From Final Goods to Inputs: The Protectionist Effect of Rules of Origin

41 Pages Posted: 2 Feb 2016  

Paola Conconi

Centre for Economic Policy Research (CEPR); Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

Manuel García-Santana

Universitat Pompeu Fabra

Laura Puccio

European Parliamentary Research Service

Roberto Venturini

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management

Date Written: January 2016

Abstract

Recent decades have witnessed a surge of trade in intermediate goods and a proliferation of free trade agreements (FTAs). FTAs use rules of origin (RoO) to distinguish goods originating from member countries from those originating from third countries. In this paper, we show that the sourcing restrictions embedded in RoO greatly distort trade in intermediaries. We focus on the North American Free Trade Agreement (NAFTA), the world's largest FTA, and construct a unique dataset that allows us to map the input-output linkages in its RoO. Using a difference-in-differences approach, we find that RoO on final goods reduced imports of intermediate goods from third countries by around 30 percentage points. Even if external tariffs are unchanged, FTAs may thus violate multilateral trade rules, by substantially increasing the level of protection faced by non-members.

Keywords: input-output linkages, rules of origin, trade agreements

JEL Classification: F23, F53

Suggested Citation

Conconi, Paola and García-Santana, Manuel and Puccio, Laura and Venturini, Roberto, From Final Goods to Inputs: The Protectionist Effect of Rules of Origin (January 2016). CEPR Discussion Paper No. DP11084. Available at SSRN: https://ssrn.com/abstract=2726564

Paola Conconi (Contact Author)

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
32 2 650 2345 (Phone)
32 2 650 4475 (Fax)

Manuel García-Santana

Universitat Pompeu Fabra ( email )

Laura Puccio

European Parliamentary Research Service ( email )

Brussels
Belgium

Roberto Venturini

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium

Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management ( email )

19 Av Franklin Roosevelt
1050
Brussels
Belgium

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