TY  - JOUR
AU  - Ju,Jiandong
AU  - Krishna,Kala
TI  - Market Access and Welfare Effects of Free Trade Areas without Rules of  Origin
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5480
PY  - 1996
Y2  - March 1996
UR  - http://www.nber.org/papers/w5480
L1  - http://www.nber.org/papers/w5480.pdf
N1  - Author contact info:
Jiandong Ju
Department of Economics
University of Oklahoma
Norman, OK  73019
E-Mail: jdju@ou.edu

Kala Krishna
Department of Economics
523 Kern Graduate Building
The Pennsylvania State University
University Park, PA 16802
Tel: 814/865-1106
Fax: 814/863-4775
E-Mail: kmk4@psu.edu
AB  - The market access and welfare effects of Free Trade Areas (FTAs) without Rules of Origin (ROOs) are studied.  We consider both the final and intermediate goods markets and their interlinkage.  The FTA weakly reduces all tariffs and prices within the FTA.  This raises quantity demanded and reduces quantity supplied for both the final and intermediate goods, thereby raising imports.  This is the classic trade creation effect and is welfare improving.  We identify two additional effects which work in the opposite direction and identify conditions under which these welfare reducing, import reducing effects dominate.
ER  -