The WTO agreement on rules of origin: implications for South Asia

The history of 'rules of origin' – the criteria for determining the national source of origin of products – have become an essential part of any trade policy regime, for commercial policy tools, more often than not, discriminate among countries. Administration of quotas, preferential tariffs, anti-dumping actions, countervailing duties, government procurement, etc, requires clearly defined rules of origin. From neutral trade policy devices employed to identity country of origin of commodities, the rules of origin are emerging as protectionist tools. This study is a critique of the harmonisation work programme (HWP).

The central objective of the HWP is to ensure that the rules of origin are employed without/ or with least trade distorting effects. But, as the paper shows, it would be too optimistic to expect such an outcome from the HWP. On the contrary, even if it is successfully completed, the HWP is likely to leave considerable scope for misuse of rules of origin for protectionist purpose. Further, the new multilateral regime, even if it succeeds in establishing semblance of an order in the arena of rules of origin, is likely to have unequal effects on members.

The paper argues that as nation-states are increasingly denied of conventional trade policy tools, they are reasserting themselves by evolving new and less visible weapons of intervention. The misuse of rules of origin as protectionist tools is widely reported from preferential trading arrangements among developed countries, such as EEC and NAFTA. More recently, non-preferential rules of origin are also being used for protectionist purpose. The authors note that it is such protectionist adaptation of the rules of origin that has prompted the WTO to launch the HWP to evolve common rules of origin for all countries.

The emerging analysis seems to suggest that the outstanding disputes are not very encouraging for the developing countries. They belong mainly to the traditional areas of western protectionism against developing countries. The fear that the developed countries are trying to manipulate rules of origin to compensate for the loss of tariff and other conventional barriers, therefore, cannot be ruled out.