ORIGINAL ARTICLE

Global Supply Chains, Trade Agreements and Rules of Origin

Posted On: Jul 24, 2021   |   Posted By: The World Economy

Abstract
Free Trade Agreements usually come with restrictions on the use of intermediate inputs in order for final goods to qualify for free trade. I focus on Rules of Origin , which limit expenses on nonmember country's intermediate inputs. In a three‐country FTA formation game, I introduce international trade in intermediate inputs and RoO restrictions. In the case of symmetric countries, I show that as countries become more involved in global supply chains, measured by their input shares in foreign final goods production, global free trade is less likely to be a stable equilibrium outcome. Free riding is the main problem preventing countries from liberalizing trade. Countries are better off being nonmembers of FTAs between the other two countries relative to global free trade. Rules of Origin can solve this problem by limiting the benefits countries get from other countries' free trade agreements. In the case of asymmetric countries, an additional incentive exists for the smaller country not...

Continue reading ...

 






The last Posts from The World Economy



Sweden's women win 2nd straight, down Australia 4-2

Sweden's women win 2nd straight, down Australia 4-2

SAITAMA, Japan - Fridolina Rolfo scored a pair of goals and Sweden won its second straight match in the group stage of the women's Olympic soccer tournament with a 4-2 victory... Read more ...

Russian star Daniil Medvedev blasts Olympics tennis tournament a ‘joke' as...

Russian star Daniil Medvedev blasts Olympics tennis tournament a ‘joke' as players grapple with sweltering conditions in Japan

Daniil Medvedev, the world's second-ranked men's tennis player, has hit out at organizers of the Olympic tennis tournament, with players being forced to contend with sweltering... Read more ...

Whatever Happened to the ‘Us vs. Them' Olympics?

Whatever Happened to the ‘Us vs. Them' Olympics?

The creators of the modern Olympics founded the Games with the intent to foster peace and brotherhood, healthy athletic competition, a humanistic appreciation of man's great... Read more ...

Crypto-based ‘shadow financial market' spooks regulators

Crypto-based ‘shadow financial market' spooks regulators

New financial services built on cryptocurrency are offering consumers the ability to borrow and trade billions of dollars without the oversight of bankers or their regulators... Read more ...

Video- Beautiful Today, Unsettled Tomorrow

Video- Beautiful Today, Unsettled Tomorrow

Read more ...

Space Jam and the Fury of an Algorithm Scorned

The reboot-along with Netflix's The Mitchells vs. the Machines-portray vengeful AIs as jilted geniuses. That revolution shouldn't be televised. Read more ...

The 16 Best Weekend Deals on Headphones, Soundbars, and More

We found discounts on a MacBook Pro, an Instant Pot, and the newest Amazon Fire tablet. Read more ...

Insiders Reveal Latest Buzz, Trade Scenarios for POR's Damian Lillard 'Crisis'

Was it a false alarm or an early warning of what's to come? Just over a week ago, Henry Abbott of True Hoop wrote, "A source close to Lillard says that in the days to come, he... Read more ...

Updated Top 100 MLB Prospects After 2021 Draft

With the 2021 MLB draft in the rearview, it's time to reset the league's landscape with an update to our top 100 prospect list that includes this year's top draft picks... Read more ...

It's a magical year for mushrooms

Rain, heat and humid help mushrooms flourish on the forest floors. Read more ...