Reconciling Rules of Origin and Global Value Chains: The Case For Reform

Rules of Origin (ROO) are in need of reform. Aside from being used for protectionist purposes, they have also become so complicated that they result in companies foregoing trade preferences granted by preferential agreements on a substantial scale. This paper makes the argument for a fundamental reconceptualization of ROO, based on today’s Global Value Chains (GVCs). The paper is divided in four sections. First, it surveys the methods currently applied for assigning origin. Existing obstacles to reform are then outlined. A third section briefly examines previous attempts at reforming ROO. Fourth, the contours and possible ramifications of a value added approach to determining origin are explored, given that (a) ROO are not suitable for today’s world characterized by GVCs; and (b) the tension between bilaterally established rules and multilateral decision-making continues to hamper attempts at harmonization or reform.