Rules of Origin InfographicBonn: German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)

The number of preferential trade agreements has increased sharply over the past decade as a response to stagnant multilateral trade negotiations. Political economy features centrally in these negotiations, for instance in the context of the Continental Free Trade Agreement (CFTA). In this paper, we discuss the challenges of rule-of origin harmonisation in this process, which is a critical element for any further integration initiative in the continent. In particular, we review different approaches to the formulation of rules of origin, determining which firms qualify to take advantage of negotiated concessions.

We focus on the experiences of the three African regional economic communities (COMESA, EAC and SADC) that are busy merging into the Tripartite Free Trade Agreement (TFTA), and assess the potential for rules of origin harmonisation, drawing also on the examples of similar efforts being made around the globe, such as for the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).

Strict rules of origin – as implemented by the European Union and the United States – require strong state institutional capacities to implement them. Firms incur high compliance costs if they wish to take advantage of them. South Africa insists on strict rules of origin, yet most African countries have weak state capacities, and the private sectors are weak and cash-strapped. Therefore, in order to maximise African countries benefits we caution against adopting rules of origin using the South African model in the CFTA.

Authors: Peter Draper, Cynthia Chikura and Heinrich Krogman. The paper is available on the German Development Institute website.

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  1. Mark Pearson March 2, 2016 at 8:13 pm · · Reply

    Technically, I don’t think that rules of origin between regional organisations can be harmonised. Say, for example, one regional organisation has a CTH rule while another has a Value Addition rule and another has a process application rule. What VA would be applicable to a CTH and what would be the applicable process application? If the C-FTA or the TFTA are going to use the existing Regional Organisations’ rules of origin as the basis for their rules of origin then the C-FTA and TFTA will have to choose an applicable rule – not harmonisation but selection of one. Semantics maybe, but this is an important point for the negotiators to understand before they waste time and energy trying to harmonise rules of origin – just chose the one that best promotes regional trade and ensures limited trade deflection.

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