Rules of Origin and Exports in Developing Economies

Discussion Papers

No.806

by Kiyoyasu Tanaka, Takahiro Fukunishi

February 2021

ABSTRACT

Rules of origin (ROO) can be highly restrictive for developing economies to obtain preferential access, but it remains unclear whether the impacts are heterogeneous. We estimate the effect of ROO on exports in developing economies by examining European Union’s trade preferences, where origin requirements for garment products were relaxed for beneficiaries in the Interim Economic Partnership Agreements (IEPA) after 2008 and for those in the Everything But Arms (EBA) scheme after 2011, respectively. The results show that ROO liberalization has little overall effect on exports in IEPA beneficiaries, but a positive impact on those in EBA beneficiaries. Only some African and Asian beneficiaries increased their exports significantly. To explain heterogeneous responses, we discuss the initial production base, investment climate, structural transformation, and economic shocks.

Keywords: Rules of origin, GSP, trade, garment, developing economies

JEL classification: F13, F14, O14

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