Return to 2003 Seminars pageWho benefits from rules of origin in a free trade area?
Jota Ishikawa, Hitotsubashi University
Abstract
Free trade areas (FTAs) have rules of origin (ROOs) in order to prevent tariff circumvention by firms of non-member countries. This paper points out that in imperfectly competitive markets, ROOs have another role which has been overlooked in the existing literature. It is shown that if the difference in external-tariffs is not so large relative to that in market sizes, ROOs benefit the firms producing those goods which do not originate in the FTA; and that if the difference in substitutability of products is not so large relative to that in external-tariffs, ROOs hurt the firms producing those goods which satisfy ROOs.
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