Rue the ROOs: Rules of origin and the gains (or losses) from trade agreements
This article provides three-good, three-country examples of trade in both intermediate inputs and final goods. These show the adverse effects that rules of origin (ROOs) can have, even in a world where every country has a free trade agreement (FTA) with every other country. ROOs may
cause ubiquitous FTAs to yield a level of welfare, for everyone, that is worse than if there were no FTAs at all, and all trade were subject to common nondiscriminatory tariffs. Thus, the move to an ever increasing number of FTAs may be reducing world welfare.
Keywords: Free trade agreements; rules of origin
Document Type: Research Article
Affiliations: Gerald R. Ford School of Public Policy, The University of Michigan, Ann Arbor, Michigan, USA
Publication date: 20 October 2018
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