The EU's Reform in Rules of Origin and International Trade: Evidence from Cambodia

Discussion Papers

No.770

by Kiyoyasu Tanaka

March 2020

ABSTRACT

The European Union (EU) has unilaterally granted developing countries with preferential access to the EU markets under the Generalized System of Preferences (GSP). To obtain preferential access, exporters in beneficiary countries must follow rules of origin (ROO) in the EU’s GSP. The previous ROO were criticized as restrictive because production costs increase with a restriction on imported inputs from the lowest-cost third countries and the administrative process of proving origin. To simplify the restrictive ROO, the EU’s reform process started in 2003, and a new regulation came into force on January 1, 2011. This paper estimates the causal impact of simplifying ROO on garment exports in a beneficiary country, Cambodia, during the period 2007-2015.

Keywords: Rules of origin, GSP, trade, FDI, Cambodia, EU

JEL classification: F13, F14, F15, O14, O24

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