Rules of origin and the use of free trade agreements: A literature review

Abstract

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 their proliferation, however, many companies elect not to utilise FTAs due to the regulatory burdens imposed by the core provisions of those agreements, that is, the rules of origin (RoO). Research on RoO, however, is in its infancy and very little has been done to assess their regulatory and administrative influence. The objective of this paper is to provide a brief overview of research conducted on RoO to introduce prospective researchers to the issues and research methodologies used. The paper briefly considers the broader historical context of the proliferation and the underutilisation of FTAs, including how RoO came to attract researchers' attention. It then examines studies on RoO and the aspects of RoO that have been the subject of research. An analysis of the different methodologies employed in related study areas follows. These studies suggest an obvious interconnection between the design and administration of RoO 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 also suggests adopting the methodologies of trade facilitation studies or tax compliance studies.