Working Paper: CEPR ID: DP5144
Authors: Joseph Francois
Abstract: This paper is concerned with rules of origin when intermediate goods are differentiated. An analytical model emphasizes trade patterns and the relative importance of trade in intermediates given trade preferences. Econometric evidence based on intra-OECD trade in motor vehicles and motor vehicle parts points to a systematic impact of trade costs and FTA membership, following from rules of origin and reduction in border measures, on the role of intermediates and their relative importance in production and trade. These results are consistent with a conceptual framework involving rules-base trade costs and two-way trade in differentiated intermediate goods and final goods.
Keywords: rules of origin; trading costs; trade in intermediates; industry location
JEL Codes: F13; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| binding rules of origin (F55) | decrease in the volume of trade in finished goods between FTA partners (F10) |
| binding rules of origin (F55) | shift in import demand for finished goods away from FTA partners towards third-country suppliers (F10) |
| binding rules of origin (F55) | demand will shift from third-country suppliers towards FTA partner suppliers for intermediate goods (F10) |
| rules of origin (F55) | act as barriers to third-country suppliers (F13) |
| rules of origin (F55) | effects on internal trade in intermediates may vary (F12) |