What is Spaghetti Bowl Effect?

Legal Definition
The spaghetti bowl effect is a phenomenon of international economic policy that refers to the complication which arises from the application of domestic rules of origin in the signing free trade agreements across nations. The effect leads to discriminatory trade policy because the same commodity is subjected to different tariffs and tariff reduction trajectories for the purpose of domestic preferences. With the increase in FTAs throughout the international economy, the phenomenon has led to paradoxical, and often contradictory outcomes amongst bilateral and multilateral trade partners. When applied specifically to trade among Asian nations, the effect is sometimes called the "noodle bowl effect".

The effect is seen as a measure of political risk for firms which seek to invest in nations with complex measures of intellectual property rights and contract law. The term was first used by Jagdish Bhagwati in his 1995 paper U.S. Trade Policy: The Infatuation with Free Trade Agreements. Subsequently, Bhagwati has used the term on various occasions in describing a problem of FTAs. He named it the "Spaghetti Bowl Effect":

"...referring to the manner in which half-finished products and parts go around various FTA networks using tariff differentiation in an effort to export finished products to the consumer countries at the lowest price; he visualized this as crisscrossing lines and likened these strings of lines to strands of spaghetti tangled in a bowl."

More recently, the term has been used by scholars to explain the difficulties of the East Asian Free Trade Agreements in solving the intertwined mass of preferential trading arrangements among ASEAN members.
-- Wikipedia