scholarly journals Tariff elimination versus tax avoidance: free trade agreements and transfer pricing

2021 ◽  
Author(s):  
Hiroshi Mukunoki ◽  
Hirofumi Okoshi
Keyword(s):  
Free Trade ◽  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Tax Avoidance ◽  
Free Trade Agreements ◽  
Value Added ◽  
Trade Agreement ◽  
Rules Of Origin ◽  
A Value ◽  
Transfer Prices

AbstractWe explore the new roles of rules of origin (ROO) when multinational enterprises (MNEs) manipulate their transfer prices to avoid a high corporate tax. The ROO under a free trade agreement (FTA) require exporters to identify the origin of exports to be eligible for a preferential tariff rate. We find that a value-added criterion of ROO restricts abusive transfer pricing by MNEs. Interestingly, an FTA with ROO can induce MNEs to shift profits from a low- to high-tax country. Because the ROO augment tax revenues inside FTA countries, they can transform a welfare-reducing FTA into a welfare-improving one.

scholarly journals From Final Goods to Inputs: The Protectionist Effect of Rules of Origin

2018 ◽  
Vol 108 (8) ◽  
pp. 2335-2365 ◽  
Author(s):  
Paola Conconi ◽  
Manuel García-Santana ◽  
Laura Puccio ◽  
Roberto Venturini
Keyword(s):  
Free Trade ◽  
Free Trade Agreement ◽  
Free Trade Agreements ◽  
Trade Agreement ◽  
Cross Product ◽  
Intermediate Goods ◽  
Rules Of Origin ◽  
The North ◽  
Cross Country ◽  
Unique Dataset

Recent decades have witnessed a surge of trade in intermediate goods and a proliferation of free trade agreements (FTAs). FTAs use rules of origin (RoO) to distinguish goods originating from member countries from those originating from third countries. We focus on the North American Free Trade Agreement (NAFTA), the world’s largest FTA, and construct a unique dataset that allows us to map the input-output linkages in its RoO. Exploiting cross-product and cross-country variation in treatment over time, we show that NAFTA RoO led to a sizable reduction in imports of intermediate goods from third countries relative to NAFTA partners. (JEL F13, F15, F23, L14, O19)

Protecting Free Trade: The Political Economy of Rules of Origin

2008 ◽  
Vol 62 (3) ◽  
pp. 507-530 ◽  
Author(s):  
Kerry A. Chase
Keyword(s):  
Free Trade ◽  
Free Trade Agreement ◽  
Returns To Scale ◽  
Free Trade Agreements ◽  
Trade Agreement ◽  
External Trade ◽  
Public Attention ◽  
Rules Of Origin ◽  
The North ◽  
Domestic Coalitions

The design of rules of origin in free trade agreements (FTAs) arouses spirited lobbying campaigns that mostly escape public attention. This article argues that the domestic groups generally most favorable to FTAs differ in their preferences over rules of origin: industries with large returns to scale favor strict rules of origin to gain scale economies in an FTA, while industries with multinational supply chains prefer lenient rules of origin to accommodate offshore procurement. An econometric analysis of rules of origin in the North American Free Trade Agreement (NAFTA) finds tougher rules of origin the higher the external trade protection and the larger the returns to scale, and more permissive rules of origin the greater the involvement in foreign sourcing. The results suggest that rules of origin may be critical to building domestic coalitions for FTAs. Industry preferences toward rules of origin therefore have important implications for the politics of FTA ratification.

The fight against international transfer pricing abuses: a recommendation for Mauritius

2019 ◽  
Vol 61 (1) ◽  
pp. 205-231 ◽  
Author(s):  
Ambareen Beebeejaun
Keyword(s):  
South Africa ◽  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Tax Avoidance ◽  
Legal Framework ◽  
Content Type ◽  
Legal Provisions ◽  
Transfer Prices ◽  
To Come ◽  
A Minor

Purpose One of the most common forms of international tax avoidance is transfer pricing by multinational enterprises. The research will investigate on the factors that contribute to transfer pricing abuses. At present, there is no substantial and extensive transfer pricing rule in Mauritius. This paper aims to analyse the legal approaches to tackle transfer pricing issues that are undertaken by some countries whose taxation regime is similar to Mauritius. The selected countries are South Africa and UK. The objective behind the comparative study is to come up with the appropriate preventive and corrective measures for Mauritius. Design/methodology/approach The methodology adopted for this research consists of a critical analysis and comparative legal review of the relevant legislation, case law and literature. A minor quantitative analysis of the transfer pricing problem in Mauritius will be conducted, in terms of which interviews will be conducted with officials from different institutions in Mauritius. Findings The study will conclude that the absence of explicit formal rules on transfer pricing allows businesses to use the country to manipulate transfer prices to avoid paying taxes. Therefore, an amendment to Mauritius laws and regulatory framework is required to dissuade multinationals to engage in transfer pricing abuses. The study will conclude that the scope and application of the arm’s length principle needs to be formally set out in legislation and also, the use of Advance Pricing Agreements will also be recommended. Originality/value The research is among the first studies that compare Mauritius legal provisions on transfer pricing with that of South Africa and UK. The research is unique as it intends to provide fruitful recommendation to stakeholders in Mauritius to enhance the existing legal framework on the subject.

The Turkey-UK Free Trade Agreement in Terms of Economic Diplomacy

2021 ◽  
Vol 23 (Fall 2021) ◽  
pp. 193-211
Author(s):  
Kaan Yiğenoğlu
Keyword(s):  
Free Trade ◽  
Free Trade Agreement ◽  
Bilateral Trade ◽  
Free Trade Agreements ◽  
Trade Agreement ◽  
Trade Agreements ◽  
The European Union ◽  
Economic Relations ◽  
Economic Diplomacy ◽  
The Uk

This article scrutinizes relations between economic diplomacy and free trade agreements by focusing on the Turkey-UK free trade agreements which came into force in 2021. Accordingly, the article first introduces the concept of economic diplomacy, an important issue as it has been shown that bilateral trade agreements, nowadays preferred by many countries, can be used as a tool of economic diplomacy. The article then discusses the history and development of free trade agreements signed by Turkey, including its long-running experience of economic integration with the European Union. Although Turkey began establishing free trade agreements in the 1990s, it has been concentrating on and accelerating its use since 2000. Based on economic and political reasons underlying the free economic agreements, the reasons why Turkey and the UK have reached such an agreement are summarized. Economic relations between the two countries are then analyzed and the details of the agreement are investigated in the context of the changes that it provides.

scholarly journals The ASEAN Free Trade Agreement and Vietnam’s Trade Efficiency

2017 ◽  
Vol 13 (4) ◽  
pp. 192 ◽  
Author(s):  
Hai Thi Hong Nguyen ◽  
Thang Ngoc Doan
Keyword(s):  
Free Trade ◽  
Free Trade Agreement ◽  
Free Trade Agreements ◽  
Trade Agreement ◽  
Trade Agreements ◽  
Trade Volume ◽  
Large Space ◽  
Trading Partners ◽  
Efficiency Performance ◽  
Stochastic Gravity

This study employs a stochastic gravity model to estimate the efficiency performance of Vietnam’s trade with its main trading partners from 1995-2015. Trade efficiency is measured as the ratio of actual trade volume to the maximum likelihood. Moreover. it analyzes the effects of both natural and man-made trade barriers on trade efficiency. The empirical results suggest that the actual trade of Vietnam appears to be much smaller than a possible efficiency level and that there is large space for further progress. Export efficiency outweighs that of import. Vietnam’s ASEAN Free Trade Agreement membership has, in general, improved the trade efficiency, whereas tariffs and domestic devaluation have impaired it. Our findings lead to the recommendation that Vietnam should join more Free Trade Agreements and break down the man-made barriers.

scholarly journals A Modest Referee: Measuring The UNESCO CCD’S Effect On Culture And Free Trade Agreement Negotiation

2021 ◽  
Author(s):  
Chantal Braganza
Keyword(s):  
Free Trade ◽  
Cultural Policy ◽  
Cultural Diplomacy ◽  
Free Market ◽  
Free Trade Agreements ◽  
Trade Agreement ◽  
Trade Disputes ◽  
Trade Dispute ◽  
Unesco Convention

The purpose of this research is to assess the effectiveness of the UNESCO Convention on the Protection and Promotion of Diversity of Cultural Expressions (CCD) as a trade instrument intended to protect local culture and cultural industries from free market influences. Much previous writing has pointed out flaws or weaknesses in its legal language and structure; few studies have been carried out on the way it has been cited and employed in actual trade negotiations and disputes. Through a recount of the its history, a close read of the original document of the CCD itself, and a case-study examination of two recently signed free trade agreements and a concluded international trade dispute, this research paper will show that the ways in which this nearly 15-year-old document has been employed does not quite live up to its intended purpose. Keywords: cultural policy, free trade, UNESCO CCD, culture and trade disputes, cultural diplomacy, CETA, CPTPP

FREE TRADE AGREEMENTS AND BRIDGEHEAD EFFECT: EVIDENCE FROM KOREA–CHILE FTA

2016 ◽  
Vol 61 (05) ◽  
pp. 1550098
Author(s):  
KICHUN KANG ◽  
PHYLLIS KEYS ◽  
YOON S. SHIN
Keyword(s):  
South America ◽  
Free Trade ◽  
Free Trade Agreement ◽  
Direct Evidence ◽  
Recent Literature ◽  
Free Trade Agreements ◽  
Trade Agreement ◽  
Trade Agreements ◽  
The Impact ◽  
Aggregate Industry

Recent literature on the dynamics of export destinations has argued that firms export their products to new markets that are geographically close and culturally related to their previous export destinations. A modified version of [Melitz, M (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695–1725.] model suggests that a preferential trade agreement may provide inefficient firms with opportunities to export their products to third destination countries. This paper finds that new Korean products have been exported to the Chile market because of reductions in Chilean tariffs and the experience gained from exporting to the Chilean market has increased the likelihood of subsequent export to other countries in South America. The paper provides direct evidence that a free trade agreement (FTA) can serve as a stepping stone to other markets.

Free Traders

2019 ◽  
Author(s):  
Malcolm Fairbrother
Keyword(s):  
Free Trade ◽  
Global Economy ◽  
Multinational Enterprises ◽  
Free Trade Agreements ◽  
Trade Agreements ◽  
The United States ◽  
Social Scientists ◽  
Historical Case ◽  
Mass Public ◽  
Political Events

This book is about the political events and decisions in the 1980s and 1990s that established the global economy we have today. Different social scientists and other commentators have described the foundations of globalization very differently. Some have linked the rise of free trade and multinational enterprises to the democratic expression of ordinary people’s hopes and desires; others have said they were a top-down project requiring, if anything, the circumvention of democracy. This book shows that politicians did not decide to embrace globalization because of the preferences of the mass public. Instead, using comparative-historical case studies of Canada, Mexico, and the United States, this book shows that politicians’ decisions reflected the agendas and outlooks of various kinds of elites. On the basis of more than a hundred interviews, and analyses of materials from archives in all three countries, the book tells the story of how the three countries negotiated and ratified two agreements that substantially opened and integrated their economies: the 1989 Canada-US and trilateral 1994 North American Free Trade Agreements. Contrary to what many people believe, these agreements (like free trade elsewhere) were based less on mainstream, neoclassical economics than on the informal, self-serving economic ideas of businesspeople. This folk economics shaped the contents of the agreements, and helped bind together the elite coalitions whose support made them politically possible. These same ideas, however, have reinforced some harmful economic misunderstandings, and have even contributed to the recent backlash against globalization in some countries.

Stocktaking and Glimpsing at Trade Law's Next Generation

2017 ◽  
Vol 111 ◽  
pp. 92-95
Author(s):  
Kathleen Claussen
Keyword(s):  
United States ◽  
Free Trade ◽  
Bilateral Trade ◽  
Free Trade Agreements ◽  
Trade Agreement ◽  
Trade Agreements ◽  
The United States ◽  
Asia Pacific ◽  
The European Union ◽  
Trade Law

These remarks are derived from a forthcoming work considering the future of international trade law. Compared with most features of the international legal system, the regional and bilateral trade law system is in the early stages of its evolution. For example, the United States is a party to fourteen free trade agreements currently in force, all but two of which have entered into force since 2000. The recent proliferation of agreements, particularly bilateral and regional agreements, is not unique to the United States. The European Union recently concluded trade agreement negotiations with Canada, Singapore, and Vietnam to add to its twenty-seven agreements in force and is negotiating approximately ten additional bilateral or multilateral agreements. In the Asia-Pacific Region, the number of regional and bilateral free trade agreements has grown exponentially since the conclusion of the Association of Southeast Asian Nations (ASEAN) Free Trade Area of 1992. At that time, the region counted five such agreements in force. Today, the number totals 140 with another seventy-nine under negotiation or awaiting entry into force. The People's Republic of China is negotiating half a dozen bilateral trade agreements at present to top off the sixteen already in effect. India likewise is engaged in at least ten trade agreement negotiations. The World Trade Organization (WTO) reports 267 agreements of this sort in force among its members as of July 1, 2016.

India’s Trade Potential and Free Trade Agreements: A Stochastic Frontier Gravity Approach

2017 ◽  
Vol 17 (1) ◽  
pp. 20160074 ◽  
Author(s):  
Surender Kumar ◽  
Prerna Prabhakar
Keyword(s):  
Free Trade ◽  
South Asian ◽  
Stochastic Frontier ◽  
Free Trade Agreements ◽  
Trade Agreement ◽  
Trade Agreements ◽  
Regulatory Quality ◽  
Trading Partners ◽  
Trade Potential ◽  
The Impact

This paper analyses the role of Free Trade Agreements in determining export and import efficiency levels in India using stochastic frontier version of gravity model. We estimate the impact of selected FTAs of India (its bilateral FTAs, FTA with ASEAN and South Asian FTA) and regulatory quality on the efficiency of exports and imports over the period of 2000–2014. The results indicate that India’s bilateral FTAs and its FTA with the ASEAN group help in improving the export and import efficiency respectively. However, the South Asian Free Trade Agreement is statistically insignificant for India’s export and import efficiency. The results also highlight importance of trading partners’ regulatory quality for enhancing the India’s trade efficiency and note that the impacts of regulatory quality are non-monotonic.

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