Private sector players want the criteria used to determine the origin or nationality of a product under the East African Community reviewed in light of the African Continental Free Trade Area (AfCFTA) agreement.
According to the East African Business Council, the rules of origin could be a game changer for the continent as long as they are simple, transparent, predictable and business friendly.
Despite the region having adopted EAC Tariff Offer for Category ‘A’ products, amounting to 90.2 percent, the region is yet to trade with the rest of the continent under the AfCFTA that came into force last year.
The rules of origin define the conditions that firms must comply with in order to authenticate that their goods originate from the Free Trade Area (FTA) and are thus eligible for preferential treatment.
They are a “passport” enabling goods originating within the FTA to circulate duty-free in the area.
“We need to ensure that the business community understands the EAC rules of origin and how they are compatible with the AfCFTA rules of origin,” said John Kalisa, chief executive of the EABC.
“And so we have been pushing for simplicity, predictability, certainty in terms of rules of origin because it is one of the instruments to enable our EAC business to rip the benefits of the AfCFTA.”
Mr Kalisa noted that it is important that the business community understands how the rules of origin work to enable them reap the enormous benefits provided for by the free trade area.
The Eighth Meeting of AfCFTA Council of Ministers responsible for trade, on January 28, agreed on the rules of origin for the bloc, removing a major hurdle to the roll out of reduced tariffs.
By granting trade preference, AfCFTA member countries would source more intermediate and final goods among themselves rather than import from abroad.
“The current challenge with the rules of origin is that they are a bit complex. The usability of these rules of origin has been one of the constraints that inhibit the growth of intra-regional trade,” said Mr Kalisa.
He explained, “This is because some of the sectors and products are missing out of the rules of origin, such as edible oil and some construction materials.”
He says the private sector had recommended revision of the rules to account for the dynamics of trade in the region.
EAC states have adopted the EAC Tariff Offer for Category ‘A’ products amounting to 90.2 per cent (5,129 tariff lines out of the total 5,688 lines) but are yet to start trading under the AfCFTA.
The EABC is concerned that a section of the business community is not even aware of the tariff offers under the AfCFTA and is calling for private sector involvement in the next phase of negotiations.
“The private sector needs to be sensitised. They need to understand what products are under the 90 percent tariff offer so that they can prepare them,” said Mr Kalisa.
The private sector is also concerned that the EAC Customs Union operations are yet to be aligned with those of the AfCFTA.
The AfCFTA is expected to boost intra-African trade by 33 percent once full tariff liberalisation is implemented.
Currently intra-African trade is a mere 15 percent, compared to around 47 percent in America, 61 percent in Asia and 67 percent in Europe, according to the United Nations Conference on Trade and Development.