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Rules of Origins Relaxation and Regional Supply Chains: Evidence from Europ

Author

Listed:
  • Pamela Bombarda
  • Elisa Gamberoni
  • Irene Iodice

    (Université de Cergy-Pontoise, THEMA)

Abstract

Free trade agreements (FTAs) incorporate regulations regarding rules of origin (RoO) and cumulation. RoO regulations, by restricting the use of inputs outside the FTA, can affect the flow of intermediates in supply chains. We construct a new database to assess the effects of RoO, enabling us to explore two major events that led to RoO re- laxation in the European context: PECS, which provided the possibility of cumulating stages of production across the European Union’s FTA peripheral partners, and EU enlargement, which eliminated RoO altogether. Our results show that the progressive reduction in RoO had a sizeable impact on reshaping regional and international sup- ply chains. Across both episodes, we estimate consistent elasticities, indicating that a 1% increase in the value requirement restriction before relaxation corresponds to an intermediate import increase ranging from 0.3% to 0.7% from countries where RoO restrictions have been lifted.

Suggested Citation

  • Pamela Bombarda & Elisa Gamberoni & Irene Iodice, 2023. "Rules of Origins Relaxation and Regional Supply Chains: Evidence from Europ," THEMA Working Papers 2023-13, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2023-13
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    References listed on IDEAS

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    More about this item

    Keywords

    Intermediate inputs trade; rules of origin; cumulation; PECS; EU enlargement; input-output tables.;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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