Executive Director of the AfCFTA Policy Network, Mr. Louis Yaw Afful, has cautioned ratified countries, who trade outside of the African Continental Free Trade Area Agreement (AfCFTA), of the struggle they are likely to encounter.
Speaking in an exclusive interview with the Vaultz News, Mr. Afful noted that the rules of origin will offer great opportunities to these manufacturing firms and may risk being dependent on third parties.
“Those countries will suffer because rules of origin in a free trade enhances boosting intra-trade. Now one important thing is that, almost every country in Africa needs this at this stage of import substitution [and] for manufacturing and industrialization. Therefore, [with] most of the raw materials imported from outside, if you can have a competitive advantage of doing it here and having it at a certain reach… and you don’t want to benefit from the trade agreement and you want to stand out and then be trading outside Africa, a time will come it will be like a barter trade. Because if Ghana is doing well [and] having the competitive advantage in metal and Ghana can supply Nigeria and Nigeria will exchange it for something, it will reduce independence on third parties, who is not a member of the agreement.
“Long term, those countries that will say they are not participating, then they are not members”.
The rules of origin, which defines the criteria that must be met for a product to be considered as having its origin in an exporting country within the AfCFTA and qualify for preferential treatment inside trade agreement, according to Mr. Afful is in its second phase with focus on value addition.
“Negotiations for phase two is what is ongoing. Phase one has been done except some few priority training services that needs to be concluded. Then also, there are some areas under tariff offers that needs to be concluded. The rules of origin, about eighty to ninety percent, has been concluded; it’s left with about ten percent for members to conclude.
“Rules of origin is key because that is what we’ll be able to know what products qualify to be given an [originating] status, where is it coming from and what has gone into the products, were the products only made from the home country… and the value additions involved… they are very important if you want to go into industrialization?
Mr. Afful further noted that, although trading has already begun with the ninety percent of the rules of origin being agreed, he opined that they “have to complete it because Africa doesn’t have all and it’s not all our materials that are made here”.
“So, in our bid to industrialize and do manufacturing and value addition, we will surely import from somewhere but when we import some things … how are you going to price it, do you want it to be free under free trade?”
The Economic Development in Africa Report 2019 notes that rules of origin could be a game changer for the continent as long as they are simple, transparent, business friendly and predictable.
The report warns that if rules of origin are made too costly or complex to comply with, firms may instead forego these preferences and choose to trade with partners outside the AfCFTA.
However, Mr. Afful insists that, once the rules of origin are agreed by all parties, then it will offer equal and fair opportunities for ratified countries.
“The rules of origin, once it is agreed… it is a fair ground, it’s a binding document… that is what we call preferential treatment because the rules of origin are like the Bible of agreement [as] we are liberalizing our economy”.