Free Trade Agreements as Protectionist Devices: Rules of Origin 1

Until recently, little attention was paid to free trade agreements (FTAs), and most theory regarding preferential trading arrangements focused on customs unions (CUs). With the recent negotiation of the NAFTA treaty, however, attention is turning to FTAs. Most analysts have regarded FTAs as being little different in their trade effects from CUs, and the NAFTA has mostly been analyzed in the traditional CU framework. For example, it has been argued that the US-Mexican FTA is probably “natural” and hence likely to be trade creating, increasing economic efficiency ² and thus enhancing welfare. ³