Diagonal Cumulation and Sourcing Decisions

Pamela Bombarda and Elisa Gamberoni ()
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Elisa Gamberoni: Université de Cergy-Pontoise, THEMA

No 2020-03, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: Free trade agreements (FTAs) are characterized by rules of origin (RoO) and cumula- tion. These rules define which intermediate goods allow a final product to qualify for preferential access. Recent literature shows that RoO led to a reduction in imports of intermediate goods from third countries relative to partners. We consider the impact of the Pan-European Cumulation System (PECS), which provided the possibility of cumulating stages of production across European Union's FTA peripheral partners. We find that PECS reshaped regional supply chains by increasing imports of inter- mediates among these peripheral countries relative to both the European Union (EU) and third countries. We also find that PECS reinforced their value chain links with third countries relative to the EU, contributing to multilateralize regionalism.

Keywords: Intermediate Trade; rules of origin; diagonal cumulation; PECS; input-output tables. (search for similar items in EconPapers)
JEL-codes: F12 F13 F14 F15 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-eec, nep-int and nep-ore
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Working Paper: Diagonal Cumulation and Sourcing Decisions (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2020-03

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