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AU hopeful rules of origin in AfCFTA supporting local production

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With the Rules of Origin (RoO) threatening to “make or break” the African Continental Free Trade Area (AfCFTA), the African Union has said negotiations are in an advanced stage to ensure that decisions will support local production and protect industries.

According to the African Union Ministers of Trade (AMOT), negotiations are ongoing to finalise the key aspects of the outstanding AfCFTA negotiations to enable the start of preferential trade on January 1, 2021.

The ministers noted significant progress in the finalisation of additional Rules of Origin following the adoption of a prioritised work programme and roadmap for the outstanding negotiations in September, to facilitate the start of preferential trade under the AfCFTA.

The Manufacturers Association of Nigeria (MAN) had insisted that key technical concerns like the crafting of a robust national negotiation mandates, the RoO phased liberalization, the developing and less developed countries dichotomy, schedule of specific tariff items in the basket for Trade in Good, should be addressed with a strong commitment on the part of the government to enhance competitiveness.

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It is expected that further substantive progress will be made in the conclusion of additional outstanding chapters on RoO in the next round of negotiations in an effort to unlock and finalise commercially and mutually beneficial tariff offers.

In considering outstanding RoO, AMOT emphasised the importance of concluding rules that promote and enhance a “Made in Africa, Grown in Africa, and Designed in Africa” approach.

RoO is a criterion which establishes the nationality of a product, used by many African countries to gain preferential treatment, while trading with other blocs like the European Union and the United States.

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 RECs’ RoO vary a lot. This has created an extremely complex situation across the continent.

According to an UNCTAD report last year, though RoO determine the country of origin of goods, and are essential to the free circulation of goods in preferential trade areas, they are one of the aspects of trade that people don’t really talk about.

Besides, UNCTAD said total elimination of tariffs under the AfCFTA could increase Gross Domestic Product (GDP) of every African country by three per cent, adding that appropriately designed RoO could significantly boost intra-African trade.

The AfCFTA is expected to lead to the creation of a single continental market of more than 1.3 billion people, with a combined annual output of $2.2 trillion. The transition phase to the Continental Free Trade Area alone could generate welfare gains of $16.1 billion and boost intra-African trade by 33 per cent.

“It is important that we seek to ensure that agreed Rules of Origin promote and support local production and value addition in Africa. Our Rules, therefore, should not be designed to benefit third parties,” said South Africa’s Minister of Trade, Industry and Competition, Ebrahim Patel, who chaired the ministerial meeting.

Also, Deputy Minister Nomalungela emphasised that “Rules of Origin should incentivise the expansion of Africa’s manufacturing capacity, including the development of supply chains and maximum value addition within the continent. These rules must serve to spur increased investment in local African productive capacity and job creation.”

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Ministers further emphasised the need for State Parties to the AfCFTA agreement to prioritise the finalisation and submission of tariff offers on the basis of the agreed RoO. The importance of ratification by AU member states to enhance inclusiveness in preferential trade under the AfCFTA was again encouraged.

Minister Patel acknowledged that the spirit of consensus building in the AfCFTA negotiations would contribute to successful deliverables for the extra-ordinary summit.

Minister Patel also noted the series of focused meetings of the negotiations and implementation structures to be held during the month of November 2020 to ensure that the necessary prerequisites for trade are in place to support the commencement of preferential trade.

These include, among others, the consideration of trade in services offers, the finalisation of tariff concessions on the basis of as many agreed RoO as possible, as well as the finalisation of the necessary customs documentation.

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