Rules of Origin and Trade Diversion: The Case of the Egyptian-European Partnership Agreement

Introduction: Preferential rules of origin (ROO) are of crucial importance in the functioning of any free trade area (FTA) in administrating a number of trade issues and in avoiding trade deflection. Despite such importance their design can result in their development as trade protectionist tool hence leading to trade diversion. This study focuses on the design of ROO in the EgyptianEuropean FTA that has been recently signed. The main aim is to investigate whether the ROO will result in trade diversion or not. Following this introduction, section two follows which provides a short literature review on the role of ROO in FTAs. Section three discusses the different methods utilized in the determinining ROO together with identifying the pros and cons of each of them. Section four reviews the methods adopted by the European Union (EU) in its design of preferential ROO. Section five is mainly confined to the method adopted in designing the ROO in the EgyptianEuropean FTA. Section six reviews the methods utilized in regional trade agreements (RTAs) worldwide to confer rules of origin. Section seven concludes and provides some policy implications.