Three Essays on the Impacts of Rules of Origin in Preferential Trading Arrangements Open Access
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This dissertation examines the effects of rules of origin (ROOs) on aspects of trade policy and preferential trade performance. In the past few decades, there has been a dramatic increase in the number of bi- or pluri-lateral preferential trading agreements that provide preferential tariff treatment on eligible products from partner countries. These preferential agreements, which by nature are discriminatory, raise concerns about inefficiencies generated by the agreements' trade motivations. A key component to understanding how such agreements affect trade lies in the details of how trade qualifies for preferential treatment in the first place, which is defined by preferential rules of origin (ROOs).Since ROOs can require that inputs be sourced from within the preferential area, my first essay analyzes whether restrictive ROOs influence most favored nation (MFN) tariff rates. The incentive of a large preferential margin for the final good may be necessary to induce final goods producers to adhere to the ROOs and source potentially higher-cost inputs from the partner providing the margin. In my second essay, I propose to examine how ROOs in two different U.S. preferential regimes - unilateral preference programs and FTAs - affect preferential trade and utilization. Since preferential tariffs are generally identical under these two regimes, this analysis better isolates the effect of differences in ROOs restrictiveness. Finally, I examine exchange rates and preferential program utilization when ROOs require a share of value content. Unlike with other types of ROOs, the ability to meet value-content requirements is a function of the exchange rate between the currencies in which inputs are denominated. I investigate the possibility that while a depreciated domestic currency can improve export competitiveness, it may also make value content ROOs more difficult to meet, since foreign inputs then make up a higher share of total production costs.