The Impact of Preferential Rules of Origin on the Relationship of Free Trade Area and the Multilateral Trading System

Abstract

The failure of Doha negotiation made regional integration organizations became the choice of development strategies in many member states. Thus, free trade rules of origin from the initial functions of determining whether goods were eligible for preferential treatment and preventing trade deflection added the characteristics of reflecting the interests of regional member countries as well as closely integrated with the production stage. The function changes led to preferential rules of origin in free trade area as the regional trade protection tools, increased regional trade diversion effect, reduced the level of global welfare, and had a definite conflict with the multilateral trading system. However, the preferential rules of origin promoted the openness within the region and increased freedom degree, was consistent with the multilateral trading system purpose, which had a coherent basis for the two. Member countries needed to adopt the principle of gradual, cumulative to achieve the principle of preferential rules of origin coordination in WTO level, in order to facilitate common development of free trade area and the multilateral trading system. China-ASEAN Free Trade Area rules of origin needed to be further adjusted, improved regional trade in services rules of origin, and adopted the principle of gradual and cumulative to eliminate the non-symmetry effects on Member States. Key words: Preferential rules of origin; Free trade area; Multilateral trade system