Market Access to the EU:Rules of Origin

Eckart Naumann

tralac ConferenceStellenbosch, South Africa

11-12 November 2004

►Preferential EU market access regimes

►Rules of Origin as key determinant of market access

►Key aspects of Cotonou Rules of Origin

►Revision of EU Rules of Origin regime: recent developments

►Key issues in the context of EPA Rules of Origin

Overview 2

►Generalised System of Preferences (GSP) – 178 dev. countries►GSP to be enhanced 2006-2008 (coverage, cumulation, graduation)

►Everything-But-Arms (EBA) – least-developed countries►39 / 48 are ACP

►Cotonou Agreement – 78 ACP countries

►Cotonou most favored among ACP based on utilisation of preferences

Preferential EU Market Access 3

►Rules of Origin - implementation of trade policy

►Set the conditions for preferential market access

►Determine “economic nationality” of goods

►Prevention of trade diversion

►Trade barrier: political economy / protectionist elements

►Relationship: Rules of Origin and margin of preference

Rules of Origin a Key Determinant of Market Access 4

►Basic principles of origin ( for preferential market access )

“Wholly obtained” or “Sufficiently processed”

►Wholly obtained: list of criteria►Mostly agricultural goods, minerals and metals, fisheries

►Sufficiently processed: 3 methodologies (VA, SP, CTH)►Applicable to most processed goods

Key Origin Criteria of Cotonou Rules of Origin 5

►ACP (excl. SA) Exports 2003: € 28bn

►Of top 25 ACP exports (at HS4) to EU in 2003,

► 10 agricultural goods [ cocoa, fish, sugar, wood, bananas…]

► 9 minerals/metals [oil, gas, diamonds, aluminium, gold…]

► 6 manufactures [jerseys, T-shirts, boats…]

Key ACP Exports 6

►Cumulation

►Value tolerance excludes tuna

►Derogation via EU-ACP Customs Cooperation Committee

Other Aspects of Cotonou Rules of Origin 7

►Cotonou: “Revision of RoO” (Art 37(7))

►EU Green Paper (December 2003, follow-up August 2004)

►Internal EU document: “RoO in Preferential Trade Regimes: Orientations for the Future”

►Revision of EU GSP: simplification, cumulation, graduation

Towards a new Rules of Origin Framework 8

►All-ACP vs. regional Rules of Origin

►Methodology: simplification and technical changese.g. single rule where feasible; VA vs foreign content

►Issues around cumulation: limitations

►Value tolerance rules: increase %, remove limitations

Key Issues in the Context of EPA Rules of Origin 9

►Asymmetrical Reciprocity: tariff liberalisation or diff. RoO?

►Design Economic Development Indicators – for asymmetry

►Focus on market access for key sectors (current difficulties):

►e.g. Fisheries NB: “wholly obtained”, processed fish, territorial waters / EEZ, ownership & crew

►e.g. Textiles and Clothing current rules based on outdated system, little recognition of technical dev’mts

see trade data

Key Issues in the Context of EPA Rules of Origin /2 10

Kenya's Garment exports to the US / EU

0

20

40

60

80

100

120

140

160

180

200

Source: UN Comtrade database

US

$ m

n

Exports to EU Exports to US

Exports to EU 2.6 2.4 2.5 1.8 1.7 1 0.2

Exports to US 31 34 39 44 64 126 188

1997 1998 1999 2000 2001 2002 2003

AGOA

11

Lesotho's Garment exports to the US / EU

0

50

100

150

200

250

300

350

400

450

Source: UN Comtrade database

US

$ m

n

Exports to EU Exports to US

Exports to EU 4.5 0.8 0.2 1.6 3.3 1.7 0

Exports to US 87 100 111 140 217 321 392

1997 1998 1999 2000 2001 2002 2003

AGOA

12

Namibia's Garment exports to the US / EU

0

10

20

30

40

50

60

70

Source: UN Comtrade database

US

$ m

n

Exports to EU Exports to US

Exports to EU 0 0.1 0.2 0.5

Exports to US 0.2 1 7 44 65

1997 1998 1999 2000 2001 2002 2003 2004

AGOA NewAGOA RoO

Data unavailable in Comtrade

projected

13

►Relationship: Rules of Origin and margin of preference

►And lastly…

ACP must push for concessions and provide innovative proposals

- If you don’t ask, you don’t get

Key Issues in the Context of EPA Rules of Origin 14