The success or otherwise of the African Continental Free Trade Area (AfCFTA) is dependent on the rules of origin, the criteria needed to determine the nationality of a product, a United Nations (UN) report has said.
The rules of origin, serve as the ‘passport’ that enables goods to circulate duty free within a Free Trade Area (FTA), as long as they qualify as originating from the area.
According to the Economic Development in Africa Report 2019, rules of origin could break the AfCFTA or be a game changer for the continent as long as they are simple, transparent, business friendly and predictable.
The report subtitled, ‘Made in Africa-Rules of Origin for enhanced intra-Africa trade’ put together by the UN Conference on Trade and Development (UNCTAD) was released last month. It was outdoored at a press launch yesterday in Accra.
The annual report, in its 19th year, analyses major aspects of Africa’s development challenges and policy issues and makes policy recommendations.
The AfCFTA, signed last year and made effective in May, is a trade agreement between 49 African Union member states, with the goal of creating a single market.
If the agreement is fully implemented, the Gross Domestic Product of most African countries could increase by one per cent to three per cent once all tariffs are eliminated, according to UNCTAD estimates.
It is also expected to boost intra-African trade by 33 per cent once full tariff freedom is implemented to attract additional intra-African investments as well as create market opportunities to foster Africa’s industrialisation.
In a presentation on the report, Mr Philip Cobbina, Managing Partner of Cicada Consulting Limited, said the gains could be undermined if rules of origin were not appropriately designed and enforced to support preferential trade liberalisation.
He said by granting each other trade preferences, AfCFTA member countries would source more intermediate and final goods among themselves rather than import from abroad.
This, he said would increase trade within the AfCFTA and serve as a base to support the growth of regional value chains and the building of manufacturing capacities in Africa.
Mr Cobbina said according to the report, if rules of origin were made too costly or complex to comply with, firms might instead forego these preferences and choose to trade with partners outside the AfCFTA.
This could negatively affect the intra-African trade which was 15 per cent, compared to about 47 per cent in America, 61 per cent in Asia and 67 per cent in Europe, according to UNCTAD data for 2015 to 2017.
The rule of origin, he said would help Ghana get easy access to the materials and equipment needed to add value to our natural resources, including cocoa and timber, for the international market.
Mr Albert Yelifari, a Principal Commercial Officer of the Ministry of Trade and Industry, said the ministry would study the report and implement the needed recommendations to position Ghana well to benefit from the AfCFTA.
BY JONATHAN DONKOR AND MALISA TETTEH