Rules of Origins Relaxation and Regional Supply Chains: Evidence from Europe

Pamela Bombarda, Elisa Gamberoni and Irene Iodice ()
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Irene Iodice: Université de Cergy-Pontoise, THEMA

No 2023-13, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: Rules of Origin (RoO) and cumulation provisions in Free Trade Agreements (FTAs) define how firms can source inputs while maintaining preferential access. Using a newly constructed database of detailed RoO regulations in the European Union, we examine how these origin requirements shape supply chains by studying two major policy changes in Europe: the PECS framework, which enabled production sharing among the EU’s peripheral FTA partners, and the 2004 EU enlargement, which eliminated RoO entirely for newly acceded members. Our results show that RoO significantly affect trade patterns–a 1% increase in value requirements before relaxation led to a 0.4-0.7% rise in intermediate imports from countries where restrictions were lifted. This response is generally stronger when preferential margins for final goods are high, suggesting that RoO interact with tariff preferences to shape global value chains. These findings underscore the trade-off policymakers face between protecting regional production through origin requirements and promoting economic integration and supply chain efficiency.

Keywords: Intermediate inputs trade; rules of origin; cumulation; PECS; EU enlargement; input-output tables. (search for similar items in EconPapers)
JEL-codes: F11 F13 F14 F15 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-eec and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2023-13

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