Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA

17 Pages Posted: 22 Jul 2005

See all articles by José Anson

José Anson

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne)

Olivier Cadot

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne); Centre for Economic Policy Research (CEPR); World Bank

Antoni Estevadeordal

Inter-American Development Bank (IADB)

Jaime de Melo

University of Geneva - Department of Political Economics; Centre for Economic Policy Research (CEPR); World Bank

Akiko Suwa-Eisenmann

L'Ecole Normale Superieure ; Paris School of Economics (PSE)

Bolormaa Tumurchudur

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne)

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Abstract

All preferential trading agreements (PTAs) short of a customs union use rules of origin (ROO) to prevent trade deflection. ROO raise production costs and create administrative costs. This paper argues that in the case of the recent wave of North-South PTAs, the presence of ROO virtually limits the market access that these PTAs confer to the Southern partners. In the case of NAFTA, we find average compliance costs around 6% in ad valorem equivalent, undoing the tariff preference (4% on average) for a large number of tariff lines. Administrative costs amount to 47% of the preference margin. These findings are coherent with the view that North-South PTAs could well be viewed like a principal-agent problem in which the Southern partners are just about left on their participation constraint.

Suggested Citation

Anson, José and Cadot, Olivier and Estevadeordal, Antoni and de Melo, Jaime and Suwa-Eisenmann, Akiko and Tumurchudur, Bolorma, Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA. Review of International Economics, Vol. 13, No. 3, pp. 501-517, August 2005. Available at SSRN: https://ssrn.com/abstract=758623

José Anson (Contact Author)

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland

Olivier Cadot

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland
+41 21 692 3463 (Phone)
+41 21 692 3495 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

Antoni Estevadeordal

Inter-American Development Bank (IADB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States
202-623-2614 (Phone)
202-623-3030 (Fax)

Jaime De Melo

University of Geneva - Department of Political Economics ( email )

40, boulevard du Pont-d'Arve
Geneva 4, CH-1211
Switzerland
+41 22 705 8273 (Phone)
+41 22 705 8293 (Fax)

HOME PAGE: http://www.unige.ch/ses/ecopo/demelo/Jaime.html

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Akiko Suwa-Eisenmann

L'Ecole Normale Superieure ( email )

48 boulevard Jourdan
75014 Paris
France
+33 1 4313 6325 (Phone)
+33 1 4313 6362 (Fax)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Bolorma Tumurchudur

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland

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