Heterogeneous Trade Agreements and Adverse Implications of Restrictive Rules of Origin: Evidence From Apparel Trade

Kaleb Abreha and Raymond Robertson

Chapter 5 in Not Just Neighbors:The Remarkable Economic Relationships in North America, 2026, pp 149-189 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We revisit the heterogeneous effects of regional trade agreements (RTAs) using a PPML gravity model and comparing apparel and total trade. Apparel, as a politically sensitive sector, has specialized, unusually restrictive rules of origin (RoOs) clauses that vary considerably across RTAs. Our RTA estimates have a significantly higher variance for apparel trade than total trade. We also find that the sizes of the RTA estimates for apparel trade are significantly and negatively correlated with the restrictiveness of RoOs. Additionally, assessing temporary exceptions to the apparel RoOs in US trade agreements, we find that ending the temporary exceptions is associated with less apparel trade. We further illustrate how RTAs can be effective development policy instruments to promote economic development in developing countries. For example, updating the RoOs in the Dominican Republic-Central America Free Trade Agreement can create jobs and significantly reduce Central American emigration.

Keywords: US–Mexico Trade; Economic Integration; North American Competitiveness; USMCA / NAFTA; Global Supply Chains; Migration and Labor Markets; Wage Inequality; Cross-border Economics; Trade Policy and Development; Regional Economic Integration; US–Mexico Relations; Bilateral Trade Flows; Border Economy; Globalization and Inequality; Policy Responses to Trade Shocks (search for similar items in EconPapers)
JEL-codes: F13 F15 F22 J61 O24 P16 P52 (search for similar items in EconPapers)
Date: 2026
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