Gabriel Felbermayr, Feodora Teti, Erdal Yalcin, 10 September 2019

Rules of origin exist to avoid trade deflection, but they distort global value chains and are costly to abide by. This column shows empirically that in preferential trade agreements, trade deflection is unlikely to be profitable because tariffs are generally low, that countries in a common free trade agreement tend to have similar external tariff levels, and that when tariff levels differ, deflection is profitable at most for one country in the pair. Moreover, transportation costs create a natural counterforce. It appears that rules of origin are primarily used to limit trade, and hence represent an instrument for trade protection. 

Stéphanie Brunelin, Jaime de Melo, Alberto Portugal-Perez, 27 April 2018

Rules of origin play a crucial role in preferential trade agreements, and they can also deny intended market access for preference receivers. This column examines a relaxation by the EU of the origin requirements for selected products from Jordan, which is intended to create 200,000 job opportunities for Syrian refugees. While the relaxation decision may have an effect on the refugee crisis in Jordan, further simplifications in RoO requirements are called for.

Andrew Powell, José Juan Ruiz Gómez, 05 April 2017

Latin America and the Caribbean needs higher growth without increasing debt. This column, based on the new 2017 IDB macroeconomic report, argues that completing intra-regional trade integration is a low-hanging fruit. Trade deals abound, the region has advanced, but regional trade is low – current agreements are too complex and inconsistent. A bottom-up, concrete, politically viable action plan is outlined. Deeper integration would boost growth in any scenario, but the pay-off is even larger if the world becomes more protectionist.

Kazunobu Hayakawa, HanSung Kim, Taiyo Yoshimi, 05 March 2017

Some exporters prefer to use most-favoured nation rates even when exporting to a fellow member of a free trade agreement. This column analyses the effect of exchange rates on the utilisation of free trade agreements, focusing on the ASEAN-Korea agreement. A depreciation of an (ASEAN) exporter’s currency against the (Korean) importer’s currency enhances utilisation rates of the trade agreement’s tariffs, with implications for the design of rules of origin. 

Paola Conconi, Manuel García Santana, Laura Puccio, Roberto Venturini, 16 March 2016

One of the more pernicious barriers to trade in today's world are so-called 'rules of origin' that should help customs officers determine a product's origin, but often serve to raise the cost of importing. In practice, such rules prevent final producers from choosing the most efficient input suppliers around the world. This column investigates the impact of rules of origin in the world's largest free trade agreement, NAFTA, on imports of intermediate goods from non-member countries. The findings show that preferential rules of origin in FTAs can violate GATT rules by substantially increasing the level of protection faced by non-members.

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