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Preferential Trade Arrangements and the Pattern of Production and Trade when Inputs are Differentiated

Joseph Francois

This paper is concerned with rules of origin when intermediate goods are
differentiated. An analytical model emphasizes trade patterns and the relative
importance of trade in intermediates given trade preferences. Econometric evidence based on intra-OECD trade in motor vehicles and motor vehicle parts points to a systematic impact of trade costs and FTA membership, following from rules of origin and reduction in border measures, on the role of intermediates and their relative importance in production and trade. These results are consistent with a conceptual framework involving rules-base trade costs and two-way trade in differentiated intermediate goods and final goods. Keywords: rules of origin, trading costs, trade in intermediates, industry location
JEL codes: F15, F13

Last updated 28 August 2014 by IIIS (Email).