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Modeling the Removal of NAFTA Rules of Origin: A Dynamic Computable General Equilibrium Analysis

Author

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  • Patrick Georges

    (Graduate School of Public and International Affairs, University of Ottawa)

Abstract

Most computable general equilibrium (CGE) studies assessing the welfare impact of moving from a North American Free Trade Agreement (NAFTA) to a deeper form of integration, for example a Customs Union (CU), typically proxy the integration as the adoption of a common external tariff towards the rest of the world. However, a CU is also an arrangement that allows for the elimination of FTAs preferential Rules of Origin (ROO), which is typically not captured in CGE studies. The paper addresses this issue using a multi-country, multi-sector dynamic CGE model. Although the removal of distortionary ROO is likely to lower the unit costs of production within North America, it may also deteriorate North American terms of trade with the rest of the world. Thus, the net effect of the removal of NAFTA ROO on welfare is ambiguous and is an empirical issue.

Suggested Citation

  • Patrick Georges, 2007. "Modeling the Removal of NAFTA Rules of Origin: A Dynamic Computable General Equilibrium Analysis," Working Papers 0705E, University of Ottawa, Department of Economics.
    • Handle: RePEc:ott:wpaper:0705e
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    References listed on IDEAS

    as
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    Cited by:

    1. Michael J. Ferrantino, 2006. "Quantifying the Trade and Economic Effects of Non-Tariff Measures," OECD Trade Policy Papers 28, OECD Publishing.

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    More about this item

    Keywords

    NAFTA; Customs Union; Rules of Origin; Common External Tariff; Computable General Equilibrium;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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