‘RULES OF ORIGIN’ AS THE MOST BURDENSOME BARRIER TO INTERNATIONAL TRADE AND NEED FOR ITS BETTER HARMONISATION

Abstract

The first and foremost goal of the World Trade Organisation (hereinafter WTO) is to liberalise international trade. It aims at eliminating discriminatory treatment of nations and reducing trade barriers. However, Free Trade Agreements (hereinafter FTAs), also known as Preferential Trade Agreements (hereinafter PTAs) act as significant barriers to international trade. With a rise in plethora of FTAs between different countries, Rules of Origin (hereinafter RoO) have invariably become a hindrance to international trade. Essentially, the rise in FTAs have led to a rise in ‘preference’. This cannot be ideal for the international trade community because FTAs indirectly discriminate countries on basis of ‘rules of origin’, violating WTO’s core principles of most-favored nation treatment and national treatment. Through this paper, I am to discuss the existing problems pertaining to FTAs in light of RoO and the need for their better harmonization. The first part of the paper introduces the concepts of RoO and FTAs. The second part throws light on RoO as barriers to trade within the ambit of FTAs. It is followed by an analysis on ‘spaghetti bowl phenomenon’, a famous metaphor used in the context of rising PTAs.  The next part discusses the case of NAFTA (FTA between US-Canada-Mexico) as an example supporting the contention that RoO indeed act as significant barriers to trade. Lastly, FTAs are discussed from the perspective of third-world countries as they are the ones who suffer in due course. It is essential to safeguard the interests of third-world countries in light of increasing FTAs. This is necessary to ensure that the purposes and principles of WTO are not diluted.