Trade and Industry

Monday, 14 March 2022

A developmental regionalism approach to the AfCFTA and Rules of Origin for the cotton, textiles and apparel regional value chain

  • Year: 2022
  • Organisation: TIPS
  • Author(s): Faizel Ismail (Director of the Nelson Mandela School of Public Governance, University of Cape Town and TIPS Research Fellow)
  • Countries and Regions: Africa

Bilateral or regional trade agreements (RTAs) are essentially preferential in nature and a deviation from the World Trade Organization principle of most-favoured-nation or non-discrimination, as they are intended to benefit signatory countries. However, the agreement could be abused by competitive third-countries that use a member country of the RTA (that has a low external tariff) as a springboard to penetrate the entire regional preferential market. Such a scenario could undermine the industries of other countries within the RTA. To avoid such a scenario, free trade agreements or RTAs use rules of origin (RoO) to determine the national origin of the product and to establish the thresholds for local content or value-added before the product is re-exported.

This Discussion Paper outlines the different types of RoO, provides a brief overview of the approaches to RoO adopted by Africa's Regional Economic Communities, and explores the mainstream academic literature on RoO in the automotive, textiles and apparel sectors. Following this, it highlights current trends in the cotton, textile and apparel production and regional value chains in Africa, arguing that the AfCFTA should adopt a developmental regionalism approach to its RoO negotiations in the cotton, textiles and apparel RVC. In this context, some recommendations for policymakers and negotiators are also provided.