Assessing the Impact of Political Economy Factors on Rules of Origin under NAFTA

Portugal-Perez, Alberto

关键词: ACCOUNTING;    APPAREL;    APPAREL EXPORTS;    BENCHMARK;    BILATERAL CUMULATION;   

DOI  :  10.1596/1813-9450-4848
RP-ID  :  WPS4848

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Rules of origin are legitimate policyinstruments to prevent trade deflection in a preferentialtrade agreement short of a customs union. Trade deflectiontakes place when a product imported into the preferentialtrade agreement through the member with the lowest externaltariff is transhipped to a higher-tariff member, whileyielding a benefit for the re-exporter. Yet, when capturedby special interest groups, rules of origin can restricttrade beyond what is needed to prevent trade deflection. Byhow much do political economy factors account for thestringency of rules of origin?This study quantifies theimpact of both determinants - those considered"justifiable" because they prevent tradedeflection and those deemed to arise from "politicaleconomy" forces - on the restrictiveness of rules oforigin under the North American Free Trade Agreement,approximated by a restrictiveness index. The main finding isthat political economy forces, especially from the UnitedStates, raised significantly the restrictiveness of therules of origin. Indeed, in industries wherepolitical-economy forces were strong prior to the NorthAmerican Free Trade Agreement, as when the U.S. Most FavoredNation tariff was high or the revealed comparative advantageof Mexico (the United States) was strong (weak), morestringent rules of origin were introduced. Thus, stricterrules of origin are associated with higher production costsreducing the potential benefits of enhanced market accessthat is initially pursued by this type of agreement.