Market Access and Welfare Under Free Trade Agreements: Textiles Under Nafta

Posted: 30 Apr 2007

See all articles by Olivier Cadot

Olivier Cadot

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

Céline Carrère

University of Geneva

Jaime de Melo

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

Alberto Portugal-Perez

World Bank

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Abstract

This paper estimates the effective market-access granted under NAFTA in textiles and apparel taking into account the presence of rules of origin (RoO) by combining two approaches. First, we estimate the effect of tariff preferences and (RoO) on the border prices of Mexican final goods exported to the US and of US intermediates exported to Mexico. We find that one third of the estimated rise in the border price of Mexican apparel products compensates for the cost of complying with NAFTA's RoO. We also find that NAFTA raised the price of US intermediates exported to Mexico by around 12% , RoOs downstream accounting for a third of that rise. Second, we use simulations to draw the likely welfare implications of RoO for Mexican exporters to the US.

Keywords: NAFTA, Rules of Origin, Regional Integration

JEL Classification: F10, F13, F15

Suggested Citation

Cadot, Olivier and Carrère, Céline and de Melo, Jaime and Portugal-Perez, Alberto, Market Access and Welfare Under Free Trade Agreements: Textiles Under Nafta. World Bank Economic Review, Vol. 19, No. 3, 2005, Available at SSRN: https://ssrn.com/abstract=982934

Olivier Cadot (Contact Author)

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

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Centre for Economic Policy Research (CEPR)

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Céline Carrère

University of Geneva ( email )

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Jaime De Melo

University of Geneva - Department of Political Economics ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

World Bank ( email )

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Alberto Portugal-Perez

World Bank ( email )

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Washington, DC 20433
United States

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