Impact of Rules of Origin on FTA Utilization in Korean FTAs

Despite the intense interest concerning Rules of Origin (ROO) in every corner, research regarding ROO has been relatively limited. It is primarily due to the difficulties of performing systematic research on ROO. The importance of the role of ROO in FTA, however, cannot be overemphasized since the economic effect of concluding an FTA is determined by ROO, in particular with respect to the market access. This study aims to investigate the economic effect of ROO of Korean FTAs on its FTA utilization. Using restrictive index, margin of preferences and other relevant variables, we test the relation between FTA utilization and related variables. The results show that more restrictive ROO has a negative impact on the utilization rates, when we drop the products with zero utilization rates and control for industry-specific characters. It also shows that higher MOP promotes the use of the Korea-ASEAN FTA. On the other hand, we fail to show that the average value of imports per-application has a positive impact on the use of FTA.