Free Trade Agreements And Exchange Rates
We are developing a theoretical model that involves taking into account the rules of origin. is used as a measure to determine the origin of automobiles under the Trans-Pacific Partnership (TPP). Net costs are “total costs” minus promotion, marketing and after-sales service, royalties, shipping and packaging, and unauthorized interest charges. This net cost indicator is less sensitive to changes in exchange rates than to the value-added ratio, as the net cost indicator does not contain the export price, the changes of which are responsible for the impact of exchange rates on the value-added ratio. As a result, the impact of exchange rates on the use of free trade should be lower if the net cost method is used, not the value-added method. In other words, the application of the net cost method would allow exporters to avoid the fear of exchange rate fluctuations and promote stable use of free trade systems by exporters. Bureau, J C, R Chakir and J Gallezot (2007), “The use of trade preferences for developing countries in the agri-food sector,” Journal of Agricultural Economics 58, 175-198. We see this effect of exchange rates on the utilization rate of the AKFTA Free Trade Agreement. In particular, by examining the use of AKFTA at the product level for exports from ten ASEAN countries to Korea during the period 2007-2011, we find statistically significant evidence that a depreciation of the ASEAN currency against the importer`s currency (Korean won) increases AKFTA utilization rates. In particular, the positive effects of exchange rates are considered more important for regional value rules than for non-regional value rules, which means, at least in part, that exchange rates influence preferential utilization rates by changing the value ratio that plays a key role in regional value content rules in AKFTA. Our results indicate that exporters cannot inadvertently comply with the rules of origin when exchange rates fluctuate and the value ratio changes.
Similar official submissions are announced by the Japan Chamber of Commerce and Industry that exporters should regularly check for exchange rate changes (e.g. B months) and confirm that they still follow the rules of origin. Exchange rates affect the use of free trade agreements (FAs). How can we interpret this surprising evidence? The existence of rules of origin has been highlighted as one of the main barriers preventing exporters from using free trade agreements and thus maintaining incomplete ATF utilization rates. Exporters must respect the rules of origin to be eligible for free trade rights. In other words, products exported under a free trade agreement must be “of origin” among the ESTV Member States. For example, a product is not considered originating when most inputs come from free trade agreements and the added value generated is not sufficient. Therefore, depending on the production structure, exporters are not necessarily able to comply with the rules of origin and cannot apply the ESFREI regime. Even if exporters follow the rules of origin, the application of the rules imposes a heavy burden on them. For example, exporters must review their production structures in detail and write a large number of documents before receiving the certificate of origin at the customs office. Therefore, if exporters feel that the “preferential margin,” defined as the difference between MFN rates and remote free trade rates, and which is the obvious advantage of the use of free trade agreements, is not large enough to offset the costs associated with the cumbersome enforcement operations, they would not make the best use of free trade agreements.
Consistent with this view, many researchers have found that greater preferential margin and less restrictive rules of origin contribute to improved use of ATF (z.B Cadot et al. 2006, Francois et al. 2006, Manch