Unified Approach to Non-Preferential Rules of Origin between EU and Korea

Purpose - The aim of this study was to examine the non-preferential rules of origin of Korea and the EU and propose unified bilateral non-preferential rules of origin using an origin restrictiveness index. Taking into consideration Korea’s major exporting products to the EU, this study focused on its major exporting product, machinery of Chapter 85. Using the origin restrictiveness index, the aim of this study was to reduce the administrative costs associated with the non-preferential rules of origin by establishing bilaterally agreeable standards for these rules. Design/Methodology - This study developed an adjusted origin restrictiveness index of Korea’s regional trade agreements by modifying the existing origin restrictiveness index. First, the association of the Korea-EU FTA and the EU non-preferential rules of origin adjusted origin restrictiveness index with export amount was tested in a fixed-effects model to confirm the need for unified non-preferential rules of origin. This study then compared the adjusted origin restrictiveness indexes of the Korea-EU FTA and EU non-preferential rules of origin. Based on this comparison, this study considered the adjusted origin restrictiveness indexes of Korea’s regional trade agreements and established a standard for which rules of origin are suitable for unification. Findings - If the adjusted origin restrictiveness index of the Korea-EU FTA and EU nonpreferential rules of origin are found to be the same, the Korea-EU FTA, which is a bilateral agreement, should be the unified bilateral non-preferential rules of origin. In cases where they differ, establishing unified bilateral non-preferential rules of origin based on the origin restrictiveness index of majority Korea’s regional trade agreements should be appropriate. If no outcome can be determined, the unified bilateral non-preferential rules of origin should be proposed in consideration of industry opinions and domestic manufacturing processes. Originality/Value - Existing studies have focused on preferential rules of origin, and there has been a lack of research on non-preferential rules, particularly the WTO non-preferential rules of origin. Also, no studies have been conducted on the non-preferential rules of origin for Chapter 85, machinery, which have not been proposed due to disagreements among WTO members. This study helps reduce the administrative costs associated with non-preferential rules of origin by establishing unified bilateral non-preferential rules of origin between Korea and the EU for Chapter 85, machinery.