Export Performance and Access to Intermediate Inputs: The Case of Rules of Origin Liberalisation

Abstract

Internationally fragmented production processes have highlighted the need of efficient sourcing from foreign suppliers. This paper aims to investigate how exports of final goods are affected by better access to foreign intermediate inputs. In particular, the paper empirically tests whether expanding the set of available intermediate input suppliers through preferential rules of origin liberalisation affects exports of final goods. We exploit the introduction of the southern Mediterranean countries into the Pan‐Euro‐Med zone of diagonal cumulation which meant that foreign intermediate inputs could be used from more countries than before without jeopardising the preferential access to the EU. Using a fixed effects specification that controls for detailed levels of unobserved heterogeneity and multilateral resistance, we examine the effect of the new diagonal cumulation possibilities on southern Mediterranean exports to EU‐15. We find a positive effect on both export intensity, the value of exports, and export diversification, the number of exported products. Being part of the Pan‐Euro‐Med zone of diagonal cumulation is associated with a 20 per cent increase in export intensity and a 5 per cent increase in export diversification.

Rules of origin and trade preference utilization among least developed countries

“…However, since rules of origin change so infrequently, there have been very few studies that analyze how rules of origin liberalization policies influence trade. The few exceptions have focused on how rules of origin liberalization influence trade values (Andersson, 2016; Bombarda & Gamberoni, 2013; Conconi et al, 2018), rather than utilization rates, and have not focused on LDCs where rules of origin are particularly burdensome 10 . By focusing on how revisions to existing rules of origin influence trade preference utilization among LDCs, this study provides new insights into the role of international development programs in export growth.…”

The European Union's reform in rules of origin and international trade: Evidence from Cambodia

“…Augier et al (2005) adopt a DD method to examine whether the introduction of cumulation rules affects bilateral trade flows in manufacturing and intermediate goods. Additionally, Andersson (2016) focuses on the introduction of southern Mediterranean countries in the PECS during the middle 2000s to investigate the impact of better access to foreign intermediate inputs on final-goods exports in these countries. In a similar approach, I argue that Cambodia had no real effective influence in the EU's reform processes, providing a plausibly exogenous policy shock to garment exports in Cambodia.…”

Global supply chains, trade agreements and rules of origin

“…As far as RoO is concerned, this paper is related to a literature on the economic effects of RoO where notable papers include Reed (1998, 2002), Krueger (1993), Krishna and Krueger (1995), Ju and Krishna (2005), Duttagupta and Panagariya (2007) and Chang and Xiao (2015). Moreover, Augier et al (2005), and more recently Andersson (2016) and Conconi et al (2018), look empirically at the trade diversion effects of RoO. My paper focuses on trade agreements and equilibrium trade regimes, while the papers above focus largely on the trade diversion and welfare effects of RoO.…”