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Rules of origin for preferential trading arrangements : implications for the ASEAN Free Trade Area of EU and U.S. experience

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  • Cadot, Olivier
  • de Melo, Jaime
  • Portugal-Perez, Alberto

Abstract

With free trade areas (FTAs) undernegotiation between Japan and the ASEAN Free Trade Area (AFTA) members and between the Republic of Korea and AFTA members, preferential market access will become more important in Asian regionalism. Protectionist pressures will likely increase through rules of origin, the natural outlet for these pressures. Based on the experience of the European Union and the United States with rules of origin, the authors argue that, should these FTAs follow in the footsteps of the EU and the U.S. and adopt similar rules of origin, trading partners in the region would incur unnecessary costs. Using EU trade under the Generalized System of Preferences with Africa, Caribbean, and Pacific partners, the authors estimate how the use of preferences would likely change if AFTA were to veer away from its current uniform rules of origin requiring a 40 percent local content rate. Depending on the sample used, a 10 percentage point reduction in the local value content requirement is estimated to increase the utilization rate of preferences by between 2.5 and 8.2 percentage points.

Suggested Citation

  • Cadot, Olivier & de Melo, Jaime & Portugal-Perez, Alberto, 2006. "Rules of origin for preferential trading arrangements : implications for the ASEAN Free Trade Area of EU and U.S. experience," Policy Research Working Paper Series 4016, The World Bank.
    • Handle: RePEc:wbk:wbrwps:4016
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    References listed on IDEAS

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    1. José Anson & Olivier Cadot & Antoni Estevadeordal & Jaime de Melo & Akiko Suwa‐Eisenmann & Bolormaa Tumurchudur, 2005. "Rules of Origin in North–South Preferential Trading Arrangements with an Application to NAFTA," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 501-517, August.
    2. Marcelo Olarreaga & Çaglar Özden, 2005. "AGOA and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access?," The World Economy, Wiley Blackwell, vol. 28(1), pages 63-77, January.
    3. Avinash K. Dixit & Gene M. Grossman, 1982. "Trade and Protection with Multistage Production," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(4), pages 583-594.
    4. Dayaratna, Banda O.G. & Whalley, John, 2005. "Beyond Goods and Services: Competition Policy, Investment, Mutual Recognition, Movement of Persons, and Broader Cooperation Provisions of Recent FTAs Involving ASEAN Countries," Working Papers 24153, Canadian Agricultural Trade Policy Research Network.
    5. Miriam Manchin, 2006. "Preference Utilisation and Tariff Reduction in EU Imports from ACP Countries," The World Economy, Wiley Blackwell, vol. 29(9), pages 1243-1266, September.
    6. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Innwon Park & Soonchan Park, 2011. "Best practices for regional trade agreements," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(2), pages 249-268, June.
    2. Maria Cipollina & Federica Demaria, 2020. "The Trade Effect of the EU’s Preference Margins and Non-Tariff Barriers," JRFM, MDPI, vol. 13(9), pages 1-20, September.
    3. Farhat Mahmood & Juthathip Jongwanich, 2018. "Export-enhancing Effects of Free Trade Agreements in South Asia," Journal of South Asian Development, , vol. 13(1), pages 24-53, April.
    4. Keck, Alexander & Lendle, Andreas, 2012. "New evidence on preference utilization," WTO Staff Working Papers ERSD-2012-12, World Trade Organization (WTO), Economic Research and Statistics Division.
    5. Samuel Admassu, 2020. "The trade creation effects of Africa’s reciprocal vis-à-vis non-reciprocal trade agreements," Empirical Economics, Springer, vol. 59(6), pages 2717-2730, December.
    6. Masahiro Kawai, 2009. "The Asian “Noodle Bowl”:Is It Serious for Business?," Working Papers id:1936, eSocialSciences.
    7. DeMaria, Federica & Drogue, Sophie & Matthews, Alan, 2008. "Agro-Food Preferences in the EU's GSP Scheme: An Analysis of Changes between 2004 and 2006," Working Papers 6151, TRADEAG - Agricultural Trade Agreements.
    8. Ram Upendra Das, 2010. "Rules of Origin under Regional Trade Agreements," Trade Working Papers 22791, East Asian Bureau of Economic Research.
    9. Misa Okabe, . "The Impact of ASEAN +1 FTAs on ASEAN's Trade," Chapters, in: Lili Yan Ing (ed.), East Asian Integration (First Edition), chapter 2, pages 25-66, Economic Research Institute for ASEAN and East Asia (ERIA).
    10. Portugal-Perez, Alberto & Wilson, John S., 2008. "Why trade facilitation matters to Africa ?," Policy Research Working Paper Series 4719, The World Bank.
    11. Misa OKABE, 2015. "Impact of Free Trade Agreements on Trade in East Asia," Working Papers DP-2015-01, Economic Research Institute for ASEAN and East Asia (ERIA).

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    More about this item

    Keywords

    Free Trade; Rules of Origin; Trade and Regional Integration; Economic Theory&Research; Trade Policy;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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