Diagonal Cumulation of Rules of Origin in South America

Abstract

This paper provides a description of what Rules of Origin are, its economic effects, the main RoO types and the options for adding leniency to these rules by means of using the diagonal cumulation. Nowadays, cumulation of origin is studied in different trade agreements models in the Americas and the use of this practice among FTAs families of one or another style is imminent. According to evidence provided by several papers (Cornejo and Harris, 2007; Gasiorek, 2007; and Estavadeordal and Suominem, 2008), we estimate that taking measures for adding leniency to RoO structures will make it more attractive for regional firms to import from within the region. Finally, more flexible rules of origin will make the region more attractive to foreign investors and, as a consequence, will foster investment flows from abroad. We consider that South American countries have now an opportunity to define a strategy for cumulating origin norms among them. Therefore, it is necessary to negotiate the implementation of a single RoO regime for the region. In this negotiation we think MERCOSUR would be the leading PTA, due to the fact that it is the main player in the region.Rules of Origin, Diagonal Cumulation, Regional Integration.