Jan 28, 2021 - Economy

How "country-of-origin" regulations jam up global trade

Felix Salmon

Illustration of a barcode on a tag with a laser beam in the shape of a question mark — Illustration: Sarah Grillo/Axios

President Biden wants the 650,000 vehicles operated by the federal government to be electric, union-made — and made in America. As Axios' Joann Muller reports, even managing the first two would be extremely difficult. The third, however, is particularly problematic.

Why it matters: We live in a world of highly complex global supply chains, where "made in" designations are increasingly difficult to determine.

It is impossible to overstate how labyrinthine and bottomless these rules are. The official World Customs Organization handbook barely scratches the surface, but all you really need to do is see the abject fear in the eyes of any international economist when you say the magic words "rules of origin."

Biden wants to change those rules, and in doing so he wants to discourage global supply chains in favor of a dream of purely domestic manufacturing. It's not clear whether changing the rules or moving the factories is the more difficult task.

Consumers in post-Brexit Britain are learning the hard way that even when there are no tariffs on goods from the EU, country-of-origin rules can end up saddling them with large and unexpected bills added onto shipments from Europe.

The big picture: This is deglobalization in action. Country-of-origin regulations are like kryptonite to efficient global supply chains. The more of them there are, the worse that is for all global trade.

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How "country-of-origin" regulations jam up global trade

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