THE Common Market for Eastern and Southern Africa (COMESA) has urged member states in the three regional economic communities (RECs) to simplify the rules of origin to enable business community exploit trade integration.
COMESA secretary-general Sindiso Ngwenya called for simple Eastern Africa Community (EAC)-COMESA-Southern African Development Community (SADC) rules of origin to ensure usability by the business community. He was speaking when he officiated at the session of COMESA senior officials meeting last week.
The meeting on the proposed COMESA, EAC and SADC tripartite Free Trade Area (FTA) was held in Kenya.
Mr Ngwenya said trade regimes that have complicated procedures including complex rules of origin are costly to the business community.
He said it may be cost-effective for importers and exporters to forgo the preferences to reduce transaction costs associated with the administration and issuance of certificate of rules of origin.
He urged the meeting not to dwell on the existing rules of origin but rather to explore simpler and robust rules that would spur trade and investment in the COMESA, EAC and SADC FTA.
“There are plenty of lessons to be learnt from successful economies whose liberal rules of origin have been the source of prosperity and wealth creation.
This negates the claim that stringent rules of origin can be used as an instrument of promoting industrialisation and value addition,” he said.
He said in order to empirically establish the efficacy of rules of origin in facilitating trade, the COMESA secretariat has carried out a study on the extent to which importers use the COMESA preference on a country by country basis.
The study revealed that the COMESA rules of origin are widely used by importers where they are superior to the rules of origin that are agreed upon at the bilateral level between member states.
“The findings of the study do confirm the expectation that liberal rules of origin that are simple to administer are widely used by the business community,” he said.
Under the COMESA trade regime, goods qualify for preferential tariff treatment if a certain percentage originates from member States. This means that all goods that meet the requirements of the COMESA rules of origin qualify for preferential tariff treatment when they are traded within COMESA.
Mr Ngwenya cited the rules of origin where it provides 25 percent of local content of value added, noting that the importers will invariably use the 25 percent rules of origin instead of the COMESA rules of origin that confer preferences for goods that meet the 35 percent local content of value added.