Type: Working Paper
From final goods to inputs: the protectionist effect of rules of origin
Working Paper, CEPR Discussion Paper, 2016/11084
CONCONI, Paola, GARCÍA-SANTANA, Manuel, PUCCIO, Laura, VENTURINI, Roberto, From final goods to inputs: the protectionist effect of rules of origin, CEPR Discussion Paper, 2016/11084 - https://hdl.handle.net/1814/60708
Retrieved from Cadmus, EUI Research Repository
Recent decades have witnessed a surge of trade in intermediate goods and a proliferation of free trade agreements (FTAs). FTAs use rules of origin (RoO) to distinguish goods originating from member countries from those originating from third countries. In this paper, we show that the sourcing restrictions embedded in RoO greatly distort trade in intermediaries. We focus on the North American Free Trade Agreement (NAFTA), the world's largest FTA, and construct a unique dataset that allows us to map the input-output linkages in its RoO. Using a difference-in-differences approach, we find that RoO on final goods reduced imports of intermediate goods from third countries by around 30 percentage points. Even if external tariffs are unchanged, FTAs may thus violate multilateral trade rules, by substantially increasing the level of protection faced by non-members.
Cadmus permanent link: https://hdl.handle.net/1814/60708
ISSN: 0265-8003; 2045-6573
Series/Number: CEPR Discussion Paper; 2016/11084
Published version: http://hdl.handle.net/1814/60673
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