Rules of origin and consumer‐hurting free trade agreements*

Mukunoki, Hiroshi; Okoshi, Hirofumi

doi:10.1111/twec.13097

Cited by 4 publications

(4 citation statements)

References 19 publications

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“…Malkawi et al have examined the extent to which ROOs still represents an obstacle to the full implementation of GAFTA [13]. Mukunoki and Hirofumi argue that if the threshold required by ROO is too high, even if all trade within the FTA is duty-free, the impact of the aggregate effect may still be negative [14]. Sytsma found that the relaxing rules of origin can allow for more foreign content in exported products has a substantial effect on preference utilization rates [15].…”

Section: Literature Reviewmentioning

confidence: 99%

Assessing the effects of ROO and tariff margin on China-ASEAN free trade agreement utilization

Zhang

2023

PLoS ONE

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This study investigates the effects of rule of origin (ROOs) and tariff margin on China-ASEAN Free Trade Agreement (CAFTA) utilization. Using a sample of 40,474 product-level observations with China’s imports from ASEAN countries during the period 2015 to 2021 and adopting the Logit model estimation methods, we found that larger tariff margin positively affects the use of CAFTA, whereas, the rules of origin show a negative effect on the CAFTA utilization. In order to assess the specific impact of two effects, we also calculate the relative contribution of these two effects to the CAFTA utilization by ASEAN countries, and the results show that the rules of origin play a more important role on the CAFTA utilization by each ASEAN country. Moreover, based on heterogeneity analysis, we also find that ROOs play an important role in the use of FTA by lower middle-income countries and the tariff margin play an important role in the use of FTA by upper middle-income and high-income countries. Based on the above findings, the study proposes some policy recommendations on how to increase the CAFTA utilization by reducing the ROO costs and accelerating tariff reductions.

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Section: Literature Reviewmentioning

confidence: 99%

Assessing the effects of ROO and tariff margin on China-ASEAN free trade agreement utilization

Zhang

2023

PLoS ONE

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“…e system for measuring the level of trade facilitation is becoming more and more complete, but few studies have incorporated trade facilitation into the GTAP model and often only unilaterally pay attention to the smoothness of infrastructure [18,22,23]. erefore, the positive impact of trade facilitation on economic and trade cooperation cannot be ignored in the study of the China-Mauritian free trade zone.…”

Section: Economic Effects Of Improved Trade Facilitationmentioning

confidence: 99%

“…13 [18] Free trade agreements can harm producers and consumers through price increases and tariff exemptions, respectively.…”

Section: [16]mentioning

confidence: 99%

Price Transmission Effect of Establishing FTA with African Countries from the Perspective of Trade Facilitation

Yuan

Zhai

2022

Mathematical Problems in Engineering

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The present article introduces the price transmission effect of establishing free trade areas with African countries from the perspective of trade facilitation. Studies on China-Africa economic cooperation, tariff reduction effects, trade facilitation effects, and price transmission effects in free trade areas were reviewed. The existing literature rarely incorporates tariffs, trade facilitation, and price transmission mechanisms into the research when studying the effects of free trade areas. The present article introduces trade facilitation into the research field of China-Africa cooperation. Taking the China-Mauritius free trade area as an example, the Global Trade Analysis Project model is used to study the price transmission effect after the establishment of the China-African free trade area. Create a model and motivation for other countries to establish free trade areas with African countries. The main conclusions are as follows: China-Mauritian free trade area has improved not only the terms of trade, GDP, and social welfare of the two countries, but also other African countries. This improvement effect mainly comes from the improvement of trade facilitation, and the contribution of zero tariff policy is relatively small. The domestic price changes in many industrial sectors of the two countries showed a significant increase, while the import prices generally showed a downward trend. Therefore, countries should actively participate in the process of global economic integration, and, in the negotiation of trade liberalization, both sides should adopt differentiated negotiation strategies and improve the weak aspects of trade facilitation, respectively, to achieve a win-win situation.

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“…Mukunoki (2017) showed that an FTA with ROO may harm consumers if it changes outside firms' location decisions. Mukunoki and Okoshi (2021) investigated a firm's export price manipulation to comply with the ROO, particularly how an MNE's transfer price manipulation affects the inputs imported from outside the FTA. None of these studies, however, consider transfer price manipulation to meet ROO.…”

Section: Literature Reviewmentioning

confidence: 99%

Tariff elimination versus tax avoidance: free trade agreements and transfer pricing

Mukunoki

Okoshi

2021

Int Tax Public Finance

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We explore the new roles of rules of origin (ROO) when multinational enterprises (MNEs) manipulate their transfer prices to avoid a high corporate tax. The ROO under a free trade agreement (FTA) require exporters to identify the origin of exports to be eligible for a preferential tariff rate. We find that a value-added criterion of ROO restricts abusive transfer pricing by MNEs. Interestingly, an FTA with ROO can induce MNEs to shift profits from a low- to high-tax country. Because the ROO augment tax revenues inside FTA countries, they can transform a welfare-reducing FTA into a welfare-improving one.

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Rules of origin and consumer‐hurting free trade agreements*

Cited by 4 publications

References 19 publications

Assessing the effects of ROO and tariff margin on China-ASEAN free trade agreement utilization

Assessing the effects of ROO and tariff margin on China-ASEAN free trade agreement utilization

Price Transmission Effect of Establishing FTA with African Countries from the Perspective of Trade Facilitation

Tariff elimination versus tax avoidance: free trade agreements and transfer pricing

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