Korea Trade Review (무역학회지)

Korea Trade Research Association (한국무역학회)
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An Endogenous Decision on the Stringency of the Rules of Origin Verification and its Implications: Focusing on Lobbying a Myopic Government

원산지규정 사후검증제도의 엄격성에 대한 내생적 결정과 함의 : 근시안적인 정부에 대한 로비모형을 중심으로

  • Woo, Han-Soun (Industrial Location Research Institute, Korea Industrial Complex Corporation) ;
  • Hwang, Seok-Joon (School of Economics & Trade, Kyungpook National University) ;
  • Hwang, Uk (School of Economics & Trade, Kyungpook National University)
  • 우한성 (한국산업단지공단 산업입지연구소) ;
  • 황석준 (경북대학교 경제통상학부) ;
  • 황욱 (경북대학교 경제통상학부)
  • Received : 2019.04.02
  • Accepted : 2019.04.17
  • Published : 2019.04.30
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Abstract

Recently, the Trump administration initiated a new United States-Mexico-Canada Agreement (USMCA) that strengthened NAFTA's rules of origin to enhance protectionism while maintaining the framework of trade agreements rather than completely abolishing them. This study focuses on the behavior of firms motivated to influence the government to practice protectionist trade by analyzing the rules of origin verification and adopting the political economics model. This paper explains the process of endogenous determination of the stringency of rules of origin verification as a non-tariff barrier using the lobbying model. Comparative static analysis shows that the more efficient technology a domestic firm has and the more government prefers to raise political contribution, the more is verification likely to be strict. This suggests that a rationale exists to maintain a free trade agreement in the form of the new agreement (USMCA) without abolishing the current NAFTA regime.

Keywords

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