Rules of Origins Relaxation and Regional Supply Chains: Evidence from Europ

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

No 2023-13, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: Free trade agreements (FTAs) incorporate regulations regarding rules of origin (RoO) and cumulation. RoO regulations, by restricting the use of inputs outside the FTA, can affect the flow of intermediates in supply chains. We construct a new database to assess the effects of RoO, enabling us to explore two major events that led to RoO re- laxation in the European context: PECS, which provided the possibility of cumulating stages of production across the European Union’s FTA peripheral partners, and EU enlargement, which eliminated RoO altogether. Our results show that the progressive reduction in RoO had a sizeable impact on reshaping regional and international sup- ply chains. Across both episodes, we estimate consistent elasticities, indicating that a 1% increase in the value requirement restriction before relaxation corresponds to an intermediate import increase ranging from 0.3% to 0.7% from countries where RoO restrictions have been lifted.

Keywords: Intermediate inputs trade; rules of origin; cumulation; PECS; EU enlargement; input-output tables. (search for similar items in EconPapers)
JEL-codes: F12 F13 F14 F15 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-eec and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2023-13

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