From Final Goods to Inputs: The Protectionist Effect of Rules of Origin

• Authors: Manuel García-Santana.
• American Economic Review

Recent decades have witnessed a surge of trade in intermediate goods and a proliferation of free trade agreements (FTAs). F TAs use rules of origin (RoO) to distinguish goods originating from member countries from those originating from third countries. We focus on the North American Free Trade Agreement (NAF TA), the world's largest F TA, and construct a unique dataset that allows us to map the input-output linkages in its RoO. Exploiting cross-product and cross-country variation in treatment over time, we show that NAF TA RoO led to a sizable reduction in imports of intermediate goods from third countries relative to NAF TA partners.