Comesa to Tackle Dispute With Egypt Over Trade Rule

Business Daily (Nairobi)

Allan Odhiambo

1 April 2011

Top leaders of the Common Market for Eastern and Southern Africa (Comesa) hope to resolve a dispute with Egypt over rules of origin during a mission planned for Cairo later this month.

Egypt, a relatively more industrialised economy than the other 18 members of Comesa, proposed last year that the thresholds for value addition should be raised from 35 per cent to 45 per cent in a move seen as seeking to tilt trade in processed goods in its favour.

“We shall be heading to Egypt to resolve this matter and we are confident of pulling something through,” Comesa secretary-general, Sindiso Ngwenya said on Wednesday.

The 35 per cent threshold is preferred by negotiators working to transform the Southern African Development Community (Sadc), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (Comesa) into a seamless market by 2012.

The business community in Egypt said their demand for a higher threshold for value addition is aimed at encouraging regional investment by locking out unfair competition from other external markets.

“I can’t tell you what position we will take in our discussion with them but you will see an outcome sooner than later.”

The demands by Egypt have not gone down well with members of Comesa, Sadc and EAC.

The threshold on value addition is uniform across the Sadc, EAC and Comesa and forms part of the Rules of Origin (ROO) that grant only goods wholly produced or substantially transformed within the region to enjoy the tariff-free trade regime.

For instance across the three blocs the ROO recognise goods produced wholly or partially from materials imported from outside the partner states.

But this is as long as the value of the imported materials does not exceed 60 per cent of the total cost of the materials used in the production of the goods and the value added resulting from the process of production accounts for at least 35 per cent of the ex-factory cost.

But simple operations such as packaging, mixing and assembly where the costs of the imported ingredients, parts and components used in any processes exceed 60 per cent of the total cost of the final product is not recognised under the rules of origin.

Value addition

But Egypt argued that the 35 per cent threshold in value addition remained too low to spur regional investment and demanded that it be revised to a minimum of 45 per cent.

The threshold demand by Egypt is a benchmark rate among most State around the Gulf region where Egypt borders.

Disputes like the one pitting Egypt against Comesa over market access are not new in the region that is witnessing an array of integration initiatives.

But with their eyes on a grand FTA arrangement, countries from Sadc, EAC and Comesa are unlikely to yield to Egypt’s demand.

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