Rules of Origin for Preferential Trading Arrangements: Implications for AFTA of EU and US Regimes

Olivier Cadot (), Jaime de Melo () and Alberto Portugal-Perez ()

No 5783, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: With FTAs under negotiation between Japan and AFTA members and between Korea and AFTA members, preferential market access will become more important in Asian regionalism. Protectionist pressures will likely rise with Rules of Origin (RoO), the natural outlet for these pressures. Based on the experience of the EU and US experience with RoO, this paper argues that, should these FTAs follow in the footsteps of the EU and the US and adopt similar RoO, trading partners in the region would incur unnecessary costs. Using EU trade with its GSP and ACP partners, the paper estimates how the utilization of preferences would likely change if AFTA were to veer away from its current uniform RoO requiring a 40% 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: AFTA; ASEAN; market access; NAFTA; PANEURO; preferential trade agreements; rules of origin (search for similar items in EconPapers)
JEL-codes: F13 F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-sea
Date: 2006-08
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