EconPapers    
Economics at your fingertips  
 

Rules of origin and the profitability of trade deflection

Gabriel Felbermayr, Feodora Teti and Erdal Yalcin

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: When a country grants preferential tariffs to another, either reciprocally in a free trade agreement (FTA) or unilaterally, rules of origin (Roos) are defined to determine whether a product is eligible for preferential treatment. RoOs exist to avoid that exports from third countries enter through the member with the lowest tariff (trade deflection). However, RoOs distort exporters' sourcing decisions and burden them with red tape. Using a global data set, we show that, for 86% of all bilateral product-level comparisons within FTAs, trade deflection is not profitable because external tariffs are rather similar and transportation costs are non-negligible;in the case of unilateral trade preferences extended by rich countries to poor ones that ratio is a striking 98%. The pervasive and unconditional use of RoOs is, therefore, hard to rationalize. (C) 2019 Published by Elsevier B.V.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (26)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Rules of origin and the profitability of trade deflection (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:78266

Access Statistics for this paper

More papers in Munich Reprints in Economics from University of Munich, Department of Economics Ludwigstr. 28, 80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg ().

 
Page updated 2025-03-22
Handle: RePEc:lmu:muenar:78266