Heterogeneous Trade Agreements and Adverse Implications of Restrictive Rules of Origin: Evidence from Apparel Trade

46 Pages Posted: 7 Mar 2023

Date Written: March 1, 2023

Abstract

We revisit the heterogeneous effects of regional trade agreements (RTAs) using a PPML gravity model and comparing apparel and total trade. The politically-sensitive apparel sector has specialized, usually restrictive, rules of origin (ROOs) clauses that vary considerably across RTAs. Our RTA estimates have a significantly higher variance for apparel trade than total trade, and ending temporary exceptions to apparel ROOs in U.S. trade agreements is associated with less apparel trade. We further illustrate how RTAs can be effective development policy instruments. For example, updating ROOs in the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) can significantly reduce Central American emigration.

Keywords: Regional trade agreements, apparel trade, rules of origin, gravity model, PPML

JEL Classification: F13, F14, F63, O24

Suggested Citation

Robertson, Raymond and Abreha, Kaleb, Heterogeneous Trade Agreements and Adverse Implications of Restrictive Rules of Origin: Evidence from Apparel Trade (March 1, 2023). Available at SSRN: https://ssrn.com/abstract=4376016 or http://dx.doi.org/10.2139/ssrn.4376016

Raymond Robertson

Texas A&M University ( email )

TAMU 4220
1004 George Bush Dr West
College Station, TX 77843
United States

Kaleb Abreha (Contact Author)

Texas A&M University ( email )

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