These treaties also establish rules for the simplification and harmonization of the rules of origin.
In general, according to an UNCTAD report, the rules of origin in these agreements regulate the regional value content required for goods to qualify for duty-free (or lower duty) treatment, and facilitate administrative procedures related to cross-border trade.
In this way, the agreements have an important effect on the investment flows between the parties.
For example, the RCEP (Regional Integral Economic Association) harmonizes the rules of origin in its 16 member states, which are at different levels of economic development.
They include import-export oriented economies, goods and services-based economies, and island and landlocked states, as well as countries with large population differences.
According to UNCTAD, the RCEP rules of origin establish a relatively low threshold for regional value content (40%), which, in combination with the move towards self-certification of origin, the elimination of non-tariff barriers and other measures of trade facilitation, is likely to boost integration. of global supply chains throughout the region.
This can help encourage the entry of foreign investment.
On the contrary, the rules of origin of the Treaty between Mexico, the United States and Canada (USMCA) include a relatively high threshold for regional value content (60% as a general rule and 75% for the automotive industry), which encourages companies to locate their production facilities in the region.
This is complemented by a provision that requires 40-45% of the parts in any duty-free vehicle to come from a “high-wage factory” (ie pay a minimum of $16 per hour on average).
Finally, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) uses an innovative approach to rules of origin, which are designed specifically for each tariff line.
This facilitates trade, since once the rules of origin for a tariff line of a product are fulfilled, there is no need for further modifications.
For example, TIPAT regulates smartphone supply chains covering components and materials sourced from many countries.