Rules of Origin (RoO) have become one of the primary policy tools adopted by both developing and developed nations to restrict the breadth and depth of preferential trade agreements (PTAs). Despite the prevalent use of RoO with deepening global value chains, scholars have limited understanding of how they complement or substitute other existing trade policy measures. We offer a theory that explains the political origins of RoO. Specifically, we argue that RoO help governments simultaneously achieve triple policy objectives when combined with preferential tariffs: (1) to protect downstream producers, (2) to provide export subsidies for upstream producers, and (3) to strengthen the existing global production networks shaped by multinational corporations. To empirically test this argument, we construct a large-scale data set on RoO covering 121 PTAs at the product-level among 85 countries that account for over 83% of global trade. Furthermore, we combine the RoO data with granular trade data around the world, such as Chinese Customs Data (2000-2013), to evaluate the effects of RoO on global economy. Our results show that RoO significantly mitigate the effects of trade liberalization. We also find that trade diversion due to RoO tends to disrupt the existing global production networks outside of PTAs.