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34 J. World Trade 141 (2000)
Negotiating Preferential Market Access

handle is hein.kluwer/jwt0034 and id is 145 raw text is: Journal of World Trade 34(1): 141-166, 2000.
Q 2000 Kluu'er Lau, International. Printed in Great Britain.
Negotiating Preferential Market Access
The Case of the North American Free Trade Agreement
In recent times there has been a large amount of literature related to the
theoretical analysis of free trade agreements (FTAs).1 Nevertheless, there has been as
yet very little empirical research on the dynamics of how these agreements have been
negotiated and implemented, their impact on the pattern of trade and investment
flows, their positive or negative externalities with respect to the multilateral system,
their effects on the productive and investment decisions in each of the parties involved,
and more generally issues regarding the political economy process behind the
negotiating process. This article attempts to make a contribution with respect to the
first question, that is the dynamics of negotiating preferential market access in FTAs. In
particular, it offers a detailed analysis of one of the most important preferential
agreements negotiated in the Americas in recent times, that is the North American
Free Trade Agreement (NAFTA) among the United States, Canada and Mexico. It
also provides a new analytical framework for exploring the interdependence among
various commercial policy instruments used in preferential market access negotiations.
The focus is on the role of two key instruments: the preferential tariff phase-out
programme and the accompanying rules of origin (RoO) negotiated under the
NAFTA. This issue has been clearly stated by Mayer (1999): Why this NAFTA? Why
its long phase outs of protection for some products and immediate elimination for
others, its exemptions, its rules of origin? (p. 111) and The [NAFTA] negotiators
faced essentially two categories of [market access] problems: How fast should the tariffs
come down? And what counted as a 'North American' good? (p. 117). This article
tries to document some of the links between those questions.
Economists have tended to view market access negotiations solely in terms of tariff
(and non-tariffs) negotiations. From an analytical point of view, the role of RoO, that
is the rules that are designed to determine the origin of products in international trade,
has usually been restricted to a secondary or supportive function. As such, RoO
0   * Research Economist, Integration, Trade and Hemispheric Issues Division of the Inter-American
Development Bank, Research Economist, Washington, D.C. The author would like to thank Robert Devlin,
Carsten Kowalczyk, Kala Krishna, Eric Miller, Uzil Nogueira and Raymond Robertson for helpful comments.
Diego Sourrouille provided able research assistance. All remaining errors or omissions are the responsibility of the
author. All opinions expressed herein are those of the author and should not be interpreted as reflecting the views
of the Inter-American Development Bank (1DB). The publishers acknowledge the permission of the Institute for
the Integration of Latin America and the Caribbean (INTAL) and the Integration, Trade and Hemispheric Issues
Division (ITD) both from the IDB.
See for example Bhagwati and Panagariya (1996).
Copyright © 2007 by Kluwer Law International. All rights reserved.
No claim asserted to original government works.

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