Economic effects of rules of origin

Abstract

Economic Effects of Rules of Origin. — Rules of origin exist because governments wish to discriminate amongst products on the basis of their “country of origin”. Since the components and activities that make up the total value added of many products are not created in a single location, rules to define a unique geographical source for products must be somewhat arbitrary, and inevitably introduce distortions into production and trade patterns as producers seek to provide their products with the most favourable origin. This paper considers the structure of such rules and their economic consequences.