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Journal of Economic Integration 2007 June;22(2) :288-319.
Rules of Origin for Preferential Trading Arrangements: Implications for the ASEAN Free Trade Area of EU and US Experience

Olivier Cadot Jaime de Melo Alberto Portugal-Pérez 

University of Lausanne
University of Geneva
Copyright ©2007 Journal of Economic Integration

With free trade areas (FTAs) under negotiation between Japan and the ASEAN Free Trade Area (AFTA) members and between the Republic of Korea and AFTA members, preferential market access will become more important in Asian regionalism. Protectionist pressures will likely increase through rules of origin, the natural outlet for these pressures. Based on the experience of the European Union and the United States with rules of origin, this paper argues that, should these FTAs follow in the footsteps of the EU and the US and adopt similar RoO, trading partners in the region would incur unnecessary costs. Using EU trade with GSP and ACP partners, the paper estimates how the utilization of preferences would likely change if AFTA were to veer away from its current uniform RoO requiring a 40% local content rate. Depending on the sample used, a 10 percentage point reduction in the local value content requirement is estimated to increase the utilization rate of preferences by between 2.5 and 8.2 percentage points.

JEL classification: F13, F15

Keywords: Rules of Origin | Preferential Trade Agreements | Market Access | NAFTA | PANEURO | AFTA | ASEAN
1. Anson, J., O. Cadot, C. Carrère, A. Estevadeordal, J. de Melo, and B. Tumurchudur, (2005), "Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA", Review of International Economics,.
2. Antkiewicz, A. and J. Whalley, (2004), "China's New Regional Trade Agreements", NBER #10992
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