Working Paper: CEPR ID: DP17882
Authors: Dzmitry Kniahin; Marcelo Olarreaga
Abstract: We explore the non-monotonic relationship between the restrictiveness of rules of origin (ROO) and beneficiaries’ value-added embedded in preferential exports. Using data for the European Union’s GSP schemes, we calculate the value-added maximizing level of ROO restrictiveness. Results suggest that current levels of restrictiveness in the European Union’s GSP schemes are not statistically different from optimal levels. More lenient ROO, as sometimes requested by GSP beneficiaries, would reduce their value-added to the benefit of foreign input providers.
Keywords: rules of origin; preferential exports
JEL Codes: F13; F14; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| low levels of ROO restrictiveness (D20) | beneficiaries' value-added content in preferential exports (F14) |
| high levels of ROO restrictiveness (D20) | beneficiaries' value-added content in preferential exports (F14) |
| optimal level of ROO restrictiveness (L21) | maximizes beneficiaries' value-added content in preferential exports (F14) |
| current ROO levels in EU's GSP schemes (F18) | statistically indistinguishable from optimal levels (H21) |
| reducing ROO to levels such as 10% (L42) | harm the value-added of beneficiaries (J17) |