Working Paper: CEPR ID: DP5264
Authors: Olivier Cadot; Cline Carrere; Jaime de Melo; Alberto Portugal-Perez
Abstract: This paper estimates the effective market access granted under NAFTA in textiles and apparel by combining two approaches. First, we estimate the effect of tariff preferences and rules of origin on the border prices of Mexican final goods exported to the US and of US intermediates exported to Mexico. We find that one third of the estimated rise in the border price of Mexican apparel products compensates for the cost of complying with NAFTA?s rules of origin. We also find that the price of US intermediates exported to Mexico is raised significantly by the presence of rules of origin downstream. Second, simulations from a structural model inspired by our econometric estimates, suggest little market access improvement for Mexican exporters.
Keywords: NAFTA; regional integration; rules of origin
JEL Codes: F10; F13; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tariff preferences (F13) | border prices of Mexican apparel (F14) |
| rules of origin (F55) | border prices of Mexican apparel (F14) |
| rules of origin (F55) | input costs (D24) |
| compliance costs (Q52) | final product pricing (L11) |
| tariff preferences (F13) | retention of tariff preference margin (F16) |
| rules of origin (F55) | pricing of US intermediates (D49) |
| rules of origin (F55) | rents generated by preferential tariffs (F16) |