Straining the Spaghetti Bowl: Re-Evaluating the Regulation of Preferential Rules of Origin

Abstract

Following the multilateral push for trade liberalization, trade protectionism has reinvented itself in one form or another. One fitting illustration of this phenomenon is the use of preferential rules of origin (PROOs) – instruments which serve to determine the origin of goods and, thus, their qualification for preferences under a regional trade agreement (RTA). After the establishment of the North American Free Trade Agreement (NAFTA), strides were made in the economic literature that brought to light how PROOs foster obscure and often cumbersome administration, differentiated treatment between otherwise ‘like’ products, and strategic restraints on trade liberalization within RTAs. The surge of RTAs concluded following the Doha Development Round negotiations deadlock has further unveiled how the ambiguity of this policy-driven tool places a strain on global value chains and renders the alleged trade creation underlying RTAs almost inaccessible for small or medium-sized enterprises.