Economic Integration and Rules of Origin Under International Oligopoly

Jota Ishikawa, Hiroshi Mukunoki and Yoshihiro Mizoguchi

Chapter 6 in Strategic Trade Policy, 2026, pp 115-151 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Free trade agreements (FTAs) have rules of origin (ROOs) to prevent tariff circumvention by firms of nonmember countries. This chapter points out that in imperfectly competitive markets, ROOs have another role overlooked in the existing literature. Instead of focusing on the impacts of ROOs in the intermediate-good markets, we draw our attention to the final-good markets to examine the effects of ROOs. We find that under some conditions, ROOs benefit both firms at the expense of consumers. Under some other conditions, ROOs benefit the firm producing outside the FTA and hurt the firm producing inside the FTA.

Keywords: Strategic Trade Policy; Rent-shifting; Monopoly; Oligopoly; Oligopsony; Trade Liberalization; Trade Costs; Tariffs; Subsidies; Foreign Direct Investment; Outsourcing; Segmented Markets; Integrated Markets; Intermediate Products; Vertical Market Structure; Information (search for similar items in EconPapers)
JEL-codes: F1 F10 F13 L1 (search for similar items in EconPapers)
Date: 2026
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