Building Inclusive Rules of Origin in the 21st Century
The number of bilateral and plurilateral trade agreements and preferential trading schemes has increased dramatically over the past two decades. These agreements effectively enable today’s international production-sharing possibilities and are at the centre of developments in supply chains and the fragmentation of value-addition. This policy brief provides an analysis and evaluation of rules of origin (RoO) in the context of regional trade agreements (RTAs) and the multilateral system. The RoO contained within RTAs have significant implications in the way firms choose the locations in which they set up segments of their production. Strict RoO can result in economically suboptimal functioning of value chains by disincentivising the use of cheaper parts and materials from third countries, and they can also affect the ability of developing countries – especially the least developed – to fully benefit from the enhanced market access granted through RTAs.
The RTA Exchange Dialogue on Rules of Origin of which this report is part seeks to identify the role of RoO in the international trading system and identify the bottlenecks that arise in their application, especially where these can impact and suppress trade of developing countries.