Diagonal Cumulation and Sourcing Decisions
Products must fulfill predetermined rules of origin to be exported under the preferential access granted by a free trade area member. In turn, rules of cumulation establish which countries' inputs qualify when computing the extent of origin of...
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/976161560386604260/Diagonal-Cumulation-and-Sourcing-Decisions http://hdl.handle.net/10986/31874 |
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okr-10986-318742022-07-18T00:22:42Z Diagonal Cumulation and Sourcing Decisions Bombarda, Pamela Gamberoni, Elisa INTERMEDIATE TRADE RULES OF ORIGIN RULES OF CUMULATION PECS INPUT-OUTPUT TABLES PREFERENTIAL TRADE EXPORTS PAN-EUROPEAN CUMULATION SYSTEM FREE TRADE AREA PREFERENTIAL ACCESS VALUE CHAIN GLOBAL VALUE CHAIN INVESTMENT DIVERSION Products must fulfill predetermined rules of origin to be exported under the preferential access granted by a free trade area member. In turn, rules of cumulation establish which countries' inputs qualify when computing the extent of origin of a product. Recent literature shows that restrictive rules of origin affect sourcing decision by reducing imports of intermediate goods from third countries relative to free trade area partners. This paper uses the introduction of the Pan-European Cumulation System in 1997 to explore the effects of rules of cumulation on trade in intermediate goods. The system provided the European Union Free Trade Area's peripheral partners (''spokes'') the possibility of cumulating stages of production from more countries to qualify for preferential access to the European Union market. Therefore, the system might have altered the organization of production in European Union centric value chains. The paper estimates a triple difference-in-differences specification and exploits different control groups. The results show that the effects of rules of cumulation on trade in intermediates are larger, with the stricter rules of origin applied to the related final good. When switching from bilateral to diagonal cumulation, the analysis finds a reduction in spokes' imports of intermediates from the rest of the world relative to those from spoke, reinforcing value chain connections within the cumulation zone. The analysis also finds a reduction in spokes' imports from the European Union 15 relative to the rest of the world and the Spokes. The findings suggest that the Pan-European Cumulation System allowed a reassessment of sourcing decisions: thanks to the possibility to cumulate, peripheral countries re-organized global value chain links. 2019-06-13T21:23:39Z 2019-06-13T21:23:39Z 2019-06 Working Paper http://documents.worldbank.org/curated/en/976161560386604260/Diagonal-Cumulation-and-Sourcing-Decisions http://hdl.handle.net/10986/31874 English Policy Research Working Paper;No. 8884 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
INTERMEDIATE TRADE RULES OF ORIGIN RULES OF CUMULATION PECS INPUT-OUTPUT TABLES PREFERENTIAL TRADE EXPORTS PAN-EUROPEAN CUMULATION SYSTEM FREE TRADE AREA PREFERENTIAL ACCESS VALUE CHAIN GLOBAL VALUE CHAIN INVESTMENT DIVERSION |
| spellingShingle |
INTERMEDIATE TRADE RULES OF ORIGIN RULES OF CUMULATION PECS INPUT-OUTPUT TABLES PREFERENTIAL TRADE EXPORTS PAN-EUROPEAN CUMULATION SYSTEM FREE TRADE AREA PREFERENTIAL ACCESS VALUE CHAIN GLOBAL VALUE CHAIN INVESTMENT DIVERSION Bombarda, Pamela Gamberoni, Elisa Diagonal Cumulation and Sourcing Decisions |
| relation |
Policy Research Working Paper;No. 8884 |
| description |
Products must fulfill predetermined
rules of origin to be exported under the preferential access
granted by a free trade area member. In turn, rules of
cumulation establish which countries' inputs qualify
when computing the extent of origin of a product. Recent
literature shows that restrictive rules of origin affect
sourcing decision by reducing imports of intermediate goods
from third countries relative to free trade area partners.
This paper uses the introduction of the Pan-European
Cumulation System in 1997 to explore the effects of rules of
cumulation on trade in intermediate goods. The system
provided the European Union Free Trade Area's
peripheral partners (''spokes'') the
possibility of cumulating stages of production from more
countries to qualify for preferential access to the European
Union market. Therefore, the system might have altered the
organization of production in European Union centric value
chains. The paper estimates a triple
difference-in-differences specification and exploits
different control groups. The results show that the effects
of rules of cumulation on trade in intermediates are larger,
with the stricter rules of origin applied to the related
final good. When switching from bilateral to diagonal
cumulation, the analysis finds a reduction in spokes'
imports of intermediates from the rest of the world relative
to those from spoke, reinforcing value chain connections
within the cumulation zone. The analysis also finds a
reduction in spokes' imports from the European Union 15
relative to the rest of the world and the Spokes. The
findings suggest that the Pan-European Cumulation System
allowed a reassessment of sourcing decisions: thanks to the
possibility to cumulate, peripheral countries re-organized
global value chain links. |
| format |
Working Paper |
| author |
Bombarda, Pamela Gamberoni, Elisa |
| author_facet |
Bombarda, Pamela Gamberoni, Elisa |
| author_sort |
Bombarda, Pamela |
| title |
Diagonal Cumulation and Sourcing Decisions |
| title_short |
Diagonal Cumulation and Sourcing Decisions |
| title_full |
Diagonal Cumulation and Sourcing Decisions |
| title_fullStr |
Diagonal Cumulation and Sourcing Decisions |
| title_full_unstemmed |
Diagonal Cumulation and Sourcing Decisions |
| title_sort |
diagonal cumulation and sourcing decisions |
| publisher |
World Bank, Washington, DC |
| publishDate |
2019 |
| url |
http://documents.worldbank.org/curated/en/976161560386604260/Diagonal-Cumulation-and-Sourcing-Decisions http://hdl.handle.net/10986/31874 |
| _version_ |
1764475267487629312 |