Free Trade Areas and Rules of Origin: Economics and Politics

Arvind Panagariya () and Rupa Dutta Gupta
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Rupa Dutta Gupta: IMF

International Trade from EconWPA

Abstract: We incorporate intermediate inputs into a small-union general- equilibrium model and develop the welfare economics of preferential trading under the rules of origin. Combining this analysis with the Grossman-Helpman political-economy model, we demonstrate that the rules of origin can improve the political viability of FTAs. Two interesting outcomes are derived. First, an FTA that lowered joint welfare of the union and was voted down in the absence of the rules of origin may become feasible in the presence of these rules. Second, an FTA that increased joint welfare of the union but was voted down in the absence of the rules of origin may become acceptable in the presence of these rules but it may also turn welfare inferior to status quo.

JEL-codes: F1 F2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pol
Date: 2003-08-18
Note: Type of Document - Tex/WordPerfect/Handwritten; prepared on IBM PC - PC-TEX/UNIX Sparc TeX; to print on HP/PostScript/Franciscan monk; pages: 345,395,4323247 ; figures: included/request from author/draw your own
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Related works:
Working Paper: Free Trade Areas and Rules of Origin: Economics and Politics (2003)
Journal Article: FREE TRADE AREAS AND RULES OF ORIGIN: ECONOMICS AND POLITICS (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpit:0308006

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