Rules of Origin in Modern Trade Agreements: Trends and Challenges

Rules of origin (ROO) and their associated procedures are critical trade policy instruments that determine the eligibility of goods for preferential treatment in preferential trade agreements (PTAs), prevent trade deflection, and limit benefits to signatories. However, restrictive ROO can be used for protectionist purposes and may challenge micro, small, and medium-sized enterprises (MSMEs) with limited capacity to decipher complicated rules or refashion their supply chains. This study explores the hypothesis that MSMEs may use only PTAs where they meet preferential ROO, rather than maximizing benefits across multiple agreements, by examining (1) the evolution of preferential ROO provisions in the PTAs; (2) differences and restrictiveness of product-specific ROO and their associated procedures in selected PTAs; and (3) the impacts on businesses, especially MSMEs, and their use of available PTAs. The findings aim to inform APEC discussions on preferential ROO and their associated procedures that maximize trade liberalization benefits for MSMEs and are part of the Trade and Investment Pillar under APEC’s Free Trade Area of the Asia-Pacific (FTAAP) Agenda Work Plan.