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

Rules of origin are legitimate policy instruments to prevent trade deflection in a preferential trade agreement short of a customs union. Trade deflection takes place when a product imported into the preferential trade agreement through the member...

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Main Author: Portugal-Perez, Alberto
Format: Policy Research Working Paper
Language:English
Published: 2012
Subjects:
Online Access:http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090227085315
http://hdl.handle.net/10986/4044
id okr-10986-4044
recordtype oai_dc
spelling okr-10986-40442021-04-23T14:02:14Z Assessing the Impact of Political Economy Factors on Rules of Origin under NAFTA Portugal-Perez, Alberto ACCOUNTING APPAREL APPAREL EXPORTS BENCHMARK BILATERAL CUMULATION BLOC TARIFFS CAPTIVE MARKETS CHECKS COMMODITY DESCRIPTION COMPARATIVE ADVANTAGE COMPETITIVE ADVANTAGE COMPETITIVENESS CONTRACTING PARTIES CUSTOMS CUSTOMS UNION DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DOMESTIC PRODUCERS DUMMY VARIABLES DUTY DRAWBACK DUTY DRAWBACKS ECONOMETRIC ESTIMATES ECONOMETRICS ECONOMIC IMPLICATIONS ECONOMIC JUSTIFICATION ECONOMICS RESEARCH EXPECTED VALUE EXPORT COSTS EXPORT DIVERSIFICATION EXPORT SECTOR EXPORT SUBSIDIES EXPORT-ORIENTED INDUSTRIES EXPORTER EXPORTERS EXPORTS EXTERNAL TARIFF FINANCIAL SUPPORT FREE TRADE FREE TRADE AGREEMENT FREE TRADE AGREEMENTS FREE TRADE AREA GENERALIZED SYSTEM OF PREFERENCES GLOBAL ECONOMY HOMOGENEOUS GOODS IMPORT PENETRATION IMPORT TARIFFS IMPORTING COUNTRY IMPORTS INDUSTRIALIZATION INTERMEDIATE GOODS INTERMEDIATE INPUTS INTERMEDIATE MARKETS INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL LAW INTERNATIONAL TRADE LOBBYING MARKET ACCESS MOST FAVORED NATION NON-TARIFF BARRIERS PARTICIPATION CONSTRAINT POLICY RESEARCH POLITICAL ECONOMY POTENTIAL BENEFITS PREFERENTIAL ACCESS PREFERENTIAL MARKET ACCESS PREFERENTIAL RATES PREFERENTIAL TARIFF PREFERENTIAL TRADE PREFERENTIAL TRADE AGREEMENT PREFERENTIAL TRADE AGREEMENTS PREFERENTIAL TRADING ARRANGEMENTS PRODUCT DIFFERENTIATION PRODUCTION COSTS PRODUCTION PROCESS PROTECTIONISM PROTECTIONIST PROTECTIONIST DEVICES QUANTITATIVE RESTRICTIONS REGIONAL INTEGRATION REGIONAL TRADE REGIONAL TRADE AGREEMENTS REGIONAL VALUE CONTENT RENEGOTIATION RULES OF ORIGIN STATISTICAL DATA TARIFF BARRIERS TARIFF CLASSIFICATION TARIFF DATA TARIFF ESCALATION TARIFF LINE TARIFF LINES TARIFF PREFERENCES TARIFF REVENUE TRADE COSTS TRADE DEFLECTION TRADE FACILITATION TRADE POLICY TRADE PREFERENCES TRADE PROTECTION TRADE REGIMES TRADE VOLUMES TRADING TRANSPARENCY TRUST FUND UNEMPLOYMENT VALUE ADDED WORLD TRADE Rules of origin are legitimate policy instruments to prevent trade deflection in a preferential trade agreement short of a customs union. Trade deflection takes place when a product imported into the preferential trade agreement through the member with the lowest external tariff is transhipped to a higher-tariff member, while yielding a benefit for the re-exporter. Yet, when captured by special interest groups, rules of origin can restrict trade beyond what is needed to prevent trade deflection. By how much do political economy factors account for the stringency of rules of origin? This study quantifies the impact of both determinants - those considered "justifiable" because they prevent trade deflection and those deemed to arise from "political economy" forces - on the restrictiveness of rules of origin under the North American Free Trade Agreement, approximated by a restrictiveness index. The main finding is that political economy forces, especially from the United States, raised significantly the restrictiveness of the rules of origin. Indeed, in industries where political-economy forces were strong prior to the North American Free Trade Agreement, as when the U.S. Most Favored Nation tariff was high or the revealed comparative advantage of Mexico (the United States) was strong (weak), more stringent rules of origin were introduced. Thus, stricter rules of origin are associated with higher production costs reducing the potential benefits of enhanced market access that is initially pursued by this type of agreement. 2012-03-19T19:08:59Z 2012-03-19T19:08:59Z 2009-02-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090227085315 http://hdl.handle.net/10986/4044 English Policy Research working paper ; no. WPS 4848 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic ACCOUNTING
APPAREL
APPAREL EXPORTS
BENCHMARK
BILATERAL CUMULATION
BLOC TARIFFS
CAPTIVE MARKETS
CHECKS
COMMODITY DESCRIPTION
COMPARATIVE ADVANTAGE
COMPETITIVE ADVANTAGE
COMPETITIVENESS
CONTRACTING PARTIES
CUSTOMS
CUSTOMS UNION
DEVELOPING COUNTRIES
DEVELOPMENT ECONOMICS
DOMESTIC PRODUCERS
DUMMY VARIABLES
DUTY DRAWBACK
DUTY DRAWBACKS
ECONOMETRIC ESTIMATES
ECONOMETRICS
ECONOMIC IMPLICATIONS
ECONOMIC JUSTIFICATION
ECONOMICS RESEARCH
EXPECTED VALUE
EXPORT COSTS
EXPORT DIVERSIFICATION
EXPORT SECTOR
EXPORT SUBSIDIES
EXPORT-ORIENTED INDUSTRIES
EXPORTER
EXPORTERS
EXPORTS
EXTERNAL TARIFF
FINANCIAL SUPPORT
FREE TRADE
FREE TRADE AGREEMENT
FREE TRADE AGREEMENTS
FREE TRADE AREA
GENERALIZED SYSTEM OF PREFERENCES
GLOBAL ECONOMY
HOMOGENEOUS GOODS
IMPORT PENETRATION
IMPORT TARIFFS
IMPORTING COUNTRY
IMPORTS
INDUSTRIALIZATION
INTERMEDIATE GOODS
INTERMEDIATE INPUTS
INTERMEDIATE MARKETS
INTERNATIONAL BANK
INTERNATIONAL ECONOMICS
INTERNATIONAL LAW
INTERNATIONAL TRADE
LOBBYING
MARKET ACCESS
MOST FAVORED NATION
NON-TARIFF BARRIERS
PARTICIPATION CONSTRAINT
POLICY RESEARCH
POLITICAL ECONOMY
POTENTIAL BENEFITS
PREFERENTIAL ACCESS
PREFERENTIAL MARKET ACCESS
PREFERENTIAL RATES
PREFERENTIAL TARIFF
PREFERENTIAL TRADE
PREFERENTIAL TRADE AGREEMENT
PREFERENTIAL TRADE AGREEMENTS
PREFERENTIAL TRADING ARRANGEMENTS
PRODUCT DIFFERENTIATION
PRODUCTION COSTS
PRODUCTION PROCESS
PROTECTIONISM
PROTECTIONIST
PROTECTIONIST DEVICES
QUANTITATIVE RESTRICTIONS
REGIONAL INTEGRATION
REGIONAL TRADE
REGIONAL TRADE AGREEMENTS
REGIONAL VALUE CONTENT
RENEGOTIATION
RULES OF ORIGIN
STATISTICAL DATA
TARIFF BARRIERS
TARIFF CLASSIFICATION
TARIFF DATA
TARIFF ESCALATION
TARIFF LINE
TARIFF LINES
TARIFF PREFERENCES
TARIFF REVENUE
TRADE COSTS
TRADE DEFLECTION
TRADE FACILITATION
TRADE POLICY
TRADE PREFERENCES
TRADE PROTECTION
TRADE REGIMES
TRADE VOLUMES
TRADING
TRANSPARENCY
TRUST FUND
UNEMPLOYMENT
VALUE ADDED
WORLD TRADE
spellingShingle ACCOUNTING
APPAREL
APPAREL EXPORTS
BENCHMARK
BILATERAL CUMULATION
BLOC TARIFFS
CAPTIVE MARKETS
CHECKS
COMMODITY DESCRIPTION
COMPARATIVE ADVANTAGE
COMPETITIVE ADVANTAGE
COMPETITIVENESS
CONTRACTING PARTIES
CUSTOMS
CUSTOMS UNION
DEVELOPING COUNTRIES
DEVELOPMENT ECONOMICS
DOMESTIC PRODUCERS
DUMMY VARIABLES
DUTY DRAWBACK
DUTY DRAWBACKS
ECONOMETRIC ESTIMATES
ECONOMETRICS
ECONOMIC IMPLICATIONS
ECONOMIC JUSTIFICATION
ECONOMICS RESEARCH
EXPECTED VALUE
EXPORT COSTS
EXPORT DIVERSIFICATION
EXPORT SECTOR
EXPORT SUBSIDIES
EXPORT-ORIENTED INDUSTRIES
EXPORTER
EXPORTERS
EXPORTS
EXTERNAL TARIFF
FINANCIAL SUPPORT
FREE TRADE
FREE TRADE AGREEMENT
FREE TRADE AGREEMENTS
FREE TRADE AREA
GENERALIZED SYSTEM OF PREFERENCES
GLOBAL ECONOMY
HOMOGENEOUS GOODS
IMPORT PENETRATION
IMPORT TARIFFS
IMPORTING COUNTRY
IMPORTS
INDUSTRIALIZATION
INTERMEDIATE GOODS
INTERMEDIATE INPUTS
INTERMEDIATE MARKETS
INTERNATIONAL BANK
INTERNATIONAL ECONOMICS
INTERNATIONAL LAW
INTERNATIONAL TRADE
LOBBYING
MARKET ACCESS
MOST FAVORED NATION
NON-TARIFF BARRIERS
PARTICIPATION CONSTRAINT
POLICY RESEARCH
POLITICAL ECONOMY
POTENTIAL BENEFITS
PREFERENTIAL ACCESS
PREFERENTIAL MARKET ACCESS
PREFERENTIAL RATES
PREFERENTIAL TARIFF
PREFERENTIAL TRADE
PREFERENTIAL TRADE AGREEMENT
PREFERENTIAL TRADE AGREEMENTS
PREFERENTIAL TRADING ARRANGEMENTS
PRODUCT DIFFERENTIATION
PRODUCTION COSTS
PRODUCTION PROCESS
PROTECTIONISM
PROTECTIONIST
PROTECTIONIST DEVICES
QUANTITATIVE RESTRICTIONS
REGIONAL INTEGRATION
REGIONAL TRADE
REGIONAL TRADE AGREEMENTS
REGIONAL VALUE CONTENT
RENEGOTIATION
RULES OF ORIGIN
STATISTICAL DATA
TARIFF BARRIERS
TARIFF CLASSIFICATION
TARIFF DATA
TARIFF ESCALATION
TARIFF LINE
TARIFF LINES
TARIFF PREFERENCES
TARIFF REVENUE
TRADE COSTS
TRADE DEFLECTION
TRADE FACILITATION
TRADE POLICY
TRADE PREFERENCES
TRADE PROTECTION
TRADE REGIMES
TRADE VOLUMES
TRADING
TRANSPARENCY
TRUST FUND
UNEMPLOYMENT
VALUE ADDED
WORLD TRADE
Portugal-Perez, Alberto
Assessing the Impact of Political Economy Factors on Rules of Origin under NAFTA
geographic_facet The World Region
The World Region
relation Policy Research working paper ; no. WPS 4848
description Rules of origin are legitimate policy instruments to prevent trade deflection in a preferential trade agreement short of a customs union. Trade deflection takes place when a product imported into the preferential trade agreement through the member with the lowest external tariff is transhipped to a higher-tariff member, while yielding a benefit for the re-exporter. Yet, when captured by special interest groups, rules of origin can restrict trade beyond what is needed to prevent trade deflection. By how much do political economy factors account for the stringency of rules of origin? This study quantifies the impact of both determinants - those considered "justifiable" because they prevent trade deflection and those deemed to arise from "political economy" forces - on the restrictiveness of rules of origin under the North American Free Trade Agreement, approximated by a restrictiveness index. The main finding is that political economy forces, especially from the United States, raised significantly the restrictiveness of the rules of origin. Indeed, in industries where political-economy forces were strong prior to the North American Free Trade Agreement, as when the U.S. Most Favored Nation tariff was high or the revealed comparative advantage of Mexico (the United States) was strong (weak), more stringent rules of origin were introduced. Thus, stricter rules of origin are associated with higher production costs reducing the potential benefits of enhanced market access that is initially pursued by this type of agreement.
format Publications & Research :: Policy Research Working Paper
author Portugal-Perez, Alberto
author_facet Portugal-Perez, Alberto
author_sort Portugal-Perez, Alberto
title Assessing the Impact of Political Economy Factors on Rules of Origin under NAFTA
title_short Assessing the Impact of Political Economy Factors on Rules of Origin under NAFTA
title_full Assessing the Impact of Political Economy Factors on Rules of Origin under NAFTA
title_fullStr Assessing the Impact of Political Economy Factors on Rules of Origin under NAFTA
title_full_unstemmed Assessing the Impact of Political Economy Factors on Rules of Origin under NAFTA
title_sort assessing the impact of political economy factors on rules of origin under nafta
publishDate 2012
url http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090227085315
http://hdl.handle.net/10986/4044
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