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Rules of Origin for Preferential Trading Arrangements: Implications for the ASEAN Free Trade Area of EU and U.S. Experience

31 Pages Posted: 20 Apr 2016  

Olivier Cadot

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

Alberto Portugal-Pérez

University of Geneva - Department of Political Economics

Date Written: September 1, 2006

Abstract

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.

Keywords: Free Trade, Rules of Origin, Trade and Regional Integration, Economic Theory & Research, Trade Policy

Suggested Citation

Cadot, Olivier and de Melo, Jaime and Portugal-Pérez, Alberto, Rules of Origin for Preferential Trading Arrangements: Implications for the ASEAN Free Trade Area of EU and U.S. Experience (September 1, 2006). World Bank Policy Research Working Paper No. 4016. Available at SSRN: https://ssrn.com/abstract=940247

Olivier Cadot (Contact Author)

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)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

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 )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

World Bank ( email )

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

Alberto Portugal-Pérez

University of Geneva - Department of Political Economics ( email )

40, boulevard du Pont-d'Arve
Geneva 4, CH-1211
Switzerland

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