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A (More) Systematic Exploration of the Trade Effect of Product-Specific Rules of Origin

Published online by Cambridge University Press:  05 September 2023

Julien Gourdon ,
Karin Gourdon  and
Jaime de Melo
Julien Gourdon*
Affiliation:
Université Clermont Auvergne, CNRS, IRD, CERDI, F-63000 Clermont-Ferrand, France
Karin Gourdon
Affiliation:
Paris School of Economics (PSE), France
Jaime de Melo
Affiliation:
University of Geneva and Fondation pour les études et recherches en développement international (FERDI), Switzerland
*
Corresponding author: Julien Gourdon, Email: julien.gourdon@gmail.com
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Abstract

Rules of Origin (RoO) are critical components of Preferential Trade Agreements (PTAs). They are designed to stop products coming into a PTA through the partner that applies the lowest tariff – a phenomenon known as trade deflection. While RoO are necessary, complex RoO may undo the benefits of trade agreements. Using a novel database of RoO, this paper evaluates the incidence and restrictiveness of different types of Product-Specific Rules of Origin (PSRs) across 128 reciprocal PTAs for the period 1990–2015. Results, based on a structural gravity model controlling for confounding factors, display wide heterogeneity across different categories of PSRs attached to preferential margins, with more flexible PSRs associated with a significantly stronger trade effect compared to more restrictive ones where exporters do not have a choice among PSRs or have to satisfy multiple PSRs. A simulation exercise reveals that a radical simplification reform leading to the adoption of flexible PSRs providing alternative choices to prove origin would have increased global trade under PTAs on average by between 2.7 and 4% during the sample period.

Keywords

F1F14F15rules of originproduct-specific rules of originregime-wide rules of origincompliance costs
Type
Original Article
Information
World Trade Review , Volume 22 , Special Issue 3-4: Double Special Issue: Trade Policy, Openness, and Development in Honour of L. Alan Winters , October 2023 , pp. 421 - 435
Copyright
Copyright © The Author(s), 2023. Published by Cambridge University Press on behalf of The World Trade Organization

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