Our paper contributes to the literature on the rules of origin (ROO) requirements of
regional trade agreements by developing a new measure of ROO requirements and by
modifying and testing an existing political economy model of ROO requirements with the
data of the Korea-United States Free Trade Agreement (KORUS FTA). In explaining the
utilization rates of KORUS FTA, Bindingness Index, the new measure of ROO
requirements taking the status quo local content of a product into consideration, performs
better than the existing measure proposed by Estevadeordal (2000). To reflect that the US
has agreed to immediate and complete liberalization on most products in KORUS FTA, we
modify the political economy model of ROO requirements of Cadot et al. (2006) by
assuming that the preferential tariff rates are zero. This modification leads to testable
predictions, some of which differs from the prediction of Cadot et al. (2006), and our
empirical analysis supports the predictions of our modified political economy model.