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A (more) systematic exploration of the trade effect of product-specific rules of origin

Author

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  • Julien Gourdon

    (CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne, AFD - Agence française de développement)

  • Karin Gourdon

    (World Bank Group)

  • Jaime de Melo

    (FERDI - Fondation pour les Etudes et Recherches sur le Développement International)

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 percent during the sample period

Suggested Citation

  • Julien Gourdon & Karin Gourdon & Jaime de Melo, 2023. "A (more) systematic exploration of the trade effect of product-specific rules of origin," Working Papers hal-04081607, HAL.
    • Handle: RePEc:hal:wpaper:hal-04081607
    Note: View the original document on HAL open archive server: https://hal.science/hal-04081607
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    References listed on IDEAS

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    1. Fontagné, Lionel & Orefice, Gianluca & Piermartini, Roberta & Rocha, Nadia, 2015. "Product standards and margins of trade: Firm-level evidence," Journal of International Economics, Elsevier, vol. 97(1), pages 29-44.
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    1. Gourdon, Julien & Gourdon, Karin & de Melo, Jaime, 2023. "A (More) Systematic Exploration of the Trade Effect of Product-Specific Rules of Origin," World Trade Review, Cambridge University Press, vol. 22(3-4), pages 421-435, October.

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    More about this item

    Keywords

    Rules of origin; Product-specific rules of origin; Regime-wide rules of origin; Compliance costs;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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