Fair trade hinges on Rules of Origin

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The Rules of Origin, which determine whether a product is produced within a particular trading partner, are pivotal to any preferential trade arrangement.

“These rules of origin that we set for ourselves have the power to render the preferences useless or to actually promote industrial growth of the continent,” Emmanuel Hategeka, the Permanent Secretary in the Rwanda Ministry of Trade and Industry said last week.

Hategeka was speaking at the at the recently concluded First Tripartite Private Sector Regional Dialogue on the theme ‘Towards a Private Sector position on TFTA Rules of Origin for increased Market Access’, in Kigali last week.

The meeting focused more on a private sector position that is common and harmonized with respect to the tripartite Free Trade Area (FTA) Rules of Origin for increased market access.

“Exporters from the different countries can only benefit from simplified rules of origin as opposed to stringent regimes of rules of origin. Such meetings therefore help discuss the crucial role of rules of origin in the implementation of the TFTA agreement,” Hategeka said.

Rules of Origin are in this case intended to retain and promote production capacities in the region but not to reduce or undermine them. This is why simple and transparent rules which are easier to administer and with which it is easier to prove compliance are needed.

Hategeka said, “We need Rules of origin that are going to help stimulate regional integration and facilitate the growth of companies that can compete not only in our domestic tripartite market but also globally.”

He said, “Rwanda believes in trade facilitation, in simplified rules to ensure that the private sector can take advantage and lead the way for Africa’s development”.

Launched in June 2015 by Heads of State of the common market for eastern and southern Africa (COMESA), the east African community (EAC), and the southern African development community (SADC), the COMESA-EAC-SADC Free Trade Area commonly known as the Tripartite FTA is anchored on three pillars such as market integration, infrastructure development, and industrialisation.

“If we are going to increase opportunities for trade within ourselves and beyond the current state of intra-Africa state, if we are going to grow more connectivity and invest more our interconnectedness, and if we are going to support rapid industrialisation on the African continent, the TFTA is probably one of those avenues we could take and we need to grab that opportunity as a continent,” he said.

TFTA is regarded as seen a good platform for creating greater synergies and partnerships for business communities of the countries involved.

TFTA covers 26 countries in three regional economic communities (COMESA, EAC and SADC) and accounts for more than half of the membership of the African Union with an estimated GDP of $1.2trillion. The TFTA has a population of 625million customers.

“As we look towards the advantages of the tripartite free trade area, we cannot ignore the challenges faced in this ambitious agenda to harmonise a preferential trade regime for 26 countries,” Sandra Uwera, CEO, COMESA business said.

“These include long distances and geographical locations which are further complicated by poor infrastructure, inefficient logistics and cumbersome customs procedures,” Uwera said.

Uwera said, “To leave up to its potential therefore, the TFTA needs to effectively enhance connectivity and linkages among the member states which requires not just elimination of all significant trade barriers but also the facilitation of trade through physical and institutional infrastructures, and this is why we need rules of origin”.

According to Uwera the purpose of preferential rules of origin is primarily to help avoid trade deflection.

Since 2010, the COMESA business council has come up with various positions on the TFTA rules of origin and key amongst them are that the rules should be objective, simple and predictable. They should be facilitating intra-regional trade, not create distortive or disruptive effects on regional trade.

The issues of rules of origin are fundamental to private sector as it can facilitate or impede intra-regional trade and business development in the region. They are one of the contentious issues as complex rules can stifle trade and can become non-tariff barriers.

“The tripartite is an opportunity for the business community presenting a wide market for us to trade with, presenting an opportunity for us to expand across the five regional economic communities, East African Business council Executive director Lillian Awinja said.

Disclaimer: The views expressed in these articles do not necessarily reflect the views of Private Sector Federation (PSF) or its investors, clients and partners. PSF is also not responsible for any errors of fact contained in the articles.