The Impact of Apparel Specific Rules of Origin on U.S. Textile and Apparel Trade: Case Study on CAFTA-DR Countries

Under trade agreements and preference programs, the rules of origin (ROOs) determine the eligibility of products to receive preferential market access. Such rules can impact trade, but it can be difficult to fully comprehend and predict how trade flows will respond to changes in the ROOs. Using the example of ROOs for U.S. apparel imports under the Caribbean Basin Trade and Partnership Act of 2000 compared with those under the Dominican Republic-Central America Free Trade Agreement, we employ a computable general equilibrium (CGE) trade model to estimate the effects of the ROO changes on U.S. imports of textiles and apparel from CAFTA-DR countries. While the results do not perfectly mirror the actual changes in trade that occurred during the time period examined (2005–15), the results suggest that modeling can be a useful tool in considering ROO changes. Further work in this area might consider the multitude of factors exogenous to the ROOs that effect trade and how to incorporate such factors into the model.