Making free trade deals work for small business

Instead of applying to the face value of shipments, the exemption should apply to the face value of the applicable MFN tariffs. [...] However, it constitutes a surgical strike that would measurably improve the functioning of NAFTA and the political prospects of agreements such as the Canada- Essential Policy Intelligence e 3 -Brief Europe Comprehensive Economic and Trade Agreement (CETA) and the Trans-Pacific Partnership (TPP) without materially compromising the enforcement of the FTA rules. [...] To the extent that there is a consensus, it is that when an MFN tariff is below about 4 to 5 percent, the costs of utilizing the FTA’s tariff preference threaten to offset the potential benefits of the preference.5 Detailed analysis in Keck and Lendle (2012) adds to the picture. [...] The fact that ROO regimes vary across FTAs, means that trading firms need to “learn the ropes” for each new market, both in terms of the general application of the rules, the administrative requirements, and the product-specific features that apply to their products. [...] A History of Reform Initiatives Rules of origin have long been a concern for the trading system, in part because they have been used as an instrument of trade protection.7 The proliferation of preferential trade agreements has intensified this concern, while the emergence of global value chains has put the spotlight on the costs of compliance and enforcement (Jones and Martin, 2012; 1).