As the AfCFTA process takes off, here is a practical way to address the rules of origin challenge
By Richard Mammah
The World Trade Organisation views rules of origin as ‘the criteria needed to determine the national source of a product.’ It goes on to add that ‘their importance is derived from the fact that duties and restrictions in several cases depend upon the source of imports.’
Going further, the trade ombudsman locates that ‘there is wide variation in the practice of governments with regard to the rules of origin.’ And it expresses it in its words further:
‘While the requirement of substantial transformation is universally recognized, some governments apply the criterion of change of tariff classification, others the ad valorem percentage criterion and yet others the criterion of manufacturing or processing operation.’
Of course it then goes on to put it in a universal perspective, arguing that: ‘in a globalizing world it has become even more important that a degree of harmonization is achieved in these practices of Members in implementing such a requirement.’
Since the discussion over the African Continental Free Trade Agreement commenced, the rules of origin challenge has continued to be raised. At a point indeed, it was a reason why a notable stakeholder like the Manufacturers Association of Nigeria stoutly stood in opposition to Africa’s largest economy, Nigeria, entering the AfCFTA process.
However, when the irony of what it would mean if Africa’s largest economy was not in the continent’s biggest political and economic move since the end of colonialism dawned on everyone, good sense prevailed and Nigeria signed up.
But that signing has clearly not eclipsed the contentious rules of origin challenge.
Practically however, this commentator prefers to view the challenge within the context of what happens in the normal course of business and national interaction in a globalised world.
As it is said, you cannot eat omelette without cracking the eggs. Though intricate, the rules of origin challenge therefore has to be seen as a criteria and negotiations hurdle that has to be addressed in a simple, plain, matter-of-fact way.
Broken down then, it may just make sense to look at the three subsets of the situation. One, of goods that are produced by firms domiciled in non–AfCFTA countries that are pitching to come into the AfCTA area. Two, of goods produced by firms that have been attracted by the long sustained clamour for Foreign Direct Investment, FDI by African governments and businesses, and are now physically located within the continent. And three, of goods that are produced by local African firms but which draw components from outside the continent.
Even as categories are being drawn up to address how to relate with these different categories, there however has to be a frank admission of the fact that a very large part of the challenge in the first place stems from the low level of manufacturing activity in the continent relative to the rest of the world. As such a lot of the debate should then be rightly focussed on how to ensure that overall, AfCFTA helps the continent in being a better and more active manufacturing sector contributor to the overall world market.
Richard Mammah writes from Lagos, Nigeria