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

Abstract

Preferential rules of origin (PROOs) are a hallmark of the modern Regional Trade Agreement network. However, the ever-rising use of PROOs has revealed their dual economic function: to prevent trade deflection from occurring, and to export domestic State protectionism to the regional level. This paper challenges existing scholarship and reassesses the WTO disciplines applicable to PROOs. Using the United States-Mexico-Canada Agreement as a case-study, it examines the ways in which PROOs have obstructed trade liberalization at the regional level in favour of embedding protectionism in certain sectors. The disciplines under Article III:4 GATT, Annex II of the Agreement on Rules of Origin, and the Trade Facilitation Agreement are then shown to limit Members' discretion in adopting PROOs. Finally, the internal and external conditions of Article XXIV GATT further restrain the extent to which Members may lawfully export their domestic protectionism through Regional Trade Agreements. Crucially, violations of the restraints under Article XXIV GATT are unlikely to be justified based on Article XX(d) GATT.