Published online by Cambridge University Press: 05 August 2019
This chapter shows that the rules of origin, which are meant to protect against the trans-shipment of foreign goods in free trade areas, are instead being used to promote particular industries. Strict rules of origin add to production costs by forcing firms to use more expensive parts and pay administrative costs. They also prevent firms from exporting to markets governed by different trade agreements and disproportionately hurt small firms. The ongoing renegotiation of NAFTA highlights the potential to expand the use rules of origin as a form of trade protection. The WTO currently has only limited disciplines on rules of origin. Clear and enforceable international regulations would help thwart the spread of complex rules.