The Origin of Goods: Rules of Origin in Regional Trade Agreements (Centre for Economic Policy Research)

347 Pages·2006·2.23 MB·English

by  Olivier Cadot

The Origin of Goods
Centre for Economic Policy Research (CEPR)
TheCentreforEconomicPolicyResearch(CEPR)wasfoundedin1983toenhance
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unifyandintegratetheEuropeaneconomicsresearchcommunity.
CEPRisbasedonanewmodeloforganizationcalleda‘thinknet’:adistributed
network of economists who are affiliated with, but not employed by, the Centre,
collaboratingthroughCEPRonawiderangeofpolicy-relevantresearchprojectsand
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institutes, central bank research departments, and international organizations.
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The Origin of Goods
Rules of Origin in Regional
Trade Agreements
Edited by
Olivier Cadot
Antoni Estevadeordal
Akiko Suwa-Eisenmann
and
Thierry Verdier
1
AC
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Acknowledgments
TheinitialideaofaconferenceandeditedvolumeonRulesofOrigingoes
back several years when Robert Devlin, then Deputy Manager at the
Integration and Regional Programs Department of the Inter-American
Development Bank (IDB), encouraged and enthusiastically supported
researchonwhatseemedatthetimeanarcanetopic,ofinterestonlytoa
handfulofspecialists.Itisatestimonytotheinitiative’sachievementthat
thetopicisnotarcaneanymore.
Finalplansforthetwoconferencesinwhichtheessayscollectedinthis
volume were discussed were drawn up between the Integration and
Regional Programs Departmentof the IDB in Washington, D.C. and two
leading research centers and networks in Europe, the Department and
Laboratory of Applied and Theoretical Economics (DELTA) and the
London-based Center for Economic Policy Research (CEPR). The first
conference,heldatParis-JourdanCampusinParisinMay–June2003,was
organized by INRA and sponsored by the IDB, DELTA, CEPR, INRA,
Fe´de´ration Paris-Jourdan and ADRES. The second and final one, held
in Washington, D.C. in February 2004, was organized and sponsored by
theIDB.
Ourdebts,aseditors,are multiple.Firstandforemost, theenthusiastic
supportshown,fromtheoutset,byallsponsorsgreatlyhelpedustocarry
this project forward to successful completion. In particular, the Inter-
American Development Bank’s financial contribution through its inte-
gration and Regional Programs department was outstandingly generous.
Several individuals stand out for their support and encouragement: in
particular Nohra Rey de Marulanda, Robert Devlin, and Carlo Binetti at
theIDB,andStephenYeoattheCEPR.
Second, our thanks go to all authors, whose combined efforts and
commitment made this book possible. Special thanks are also due to
Martha Skinner and Ziga Vodusek at the IDB as well as Madeleine Roux
and Beatrice Havet at INRA for their effort and commitment in the
organizationofthetwoconferences.Fortheircriticalcontributiontothe
v
Acknowledgments
finalconferenceanditsinvaluableimpactonthequalityofthepapersin
this volume, we would also like to thank the distinguished team of
discussants: Rafael Cornejo (IDB); Michael Ferrantino (USITC); Jeremy
Harris(IDB);BernardHoekman(WorldBank);StefanoInama(UNCTAD);
WilliamJames;MariaMayda(GeorgetownUniversity);MarceloOlarreaga
(World Bank); Antonio Spilimbergo (IMF); Brian Staples (Trade Facilita-
tion Services, Ottawa) and Robert Teh (WTO). Last but not least, the
processofproducingabookgoesbeyondthetechnicalcompetenceofthe
authors. We are deeply grateful for the skilled work of all involved, in
particular,JenniferWilkinson,AssistantCommissioningEditorandCarol
Bestley,ProductionEditoratOxfordUniversityPress.
Theviewsexpressedinthesepapersaresolelythoseoftheauthors,and
theydonotrepresenttheviewsoftheinstitutionstheyareaffiliatedwith.
O.C.
A.E.
A.S.-E.
T.V.
vi
Contents
ListofFigures ix
ListofTables x
ListofContributors xii
Introduction 1
Olivier Cadot, Antoni Estevadeordal, Akiko Suwa-Eisenmann, and
Thierry Verdier
Part I. Rules of Origin: Theoretical perspectives 17
1 Understanding Rules of Origin 19
Kala Krishna
2 The impact of Rules of Origin on strategic outsourcing:
an IO perspective 35
Mathias Thoenig and Thierry Verdier
Part II. Rules of Origin in Regional Trade Agreements
around the world 67
3 Mapping and measuring Rules of Origin around
the world 69
Antoni Estevadeordal and Kati Suominen
4 Rules of Origin for services: economic and legal
considerations 114
Americo Beviglia Zampetti and Pierre Sauve´
Part III. The political economy of Rules of Origin 147
5 Rules of Origin as export subsidies 149
Olivier Cadot, Antoni Estevadeordal, and Akiko Suwa-Eisenmann
vii
Contents
6 Rules of Origin and US trade policy 173
I.M. (Mac) Destler
Part IV. Measuring the impact of Rules of Origin 189
7 Are different Rules of Origin equally costly? Estimates
from NAFTA 191
Ce´line Carre`re and Jaime de Melo
8 Implementing PTAs in the Southern Cone region
of Latin America: Rules of Origin 213
Pablo Sanguinetti and Eduardo Bianchi
9 Preferential trade arrangements production, and trade with
differentiated intermediates 237
Joseph Francois
Part V. Rules of Origin and development 257
10 Rules of Origin as tools of development? Some lessons
from SADC 259
Hennie Erasmus, Frank Flatters, and Robert Kirk
11 Trade preferences for Africa and the impact of Rules
of Origin
Paul Brenton and Takako Ikezuki 295
Index 315
viii
List of Figures
1 Verticaltradeinatwo-stageframework 4
2 Theeffectoftariffpreferences 5
3 TariffpreferencesandRoOcombined 6
4 PSROrestrictivenessandregime-widefacilitation,selectedPTAs 10
1.1 PhysicalcontentRoOandcosts 25
1.2 Demand,priceandcostinanFTA 27
2.1 Reactioncurveofoutsourcing 40
2.2 Nashequilibriuminoutsourcing 41
2.3 Profitfunctions 44
2.4 ReactioncurveundertheRoO 45
2.5 (a)Someusefulnotations;(b)EquilibriumwithabindingRoO;
(c)MultipleequilibriainoutsourcingwithRoO 46
2.6 EffectsofRoOonprofits 48
2.7 Equilibriumintheno-RoOregime 56
2.8 EffectofaRoOonlocalsupplier’sinvestment 59
2.9 EffectofaRoOonmonopoly’soutputandprofit 60
2.10 PositiveeffectofaRoOonequilibrium 61
2.11 PerverseeffectofaRoOonequilibrium 62
3.1 DistributionofCTCcriteriabyagreement 82
3.2 RestrictivenessofRoOinselectedPTAs 94
3.3 FacilitationindexforselectedPTAs 97
9.1 Turkey’smotorvehicleexportstoGermany 251
9.2 Mexico’sautoexportstotheUS 251
ix