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Free Trade Areas and Rules of Origin: Economics and Politics
Author:
Mr. Arvind Panagariya null

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Rupa Duttagupta null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 229
Language:
English
Publication Date:
01 Nov 2003
DOI:
https://doi.org/10.5089/9781451875492.001
ISBN:
9781451875492
ISSN:
1018-5941
Pages:
30
Keywords:
WP; trade diversion; Rules of Origin; FTA; Welfare; Political economy; FTA equilibrium; binding ROO; FTA price; supply curve; A. ROOs; FTA endorsement; ROO inclusion; trade creating FTA; FTA viability; welfare-reducing FTA; FTA in the absence; Tariffs; Imports; Exports; Trade in goods; North America
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Incorporating intermediate inputs into a small-union general-equilibrium model, this paper first develops the welfare economics of preferential trading under the rules of origin (ROO) and then demonstrates that the ROO could improve the political viability of Free Trade Agreements (FTAs). Two interesting outcomes are derived. First, a welfare reducing FTA that was rejected in the absence of the ROO becomes feasible in the presence of these rules. Second, a welfare improving FTA that was rejected in the absence of the ROO is endorsed in their presence, but upon endorsement it becomes welfare inferior relative to the status quo.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund