The Restrictiveness of Rules of Origin in Preferential Trade Agreements

Conference paper

The Restrictiveness of Rules of Origin in Preferential Trade Agreements was presented by Paul Gretton and Jyothi Gali at the 34th Conference of Economists 2005, University of Melbourne on the 26 to 28 September 2005. The paper is based on Restrictiveness Index for Preferential Rules of Origin, a supplement to the research report Rules of Origin under the Australia—New Zealand Closer Economic Relations Trade Agreement.

Rules of origin are the criteria used to determine where a good has been made for the purpose of ensuring only the products of countries which are party to a preferential trade agreement (PTA) obtain concessional entry under the agreement. Because origin rules act as non-tariff barriers to trade, their welfare impact is not easily measured or evaluated.

This study adopts an index approach to assess the degree of restrictiveness of rules of origin in 20 agreements. This new index quantifies the trade restrictions embodied in rules of origin into a summary measure to facilitate comparisons on a common basis across PTAs. Results from the index calculations show substantial variation in the restrictiveness of origin rules across PTAs.

The results show that NAFTA and related agreements and agreements entered into by the European Union tend to have the most restrictive rules. They also show that origin rules of longer standing agreements entered into by Australia tend to be less restrictive than rules of recent agreements.