Rules of origin and the use of free trade agreements

Abstract

The main points of this paper were presented at the first Global Conference of the International Network of Customs Universities on May 21-23, 2014 in Baku, the Azerbaijan Republic. One of the key reasons for countries to enter into bilateral or regional Free Trade Agreements (FTAs) is to eliminate tariff- and non-tariff barriers between or among them. Despite the proliferation, however, many companies elect not to utilize FTAs due to the regulatory burdens imposed by FTAs’ core provisions, i.e. the Rules of Origin (RoOs). Research on RoOs, however, is in its infancy, and very little has been done in the way of assessing the regulatory and administrative influences of RoOs. This paper briefly considers the broader historical context of the proliferation and the underutilization of FTAs, including how RoOs came to attract researchers’ attention. It, then, examines studies on RoOs and the aspects of RoOs that have been the subject of research. Studies have suggested an obvious interconnection among RoOs’ design, administration, and the use of FTAs. In this respect, this paper proposes that a new framework of research will complement the existing work in helping us to understand the interconnection from an administrative perspective. In constituting this framework, it is also suggested that adopting the methodologies of trade facilitation studies or tax compliance studies is a good start. By doing so, this paper provides that research into RoOs will enhance our knowledge on the cost side of FTAs.