DP5264 How Much Market Access in FTAs? Textiles Under NAFTA

Author(s): Olivier Cadot , Céline Carrère , Jaime de Melo , Alberto Portugal-Pérez

Publication Date: October 2005

Keyword(s): NAFTA , rules of origin , regional integration

JEL(s): F10 , F13 , F15

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP5264.asp

This paper estimates the effective market access granted under NAFTA in textiles and apparel by combining two approaches. First, we estimate the effect of tariff preferences and rules of origin on the border prices of Mexican final goods exported to the US and of US intermediates exported to Mexico. We find that one third of the estimated rise in the border price of Mexican apparel products compensates for the cost of complying with NAFTA’s rules of origin. We also find that the price of US intermediates exported to Mexico is raised significantly by the presence of rules of origin downstream. Second, simulations from a structural model inspired by our econometric estimates, suggest little market access improvement for Mexican exporters.