Impact of Rules of Origin on Market Access in Japan for Developing Countries Under Generalized System of Preferences (GSP)

Abstract

This paper analyses the impact of rules of origin (ROO) of Japan’s Generalized System of Preferences (GSP) on Japan’s import value using data for 97 countries and territories. Under the GSP scheme, Japan unilaterally provides preferential tariff treatment for goods originating in developing countries to promote their exportation and economic growth. Aiming to capture the restrictiveness of ROO, I construct a synthetic index based on earlier research by Cadot et al. (2006). Regression results show that when the tariff rate under ROO is raised by one point, import value using GSP decreases by 19.2 per cent. This result is statistically significant and robust. An additional finding is that the GSP import value increases by approximately 3 per cent when the tariff rate is reduced by one percentage point. Furthermore, EPA eligibility reduces the GSP import value significantly because when both Economic Partnership Agreements (EPAs) and GSP preferential tariffs are provided to the same product, and if the EPA rate is less or equal to the GSP rate, importers cannot claim GSP. On the other hand, exemption from documentary submission requirements does not affect the GSP import value. These findings have the potential to enable Japan to make trade rules more strategic in response to changes in the global trade environment.