Xinhua | 27 June 2019
Rules of origin key to African Continental Free Trade Area: UN report
GENEVA, June 26 (Xinhua) — Rules of origin, the criteria to determine the nationality of a product, could make or break the African Continental Free Trade Area (AfCFTA) that entered into force in May, a new United Nations report said Wednesday.
The Economic Development in Africa Report 2019 from the United Nations Conference on Trade and Development (UNCTAD) notes that rules of origin could be a "game changer" for the continent.
"They must be simple, transparent, business-friendly and predictable" to work, said UNCTAD Secretary-General Mukhisa Kituyi at a press conference here.
Kituyi said that African Union (AU) heads of State would hold an extraordinary summit on the AfCFTA on July 7 in Niamey, the capital of Niger, dedicated to the operational phase for what can bring into force the "world’s biggest free-trade area."
He said, "The AfCFTA is a landmark achievement in the continent’s history of regional integration and is expected to generate significant gains."
The rules of origin will, however, determine whether preferential trade liberalization can create those gains for Africa’s industrialization.
Currently, intra-African trade is a mere 15 percent, compared to around 47 percent in the Americas, 61 percent in Asia and 67 percent in Europe, according to UNCTAD data for 2015 to 2017.
The UN agency report says AfCFTA could radically change that.
"If the agreement is fully implemented, the gross domestic product of most African countries could increase by 1 percent to 3 percent once all tariffs are eliminated, according to UNCTAD estimates," says the report.
It says that AfCFTA is expected to boost intra-African trade by 33 percent once full tariff liberalization is implemented, attracting additional intra-African investments and creating market opportunities to foster Africa’s industrialization through regional value chains.
However, many of these gains could be undermined if rules of origin are not appropriately designed and enforced to support preferential trade liberalization.
"Preferential trade liberalization is the raison d’etre of a free trade area (FTA), whereby member countries scrap import tariffs and quotas among themselves on most traded goods, to confer a competitive advantage to firms within the FTA," says the report.