@article{Georges:331413,
      recid = {331413},
      author = {Georges, Patrick},
      title = {Modeling the Removal of NAFTA Rules of Origin: A  Computable General Equilibrium Analysis},
      address = {2005},
      pages = {59},
      year = {2005},
      note = {Presented at the 8th Annual Conference on Global Economic  Analysis, Lübeck, Germany},
      abstract = {NAFTA Rules of Origin (ROO) are used to determine which  goods are attributable to NAFTA member countries and thus  eligible for a preferential tariff. These rules create  incentives for NAFTA producers to source inputs from  potentially higher priced North American suppliers. As  such, a ROO is an implicit tax on the intermediate goods  produced by the rest of the world. Most computable general  equilibrium (CGE) studies assessing the welfare impact of  moving from NAFTA to a deeper form of integration, for  example a North American Customs Union (CU), typically  proxy the integration as the adoption of a common external  tariff towards the rest of the world. Thus, these studies  do not explicitly consider the impact of eliminating the  distortion created by the NAFTA ROO. This paper shows that  the failure to account for the removal of ROO in these  studies would likely lead to biased estimates. I explicitly  consider the impact of removing the NAFTA ROO in a  multi-country multi-sector dynamic general equilibrium  model. The objective is to provide better estimates of this  shock on production and welfare. Although the removal of  distortionary ROO is likely to lower the unit cost of  production within NAFTA, it may also deteriorate NAFTA  terms of trade with the rest of the world. The net effect  on welfare is ambiguous and is thus an empirical issue,  which is addressed in this paper. This is illustrated using  three distinct scenarios for which I do not take sides, but  that I propose as a springboard for a general discussion.},
      url = {http://ageconsearch.umn.edu/record/331413},
}