Rules of Origin: Regimes in East Asia and Recommendations for Best Practice

Erlinda M. Medalla
JEL codes: 

With globalization and advances in information and communication technology (ICT) leading to growing international production sharing, amidst the increasing trend in preferential trading arrangements (PTAs), rules of origin (ROO) has been beset with difficult recurring issues. First and foremost is the cost of ROO administration. Second, ROO as part of PTAs could generate new barriers to trade, thus taking with one hand what the other hand has given. In turn, this gives rise to another key concern: its potential use as a protectionist tool.
To achieve the East Asian vision of a community, any RTA it would endeavor to establish should set a rational, enabling regime of ROO that would facilitate even as it attempts to prevent trade deflection, with enough safeguards for inclusive development both within and across countries in the region. There is a consensus that the movement should be towards more simple and unrestrictive ROO.
In sum,
o Consolidation of the multiple membership agreements in the region around more liberal ROO should be the general guideline to achieve the vision of an East Asian community.
o Currently, majority of East Asia RTAs combine the three main ROO approaches: (1) the regional value added criterion- RVA, (2) the change in tariff classification- CTC and (3) specified processes (SP). Liberalizing features such as de minimis are in cases used, often in a product specific approach. Reliance on government certification is the general rule.
o The relatively simple and liberal ROO provision of AFTA, and the generality in application. In addition, reforms being sought lean towards more liberal rules by expanding/easing standards.
o The AFTA ROO would provide a good starting point for EAFTA.
o Necessarily, there should be a coordinated and cooperative action among member countries.