The Laffer curve for rules of origin Head, Keith; Mayer, Thierry; Melitz, Marc
Journal of international economics,
July 2024, 2024-07-00, 2024-07, Volume:
150
Journal Article
Peer reviewed
Open access
Firms in regional trade areas choose whether to comply with rules of origin (RoO) or pay a tariff penalty. Stricter content requirements initially expand regional part sourcing, but contract it when ...set at levels above a threshold, analogously to the Laffer curve for taxes. We calibrate the model to fit part cost shares for autos sold in North America. The effects of the 75% RoO imposed in 2020 depend on the relevant tariff and the ability to relocate assembly. With fixed assembly locations, the higher RoO reduces employment in all three countries for cars, where tariffs are low. For trucks, the 25% US tariff induces more compliance in Canada and Mexico, increasing employment in those countries. With the option to relocate assembly, higher RoOs redistribute employment to the US, but Canada and Mexico lose more, leading to a half percent decline in North American employment for both cars and trucks.
This work is a reflection of a critical viewpoint on the academic work of Tania Voon. She argues on the elimination of trade remedies from the multilateral trading system of the World Trade ...Organization on the basis of various considerations, including on the basis of some lessons from Regional Trade Agreements. The article makes no attempt to strike a balance between consumer and domestic industry interests. Additionally, it must be recognized that eliminating a structural protection mechanism is not always the best course of action because, in a global market such as that of trade, there are numerous players with disparate interests. If trade remedies are eliminated, a void will exist in which there will be nothing to regulate short-term issues, which will also affect the WTO's long-term objectives.
This paper aims to investigate how selected regional trade agreements (RTAs) affect trade efficiency in East Asia, which is measured by the ratio of actual exports to their maximum potential export ...value. To achieve this, we use a stochastic frontier gravity model and bilateral trade data of 16 countries from 1990 to 2018. Our results indicate that RTAs generally improve trade efficiency between member countries. Moreover, we distinguish between intra-bloc and extra-bloc trade, and found that export diversion due to RTAs is rare in East Asia. On the other hand, our result shows that the imports of ASEAN countries tend to divert away from non-members.
In regional trade agreements (RTAs), member countries choose a common rule of origin (RoO) for each product. This study examines the factors that influence RoOs in four ASEAN‐plus‐one RTAs, which are ...agreements between ASEAN and four individual countries. One unique feature is that ASEAN as a whole negotiates with a plus‐one country, which may dilute the interests of individual ASEAN countries at large. Our findings are summarised as follows. First, the more restrictive RoOs are set in the products where plus‐one countries are less competitive against most ASEAN countries. Second, the more restrictive RoOs are likely to be imposed in products that plus‐one countries protect with higher most favoured nation tariffs. These two results reflect the bargaining power among a plus‐on country and ASEAN countries and indicate that plus‐one's preference influences RoOs more strongly. Third, we find contrasting results between intermediate and final products. RoOs are likely to be less restrictive in intermediate products and more restrictive in final products when plus‐one countries have higher export competitiveness or when the majority of ASEAN countries have higher MFN tariffs.
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