Divergent Integration

Jan I. Haaland, Ian Wooton

Research output: Working paperDiscussion paper

Abstract

Trade liberalisation is often characterised as either preferential or non-discriminatory but not all preferential trade agreements are the same. We focus on non‐tariff measures that can constitute barriers to trade and that differ between free‐trade agreements (FTAs) and customs unions (CUs). In particular, we investigate the role of rules of origin (RoO) in restricting market access for nations excluded from a CU. We develop a simple general equilibrium model characterised by trade in intermediate and final products and use this to examine the implications of binding RoO in an FTA on market outcomes and the welfare of agents in the economy. We highlight the phenomenon of “induced trade diversion” where RoO can result in countries losing from preferential market access.
Original languageEnglish
Place of PublicationLondon
Number of pages33
VolumeDP16040
Publication statusPublished - 13 Apr 2021

Publication series

NameInternational Trade and Regional Economics
PublisherCentre for Economic Policy Research
No.1864-1618313014
ISSN (Electronic)0265-8003

Keywords

  • preferential trading
  • rules of origin
  • non‐tariff measures

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