Rules of origin hinder application of Arab free Trade area
Regional, Economics, 7/3/2002

The Arab League's Committee on the rules of origin is expected to meet in August, before the convening of the Arab League's social and economic council to submit its final opinion of the draft Arab rules of origin, which was chalked out by a wide array of Arab experts and discussed by the committee during the past five meetings, which ran for nearly two years.

According to Arab League sources, the committee would be faced with a big dilemma represented in the need for disengagement between views expressed by Morocco, Algeria Tunisia, Egypt, and Syria.

Those states underlined the need for developing existing rules of origin in order to provide enough protection for Arab industries in the face of the leakage of non-Arab products.

Some called for reactivating inter-Arab trade relations, protecting existing industries, guaranteeing promotion of industries, together with providing support and protection for domestic industries. Others like Jordan and Lebanon, as well as most of the gulf states, see no risk in adopting soft rules of origin that could lead to easy, leakage of foreign commodities to the Arab region.

The first group underlined the need for supporting existing rules of origin on the basis that the local component in Arab commodities should account for 60 percent, compared to 40 percent for foreign input and not the contrary as expressed by the second group.

Experts refer to disagreement over the rules of origin saying it represents the most important obstacle hindering inter-Arab trade. In order to support their argument, they indicated that though 50 percent of customs duties were eliminated in the framework of the Arab trade, trade did not increase during the past five years.

Reports indicated that the alternative for tight rules of origin would be keeping the current status under which foreign commodities would slip, into Arab markets improperly, thus threatening Arab industrial production.

On the Arab rules of origin, Jamal Eddine Bayoumi, Secretary General of the Arab Investors Union, said that a team of Arab experts were assigned for drafting the detailed rules of origin which would be used as a criterion for preferential treatment given to trade exchanges in the Arab free trade area.

He said under this move, member states drew a list of 2952 commodities which are not covered by deregulated Arab trade, apart from other things, hindering the growth of preferential Arab trade.

On Feb. 7,1999, the socia1 and economic council agreed on the plan which was followed by the Arab experts team for drafting rules of origin which wore based on the following:

Considering the current status of the Arab rules of origin and the reasons of its failure.

Getting informed of the experiments of regional groupings such as EFTA, NAFTA, EU, COMESA and adopting suitable rules.

Seeking conformity between Arab and European rules of origin, as the European Union is the first trade partner to the Arab countries. Laying out a gradual technique for moving ahead.

Bayoumi said that the team of experts remarked that the rules of origin used by NAFTA are complicated and that rules used by Arab and COMESA areas are not tight enough, meaning that they allow leakage of foreign products at the expense of local products.

For this reason they settled on rules applied by the EU with its partners for the following reasons: They represent an in-between approach, meaning 60 percent for local product and flexible rules. Most of the Arab states are using the same rules applied by the European Union.

Moreover, experts were dispatched to the Arab states to explain these rules of origin and meetings were held at the Arab League, but no agreement was reached on a system for detailed rules of origin. However, he noted that those meetings were characterized by:

Commitment by representatives of some countries which do not produce agricultural commodities to rules which are not conducive to protecting production and encouraging Arab agricultural production.

Emergence of traditional disagreement among producers of clothes on the one hand and among manufactures of clothes on the other.

Resorting to voting for adoption of some rules without genuine negotiations among states which have interest in those rules. Some experts say it is feared that if matters remained as they are, we shall have a free trade area lacking tight rules for carrying it out and negative lists that hinder liberalization of Arab trade.

Bayoumi further noted that decision-makers should have the following guidelines:

That the Arab Mediterranean countries are already applying proponed rules in dealing with the European Union.

Those countries will have to accept the same rules in dealing with Tunisia, Egypt and Morocco, which signed the Aghadir agreement for establishing the Arab Mediterranean free trade area.

That lack of sincere rules will encourage negative lists and hinder liberalization of Arab trade.

For these reasons, he suggested the following:

A call for holding sectoral and technical meetings among those concerned in every production sector in order to reach solutions that observe interests of all.

Dispatching experts for consultations on points that need to be clarified.

Convening explanatory seminars in Arab states if needed. Discussing all matters at the ministerial and political levels.

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