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Impact of exceptional arrangement of rules of origin on agri-product imports in China’s FTAs

LYU Jianxing1 ZENG Yinchu2

(1.School of Economics and Statistics, Guangzhou University)
(2.School of Agricultural Economics and Rural Development, Renmin University of China)
【Knowledge Link】compliance cost; rebalancing

【Abstract】The rules of origin (RoO) are the nationalities of products in Free Trade Agreements (FTAs), which are invisible protection measures on trade. In this paper, based on the product-level data of 2002–2015, we used Poisson Pseudo-Maximum Likelihood (PPML) estimator to analyze the impact of exceptional arrangement of RoO on agriproduct imports in China’s FTAs, followed by various robustness tests. The results show that both exceptional arrangement and normal arrangement of RoO have significant inhibitory effects on agri-product imports, where the inhibitory effect of exceptional arrangement is two times that of normal arrangement. These results reveal the protection effect of RoO on imports with compliance costs of 9.72% and 5.10% for exceptional arrangement and normal arrangement, respectively. In conclusion, using specific RoO to protect sensitive products could be as useful as tariffs, while RoO is easier to be achieved in trade negotiations. Thus we suggest paying more attention to RoO in China’s FTA strategy.

【Keywords】 market access; exceptional arrangements; rules of origin; Free Trade Agreement (FTA) ; agri-products;


【Funds】 Project of Guangzhou University Talent Introduction Research Startup Fund (27000503117) Major Project of National Natural Science Foundation of China (71633005)

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    [1]. ① As Grossman and Helpman (1995) stated, if sugar and citrus from the United States did not become an exceptional arrangement for tariff concessions, NAFTA might not exist. [^Back]

    [2]. ② For example, the original texts of RoO in China-ASEAN FTA and China-New Zealand FTA are 46 pages and 105 pages respectively. It is more complicated to consider the exclusions and alternative combinations of WO, CTC and RVC in RoO. [^Back]

    [3]. ① Baier and Bergstrand (2007) pointed out that controlling country-time and product-time in panel data model can better solve the relationship between time-varying non-observable factors and disturbance terms. However, due to the large observed values from text samples, if the country-time and product (2-digit code) -time are controlled, 3108 more variables (185*14) and (37*14) need to be generated, leading to excessive calculation. To this end, drawing on the practice of Hayakawaet al. (2016), this paper respectively controls the country, product and time fixed effects. [^Back]

    [4]. ② The specific RoO for agri-products in China’s FTAs are detailed in the article and authored by Lyu Jianxing et al. (2017). [^Back]

    [5]. ① The four FTAs on goods were entered into effect in July 2005, July 2006, July 2007 and October 2008, respectively. By 2015, the medium and long-term trade effects of the four FTAs have gradually emerged, while the other FTAs have not fully realized the medium and long-term trade effects. [^Back]

    [6]. ② Specifically it includes: Chapter HS01–24, as well as 2801, 2905, 3301, 3501–3505, 3809, 3823, 3913, 4101–4103, 4301, 5001–5003, 5101–5103, 5201–5203, 5301–5305 and 7101. [^Back]

    [7]. ③ Principles for conversion from Specific HS8 digit code to HS6 digit code and for conversion between different HS versions are detailed in the data description from Lyu Jianxing et al. (2017). [^Back]

    [8]. ④ Due to the limitation of space, descriptive statistics of variables are not shown here. [^Back]

    [9]. ① The formula is exp (roo_except)−1. [^Back]

    [10]. ① As Kohpaiboon (2010) pointed out, the FTA utilization rates on Thailand’s exports to Indonesia, Malaysia, the Philippines and Vietnam in 2008 were 18.3%, 27.4%, 16.7% and 26.1%, respectively. [^Back]

    [11]. ① Due to the limitation of space, the matching between the experimental group and the control group and the results of the balance test are not shown, and are available upon request. [^Back]

    [12]. ① Based on the convenience of calculation, the relative comparative advantage ratios are the average values between the years of 2002–2004, and are all data derived before the four FTAs’ entry into effect. [^Back]

    [13]. ① Similarly based on computational convenience, import proportions are the average values between the years of 2002–2004, and are all data derived before the four FTAs’ entry into effect. [^Back]


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This Article


CN: 11-1692/F

Vol , No. 11, Pages 132-144

November 2018


Article Outline



  • Introduction
  • 1 Econometric models, estimation methods and data sources
  • 2 Estimates and discussion
  • 3 Conclusions and policy implications
  • Footnote