The United Nations Conference on Trade and Development (Unctad) released its 'Economic Development in Africa Report 2019' on Wednesday, calling for the continent to give serious attention to the issue of Rules of Origin (RoO). RoO are the criteria which establish the nationality of a product, and the Unctad report cautions that they could “make or break” the African Continental Free Trade Area (AfCFTA).
“The AfCFTA has come into force,” highlighted Unctad Africa, Least Developed Countries and Special Projects Division Africa section chief Junior Davis, at a briefing at the Industrial Development Corporation’s head office in Sandton, Johannesburg. “It’s a tremendous opportunity. … The single biggest free trade area in the world.”
“Rules of Origin are rules that determine the country of origin of goods,” he observed. “They are essential to the free circulation of goods in preferential trade areas. … Without Rules of Origin, a continental free trade area, anywhere in the world, cannot work. It’s one of the aspects of trade that people don’t really talk about.”
Appropriately designed RoO could significantly boost intra-African trade. In comparison with the other continents, this is currently at a low level. Over the period 2015 to 2017, intra-African trade accounted for just 15.2% of total African trade; the equivalent figures for the other continents were America, 47%; Asia, 61%; and Europe, 67%. It should be noted that the existing intra-African trade was more manufactures-intensive than African trade with other regions.
RoO are not new to Africa. The continent possesses a number of regional economic communities (RECs – Unctad lists eight), each of which has its own RoO. The problem is that these existing REC RoO vary a lot. This has created an extremely complex situation across the continent.
Unctad hopes that the AfCFTA will be able to achieve convergence between these many diverging sets of RoO. But “[i]t is a complex, sensitive thing to do,” he noted. A complication is that the RoO of each REC reflect the particular concerns of the member countries of that REC. Issues which are sensitive in one REC are not at all sensitive in another one.
Davis emphasised that RoO should be simple, transparent, predictable and trade-facilitating. They should be designed and implemented to reduce compliance costs. And simple and transparent RoO will reduce origin fraud.