Chapter

Preferential trade arrangements production, and trade with differentiated intermediates <sup>†</sup>

Olivier Cadot, Antoni Estevadeordal, Akiko Suwa-Eisenmann and Thierry Verdier

in The Origin of Goods

Published in print February 2006 | ISBN: 9780199290482
Published online May 2006 | e-ISBN: 9780191603471 | DOI: http://dx.doi.org/10.1093/0199290482.003.0010
 Preferential trade arrangements production, and trade with differentiated intermediates  †

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This chapter focuses on the difference between free trade agreements with rules of origin and customs unions. The first part develops a model to assess the trade and production in intermediate and final goods under these two forms of preferential trading arrangements. The second part performs a cross-sectional econometric analysis of bilateral trade in finished motor vehicles and parts in the OECD area. The findings suggest that ROO can be an effective barrier against third-party suppliers of intermediate goods, and that the ‘border effect’ on trade is mitigated within customs unions.

Keywords: rules of origin; preferential trading arrangement; free trade agreement; customs union; border effect; final good; intermediate good; OECD; motor vehicle

Chapter.  8595 words.  Illustrated.

Subjects: International Economics

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