ECONOMIC INTEGRATION AND RULES OF ORIGIN UNDER INTERNATIONAL OLIGOPOLY

Jota Ishikawa, Hiroshi Mukunoki and Yoshihiro Mizoguchi

International Economic Review, 2007, vol. 48, issue 1, 185-210

Abstract: Free trade agreements (FTAs) have rules of origin (ROOs) to prevent tariff circumvention by firms of nonmember countries. This article 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. Copyright 2007 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Date: 2007
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