Rules of Origin as Export Subsidies ¤ Olivier Cadot

The paper estimates the e¤ect of NAFTA’s rules of origin (ROO) on Mexican access to the US market treating explicitly the endoge-nous determination of ROOs. The …rst equation determines Mexico’s NAFTA (preferential) exports to the US as a function of tari ¤ prefer-ence and Estevadeordal’s qualitative ROO index. The second equation determines ROOstrictness on the basis of a Grossman-Helpman model identifying channels through which lobbying by US intermediate-good producers leads to deep preferences and sti ¤ rules of origin in down-stream sectors. The estimates suggest that the creation of a captive market for upstream intermediate-good producers is indeed one of their political determinants