Modeling the Removal of NAFTA Rules of Origin: A Dynamic Computable General Equilibrium Analysis

Patrick Georges

No 0705E, Working Papers from University of Ottawa, Department of Economics

Abstract: Most computable general equilibrium (CGE) studies assessing the welfare impact of moving from a North American Free Trade Agreement (NAFTA) to a deeper form of integration, for example a Customs Union (CU), typically proxy the integration as the adoption of a common external tariff towards the rest of the world. However, a CU is also an arrangement that allows for the elimination of FTAs preferential Rules of Origin (ROO), which is typically not captured in CGE studies. The paper addresses this issue using a multi-country, multi-sector dynamic CGE model. Although the removal of distortionary ROO is likely to lower the unit costs of production within North America, it may also deteriorate North American terms of trade with the rest of the world. Thus, the net effect of the removal of NAFTA ROO on welfare is ambiguous and is an empirical issue.

Keywords: NAFTA; Customs Union; Rules of Origin; Common External Tariff; Computable General Equilibrium (search for similar items in EconPapers)
JEL-codes: C68 D58 F13 F15 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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