The impact of rules of origin on trade flows

Abstract

"A great deal of post-war trade liberalization resulted from regional, preferential trade agreements. Preferential trade agreements cut tariffs on goods originating only in those nations that have signed the agreement. Therefore, they need 'rules of origin' to determine which goods benefit from the tariff cut. Rules of origin have long been ignored for two good reasons: they are dauntingly complex and at first sight appear mind-numbingly dull. The third standard reason for ignoring them - the assertion that they do not matter much - turns out to be wrong. We show that rules of origin are important barriers to trade. Moreover, such rules are emerging as an important trade issue for three additional reasons. First, preferential trade deals are proliferating worldwide. Second, the global fragmentation of production implies complex international supply chains which are particularly constrained and distorted by rules of origin. Third, the extent to which regionalism challenges the WTO-based trading system depends in part on incompatibilities and rigidities built into rules of origin." Copyright � CEPR, CES, MSH, 2005.

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Trade, Standards, and Poverty: Evidence from Senegal

“…The first critique is that the proliferation and tightening of quality and safety standards in high-income markets is causing new (non-tariff) barriers for developing country exports (Augier et al, 2005;Brenton and Manchin, 2002;Unnevehr, 2000). The second critique is that increasing standards result in the marginalization of small businesses and poor farm-households in developing countries as they are excluded from high-standards supply chains while the rents in the chain are extracted by large (often multinational) companies and developing country elites (Dolan and Humphrey, 2000;Farina and Reardon, 2000;Reardon et al, 1999).…”

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