The name is absent



Rules of Origin and Gains from Trade

Earl L. Grinols* and Peri Silva^

May 2008

Abstract

This paper identifies the most restrictive limit that rules of origin can enforce and still
continue to guarantee gains from trade for free trade area formation in general settings.
Many commonly used rules of origin exceed this condition in practice. Second, free trade
areas generally involve unharmonized tariffs requiring rules of origin that make standard
analyses diffcult or inapplicable. We incorporate the identified welfare-supporting rules of
origin into standard existence of equilibrium proofs and prove the existence of a free trade
area equilibrium involving only
within-FTA transfers that is at least as satisfactory for every
consumer worldwide as an arbitrary original world trade allocation. The analysis explains
why hub-and-spoke extensions of free trade areas cannot guarantee gains from trade for all
participants in general.

JEL classification numbers: D60, F13, F15

Keywords: Rules of origin, free trade areas, Walrasian equilibrium, welfare analysis.

*Department of Economics, Hankamer School of Business, Baylor University, One Bear Place ^98003, Waco,
Texas 76798

^Corresponding Author: Department of Economics, University of North Dakota, and Centro Studi
Luca d’Agliano. Gamble 290 Centennial Drive, Grand Forks, ND 58202; Tel. (701)777-3351; e-mail:
[email protected]. Peri Silva acknowledges financial support from CAPES-Brazil.



More intriguing information

1. The mental map of Dutch entrepreneurs. Changes in the subjective rating of locations in the Netherlands, 1983-1993-2003
2. The name is absent
3. Measuring Semantic Similarity by Latent Relational Analysis
4. The name is absent
5. The name is absent
6. Family, social security and social insurance: General remarks and the present discussion in Germany as a case study
7. Optimal Vehicle Size, Haulage Length, and the Structure of Transport Costs
8. The name is absent
9. What Contribution Can Residential Field Courses Make to the Education of 11-14 Year-olds?
10. THE CO-EVOLUTION OF MATTER AND CONSCIOUSNESS1