Rules of Origin for Preferential Trading Arrangements: Implications for the ASEAN Free Trade Area of EU and U.S. Experience
University of Lausanne - School of Economics and Business Administration (HEC-Lausanne); Centre for Economic Policy Research (CEPR); World Bank
Jaime De Melo
University of Geneva - Department of Political Economics; Centre for Economic Policy Research (CEPR); World Bank
University of Geneva - Department of Political Economics
September 1, 2006
World Bank Policy Research Working Paper No. 4016
With free trade areas (FTAs) under negotiation 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.
Number of Pages in PDF File: 31
Keywords: Free Trade, Rules of Origin, Trade and Regional Integration, Economic Theory & Research, Trade Policy
Date posted: October 27, 2006
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