROOs are used as a protective trade policy against the FTA member country with an outsourcing option for technologically dominant intermediate goods. Practical implications – The non-cooperative features of ROOs found in this paper necessitates the introduction of an international coordination mechanism to avoid the prisoners’ dilemma-type implementation of ROOs. Originality/value – This paper provides a theoretical frame to analyze the protective effects of ROOs under PTAs.

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Economic effects of rules of origin

Abstract: F13,

Cited by 71 publications

References 14 publications

Making EU Trade Agreements Work: The Role of Rules of Origin

Making EU Trade Agreements Work: The Role of Rules of Origin

Making EU Trade Agreements Work: The Role of Rules of Origin

Are rules of origin protective measures under preferential trade agreements?

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