Closing in on harmonizing Rules of Origin for AfCFTA: anatomy of reconciliations and remaining challenges

To become operational, the Africa Continental Free Trade Area (AfCFTA) must harmonize Rules of Origin (ROO) across Africa's Preferential Trade Agreements, usually defined at the level of the Regional Economic Communities (RECs). Negotiators have agreed on a set of common Regime-Wide (RWRs) rules and on about 82% of the expected different Product-Specific Rules (PSRs). This paper documents the starting point for the negotiations, and then contrasts the characteristics of RWRs and PSRs with the initial starting point using three measures: Textual overlap, regulatory distance, and an index of restrictiveness (R-Index). For RWRs those for AfCFTA are, overall, more transparent and more flexible. For PSRs that are more heterogeneous across RECs and more complex to describe meaningfully from an economic standpoint, the paper brings out the following. Where agreement has been reached, AfCFTA choices rely more often on a single criterion option, an indication of greater transparency than at the REC level. In addition, composite criteria are in the form of choice rather than cumulative. For those 973 products still under negotiation, preferential margins stand at 21% almost twice the average the margins for those agreed. Significantly and expectedly, regulatory distance (in the sense of different PSRs at the HS6 level) is less than among PSRs where agreement has been reached. R-index values as an indicator of the complexity and restrictiveness of PSRs (a higher value indicates a more restrictive PSR) are higher among PSRs where agreement has not been reached. These patterns also serve as indirect evidence of the usefulness of these two indicators to describe and summarize the complexity of ROOs across PTAs. Concluding comments suggest ways ahead to address the challenge of setting up ROO that are business friendly rather than business-owned in the sense of penalizing small firms by their complexity.