Would Harmonizing Preferential Rules of Origin Aid Trade Liberalization?

Abstract

Rules of origin are those laws and regulations that are applied to determine the country of origin of goods. Upon the importation of a product, each country applies its own rules of origin to determine the origin of the product. Such origin rules are known as “non-preferential rules of origin”. However, there is another type of rules of origin called “preferential rules of origin”. They are used to stipulate whether a good is deemed to originate in a preferential trade agreement partner country and consequently eligible for preferential tariff treatment. Unfortunately, preferential rules of origin have been misused by some countries to achieve protectionist, trade-diverting and political objectives. Misusing preferential rules of origin can lead to negative results and therefore does not facilitate international trade. In addition, the increase in the number of preferential trade agreements leads to the proliferation of preferential rules of origin worldwide. Their variations, along with their complexity, are considered to be a nightmare for producers and traders all over the world. Harmonizing preferential rules of origin would eliminate their negative effects, thereby helping to liberalize international trade. This thesis discusses the negative effects that may result from the misuse of preferential rules of origin and gives realistic examples showing how the misuse of rules of origin in different preferential trade regimes hinders international trade. Also, the thesis offers the member countries of the World Trade Organization a proposed harmonized set of preferential rules of origin to be hopefully implemented in the World Trade Organization system. Moreover, the thesis theoretically tests the proposal and gives very deep and technical details on that.