Working Paper: CEPR ID: DP4437
Authors: Cline Carrere; Jaime de Melo
Abstract: Preferential market access, either in the recent OECD initiatives or in the North-South FTAs, requires the use of rules of origin (RoO). Recent studies have questioned the extent of market access provided by these preferences. Using data on Mexican exports to the US in 2001, this Paper estimates the likely costs of different RoO for final and intermediate goods, and compares these results with those obtained from a synthetic index. Econometric results are plausible (they satisfy the revealed preference criterion that estimated costs should be less than preference rates when utilization rates are significantly positive), and they indicate that changes in tariff classification are more costly for final goods than for intermediate goods. For activities subject to regional value content minima, we carry out illustrative simulations indicating what tariff preference margin would be necessary to compensate for the import content minima. Overall, our cost estimates suggest that, at least in the case of NAFTA, preferential market access was quite small, leading us to speculate that these conclusions may carry over to other North-South preferential schemes.
Keywords: rules of origin; costs; NAFTA
JEL Codes: F13; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| changes in tariff classifications (F13) | compliance costs for final goods (Q52) |
| changes in tariff classifications (F13) | compliance costs for intermediate goods (L60) |
| ROO (R19) | compliance costs (Q52) |
| ROO (R19) | utilization rates (L97) |
| utilization rates (L97) | preference margins (D11) |