Rules of origin and regional upstream competition

Kazuhiro Takauchi (), Tomomichi Mizuno and Qing Hu ()
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Kazuhiro Takauchi: Kansai University
Qing Hu: Kansai University

No 2519, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: To enjoy the preferential access of a free trade area (FTA), rules of origin (ROO) of the FTA defines how much to use regional contents. Hence, ROO defines the inter-firm transactions among upstream and downstream firms. We show asymmetric multiple equilibria in the downstream market "one firm meets ROO while the other does not" can appear for the effect of regional upstream competition. Importantly, our results, which correspond the real situation, maximizes consumer and total surpluses in the final-good importer. Hence, if the practitioner in the country concerned promoting utilization of the FTA, it may backfire.

Pages: 28 pages
Date: 2025-09
New Economics Papers: this item is included in nep-iaf
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