The politics of rules of origin

The political economy literature of international trade posits that external trade policies are closely linked with domestic and foreign political processes. Rules of origin (ROOs) aim to determine whether a particular trade concession (e.g., duty-free import) will be applied to a given product in international trade. Certain features of ROOs make them particularly susceptible for employment as an instrument of foreign and domestic policies. The increasing political employment of ROOs was one of the principal factors leading to the inclusion of this topic in the Uruguay Round agenda and the formulation of the 1994 World Trade Organization (WTO) Agreement on Rules of Origin. As elaborated in the subsequent text, that initial agreement is not effectively coping with the widening political employment of ROOs. This chapter analyzes the political utilization of ROOs and offers some proposals to strengthen future agreement in this sphere. Rules of origin primarily serve as a differentiating mechanism for distinguishing between products according to their place of production. These rules are indispensable for the operation of international trade regimes that promote liberalization on a reciprocal basis. Under the WTO agreements, as well as bilateral and regional trade agreements (RTAs), trade concessions are granted only to products manufactured in states that undertake to grant concessions to products of other contracting states.