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Rules of origin for preferential trading arrangements : implications for the ASEAN Free Trade Area of EU and U.S. experience
 
Author:Cadot, Olivier; de Melo, Jaime; Portugal-Perez, Alberto ; Collection Title:Policy Research working paper ; no. WPS 4016
Country:United States; East Asia and Pacific; Europe and Central Asia; Date Stored:2006/10/24
Document Date:2006/09/01Document Type:Policy Research Working Paper
SubTopics:Rules of Origin; Economic Theory & Research; Free Trade; Trade Policy; Trade and Regional IntegrationLanguage:English
Region:East Asia and Pacific; Europe and Central Asia; Rest Of The WorldReport Number:WPS4016
Volume No:1 of 1  

Summary: 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, the authors argue that, should these FTAs follow in the footsteps of the EU and the U.S. and adopt similar rules of origin, trading partners in the region would incur unnecessary costs. Using EU trade under the Generalized System of Preferences with Africa, Caribbean, and Pacific partners, the authors estimate how the use of preferences would likely change if AFTA were to veer away from its current uniform rules of origin requiring a 40 percent 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.

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