Implications for Africa

Isabelle Ramdoo Deputy Programme Manager

Trade and Economic GovernanceECDPM

25 – 26 July 2013 Libreville Gabon

EU Trade Policy with third countries

1. EU Trade Policy• With whom and where?• For What?

2. New geopolitics of EU Trade Policy

3. Implications of EU trade policy with third countries on EU-Africa relations• Agreements signed• Current negotiations

4. What then for Africa?

Structure of Presentation

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State of play: EU in a changing world

1.1 Changing geopolitics and centres of gravity moving Easta. Share of GDP is declining and projected to be dwarfed by emerging countriesb. Share of global trade is still important, but is also projected to decline c. Exacerbated by the 2008-09 financial and economic crisis

Trade patterns moved from a country specialisation (primary commodities for the South and manufactures for the North) to intra-firm/network specialisation in tasks, giving the South considerable advantage in the production of manufactures

1 Overview: Where EU is going and why?

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• Participation of developing countries in global services trade rose from 19 to 24% during the same period.

• The rise of the emerging economies: Brazil, Russia, India, China, and South Africa– now economic and political actors (members of G20). Together, they account for more than 40% of the world population (market) and approximately 17% of the value of world GDP (purchasing power).

• THEREFORE: URGENT need of growth to preserve its industries and growth. For this change in logic and change in focus. Trade is core component of Europe 2020 strategy.

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Today EU and US dominate the world Tomorrow China and the emerging countries will dominate

a. Share of EU GDP is declining and projected to be dwarfed by emerging economies

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Share of World Trade in 2010 Share of World Trade in 2030

b. Still a major trading block BUT share is also declining

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• After imposing a moratorium on negotiating new PTAs from 1999-2006, the EU in 2007 began negotiating a new generation of more ambitious or comprehensive FTAs.

• 2006 Global Europe strategy: the EU targeted a number of larger countries and regions for negotiations, including South Korea, India, Canada, and the Association of South East Asian Nations (ASEAN).

• 2010 Trade, Growth and World Affairs: Renewed policy to strengthen EU’s institutional setting to make EU’s trade voice louder and clearer. Purpose: complete trade deals on the table and engage in ambitious negotiations with strategic partners

1.1 Change of logic and change of focus.

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EU will:1. Pursue and conclude current negotiations;2. Deepen strategic partnerships;3. Take trade policy forward, including by supporting its SMEs in

going global

Its trade agreements are expected to be:

1. Big enough to have an impact on EU economies;2. Have to be big enough NOW because need for growth is urgent (hence the rush to sign PTAs with main partners)3. PTAs must be BOLD to trigger changes in Europe (to trigger regulatory reforms in key sectors)

Key objectives of 2010 renewed strategy:

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Some Facts:EU current FTAs – Where?

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But EU’s Major markets NOT covered yet!

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Neither are EU Major investment partners!!

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Status of EU FTAs and their share of EU trade (%), 2009: What is really covered?

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EU Trade with main trading partners, 2009

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Strategy differ if EU is next exporter OR not importer

Fuel and minerals: net importer: that’s why they push for fair access

Manuf and services net exporter: that’s why they push for aggressive MA (extensive trade liberalisation)

Now: Clear market access outreach strategy

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EU’s trade policy is grouped into four categories :

1. FTAs with strategic partners: Countries where EU’s objective is to neutralise potential

discrimination against EU exports and investments:• Signed so far: South Korea (2011), Chile, South Africa.• Completed with Singapore in Dec 2012• Nego started with Trans-Atlantic Agreement with US (June

2013), Canada (2009), Japan (March 2013); Thailand (May 2013)• No discussions yet with China and Russia.2. Agreements with geographically close neighbours for which the EU is prepared to offer accession or some slightly looser relationship. These include EFTA, Turkey, Central and Western European countries and West Balkans (Association Agreements for potential future EU countries)

2. The new geopolitics of EU Trade Policy

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3. Agreements designed primarily to foster stability around the EU borders – Mediterranean countries, Gulf States, Ukraine

4. Agreements with a historical and development focus – this is the case of EPAs

In addition, EU provides autonomous preferences to developing countries and LDCs under its Generalised System of Preferences (GSP) and Everything but Arms (EBA). The current GSP covers 176 countries.

GSP: number of countries have been reduced to about 80. All high income and upper middle income countries (eg. China, Brazil, Malaysia, Gulf states) removed. New GSP will start in 2014.

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Economic Partnership Agreements:

Today, 36 ACP countries have some sort of EPA. They are:16 Caribbean countries (Haiti did not sign);2 Pacific countries (Fiji and Papua New Guinea)2 West African countries (Ivory Coast and Ghana)1 Central African country (Cameroun)5 Eastern and Southern African countries (Mauritius, Seychelles, Madagascar, Zambia, Zimbabwe)5 SADC countries (Mozambique, Botswana, Lesotho, Swaziland, Namibia)5 East African countries (Kenya, Burundi, Rwanda, Uganda, Tanzania)

All of them have duty free and quota free market access to EU. But MAR1528 Deadline on 1st October 2014. Only countries that sign, ratify and start implementing their EPAs will continue to benefit from EPA Market Access conditions.

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• To date, EU has signed the following agreements:

• A customs union with Turkey

• A European Free Trade Agreement (EFTA) with neighbouring European countries, which are not part of the EU (Switzerland, Liechtenstein, Iceland, Norway).

• Stabilisation and Association Agreements with former Eastern European countries (Macedonia, Croatia, Albania, Montenegro, Bosnia, Serbia)

• Association agreements with Mediterranean countries (Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestine, Syria, Tunisia) in 2000. Agadir Agreement among Tunisia, Morocco, Egypt and Jordan (FTA). Launched DCTFA Negotiations started in April 2013 with Morocco.

• Free Trade Agreements with Mexico (1999), Chile (2002), S Korea (2012), Singapore (2012 0 signed but not yet applied)

• EPAs with ESA, Cariforum, PNG (2008)

• Trade and Development Cooperation Agreement, South Africa (1999)

• Preferential agreements with Peru – Columbia (2012); Central America with Panama, Guatemala, Costa Rica, El Salvador, Honduras, Nicaragua (2012) ; These 2 agreements are not yet into force

Overview of Bilateral FTAs – Agreements signed

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• US: Negotiations for a Transatlantic Trade and Investment Partnership (TTIP) started in July 2013

• India – a high potential economy, with rising middle class (markets) and rising GDP (purchasing power). Negotiations are quite slow.

• ASEAN (Indonesia, Malaysia, Philippines, Singapore, Philippines, Thailand, Vietnam, Cambodia, Laos, Myanmar): Third largest trading partner of EU. Negotiations for FTA have started with Malaysia in 2010, with Thailand in 2012 and with Vietnam in 2012.

• Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE). Negotiations were re-launched in 2002

• MERCOSUR - Argentina, Brazil, Paraguay and Uruguay – first EU’s market for agriculture (19.8% of total EU imports). Negotiations difficult (8 rounds)

• Canada: Started in May 2009, Quite advanced, but yet to be concluded.

• Japan: Negotiations launched in April 2013

FTAs under negotiations – strategic partnerships

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3. Overview of EU FTA’s with key partners

How will Africa be affected?

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Africa/ACP countries are covered by multiple (5) regimes:1. LDCs are covered by EBA: DFQF with stricter RoO compared to countries

with FTA (except for some textile products where they have ST)2. GSP – with trade preferences for a no. of products; with stricter RoO3. EPA – only 4 countries (ESA) currently applying the EPAs; some others

have signed but not ratified; others have initialed but not signed; 4. South Africa – TDCA5. North Africa: Euromed Agreement; some have started to negotiate

DCFTA

Given different rules in these agreements, cummulation of RoO is made difficult and countries face competing MA towards EU (varying degree of openness for their products;

Not conducive to intra-regional trade because cannot be used as a lever to build regional markets.

Implications for Africa/ACP

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1. Erosion of preferences:Europe has tariff peaks on a number of products of interest to Africa. This is expected to be eliminated, causing African business to have to compete more to access EU

2. Beyond tariffs, erosion of preferences due to partners’ improved RoO; non-tariff measures are also tackled (eg. Standards);

3. Trade diversion: better market access condition, with relatively easier procedures is expected to divert trade away from Africa;

4. Services and investments: The new generation of agreements is not only about trade. But massively about inter-related investments and services given the high degree of inter-dependence among those economies. Expected to deepen further investment in these sectors if access to markets are improved

Impact of EU’s trade agreements on Africa

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Erosion of preferences: Main exports from African regions to EU

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But also beef, tobacco, furniture

EPA Market Access: duty free and quota freeEBA Market Access: duty free and quota freeGSP Market Access (see table below)

1. EU Med AgreementsCoverage: Algeria, Egypt, Israel, Jordan, Lebanon, Morocco,

Tunisia, Palestine, Turkey, Syria (not signed)

• Cover essentially trade in goods, being complemented with a number of additional negotiations to open up additional agricultural trade;

• Duty-free access to the EU for Med industrial products and around 80% of agricultural produce

• Common rules to allow cumulation of origin within the Euromed and beyond.

• Regional convention on PanEuroMed preferential rules of origin agreed in 2011

• However: proper implementation of the requires complete South-South FTA network

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1. Textile and clothing (shirts, tshirts, pulls, trousers, yarn) • Tunisia, Morocco and Egypt are important producers of T&C: DFQF• RoO: single transformation for fabric; double transformation

for Apparel• Cummulation: Jordan, Morocco, Egypt and Tunisia have an FTA:

allows them bilateral, diagonal and full cumulation

2. Fisheries:• Tunisia and Morocco produce preserved, fresh and chilled fish

products, DFQF, except for Egypt on Tuna (duty 20.5%)

3. Other important products include nuts (almonds, cashew) and citrus fruits (oranges, lime, grapefruits etc). All enjoy DFQF

Key products of interest to Africa

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Key products which will where margins of preferences will be eroded

Preference erosion

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  Oranges Mandarines grapefruits Lemon LimeGrapes, seedless

grapes, others

MFN 3.20% 16% 2.40% €82.40/100 kg 12.80% €50/100 kg 17.50%GSP 0% 12.50% 0% n/a 8.90% n/a 14.10%FTA 0% 0% 0% 0% 0% 0% 0%

 Cashew nuts, in shell and 

shelled Almonds, bitter Almonds othersMFN 0% 0% 5.60%

Non pref TRQ n/a n/a 2.00%GSP 0% 0% 2.10%FTA 0% 0% 0%

  Tshirt cotton Shirts CottonT Shirts man-

made Trousers Denim fabric Cotton FabricPullover cotton

Pullover wool yarn

MFN 12% 12% 12% 12% 8% 8% 12% 12% 3.8%GSP 9.6% 9.6% 9.6% 9.6% 6.4% 6.4% 9.6% 9.6% 3.8%FTA  0% 0% 0% 0% 0% 0% 0% 0% 0%

  Fish fillets Tuna, skip jack Fish prepared, preservedMFN 18% 24% 24%GSP 14.5% 20.5% 20.5%FTA 0% 0% 0%

4 Agreements:

1. EU - Mexico (1st generation – not full FTA) – entered into force in 2000

2. EU – Chile (1st generation – not full FTA), entered into force in 2003

3. EU – Central American countries (2nd generation, more comprehensive). Signed in 2012, expected to enter in force in 2nd half of 2013 (69% lib immediately; 96% in 10 years; 100% in 15 yrs)

4. EU – Peru – Columbia (2nd generation, more comprehensive) in force since 1st March 2013 with Peru, Columbia being finalised

2. Agreements with Latin American countries

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• EU – Mexico: does not cover all agricultural products but covers goods. Mex is an important producer of textiles

• EU – Chile : do not cover all agricultural products• EU – CA and EU-Peru-Columbia: DFQF (they already GSP+

countries)

Rules of origin for EU-CA and EU Peru-Columbia:- Bilateral Cumulation;- Diagonal cumulation between: EU, Columbia and Peru on the one

hand; and Costa Rica; El Salvador, Guatemala; Honduras; Nicaragua; Panama and Venezuela; or at the request of C and P for materials originating from Central America, Latin America and Caribbean countries if:-Products are sufficiently worked;-RoO are identical in these countries;-Countries have signed a customs cooperation agreement + certification and verification of status

Key elements of Agreements

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Preference erosion

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 Fish fillets, fresh,

frozen, chilledTuna, skip jack

fish prepared and preserved

Mexico 0.0% 6.8% 6.8%Chile 3.4% 8.0% 8.0%

Colombia* 0.0% 0.0% 0.0%El Salvador* 0.0% 0.0% 0.0%

1. Fish and fish product

2. Fruits: bananas, pineapples, mangoes (origin: Central America, Peru)  Bananas Pinepples Mangoes

 Plantain, fresh and dried (08.03.10)

Others, fresh and dried (08.03.30) Dried  Others   

MFN 16% 16% 5.8% 5.8% 0%GSP 12.5% 12.5% 2.3% 2.3% 0%FTA 0% 0% 0% 0% 0%

3. Coffee, tea (origin: Columbia, Central America)

Coffee (09.01) Not roasted  Roasted 

Coffee substitute containing coffee (09.01.90.90)

 Not decaf (09.01.11) Decaf (09.01.12) Not decaf (09.01.21) Decaf (09.01.22)

MFN 0% 8.3% 7.5% 9.0% 11.5%GSP 0% 4.8% 2.6% 3.1% 8.0%FTAs 0% 0% 0% 0% 0%

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4. Cocoa and cocoa products (origin mainly Ecuador, Peru)

  Cocoa beans (18.01) Cocoa paste (18.03) Cocoa butter (18.04) Cocoa powder (18.05)MFN 0% 9.6% 7.7% 8.0%GSP 0% 6.1% 4.2% 2.8%FTA 0% 0% 0% 0%

Chocolate (18.06) 0%<sucrose<5% 5%<sucrose<65% 65%<sucrose<80% >80% sucrose

MFN 8% 8% + €25.2/100kg 8% + €31.4/100kg 8% + €41.9/100kgnon-pref TRQ 43% 43% 43% 43%

GSP 2.80% 2.8% + €25.2/100kg 4.5% + €31.4/100kg 4.5% + €41.9/100kgFTA 0% 0% 0% 0%

5. Textiles products (origin: Mexico, Central America)

  Tshirt cotton Shirts CottonT Shirts man-

made Trousers Denim fabricCotton Fabric

Pullover cotton

Pullover wool yarn

MFN 12% 12% 12% 12% 8% 8% 12% 12% 3.8%

GSP 9.6% 9.6% 9.6% 9.6% 6.4% 6.4% 9.6% 9.6% 3.8%

FTA  0% 0% 0% 0% 0% 0% 0% 0% 0%

6. Other potential exports to EU

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Cut flowers Roses (06.03.11) Carnation (06.03.12) Orchids (06.03.13) Others (06.03.90)MFN 12% 12% 12% 10%GSP 8.5% 8.5% 4.2% 6.5%FTA 0% 0% 0% 0%

7. Nuts

 

Cashew nuts, in shell and shelled

Almonds, bitter

Almonds others

Macadamia, in shell 

and shelled

Hazelnuts, in shell and shelled

Walnuts, in shell

Walnut shelled

Pistachio, in shell and 

shelled Pine nutsMFN 0% 0% 5.6% 2% 3.2% 4.0% 5.1% 1.6% 2%

Non pref TRQ n/a n/a 2.0% n/a n/a n/a n/a n/a n/aGSP 0% 0% 2.1% 0% 0% 0% 0% 0% 0%FTA 0% 0% 0% 0% 0% 0% 0% 0% 0%

• South Korea signed an FTA with the EU in 2011. This FTA is considered as the most advanced trade agreement the EU has signed so far. S. Korea does not benefit from full duty free and quota free market access to the EU.

• On average, S. Korea is not a large trading partner to the EU: EU’s share of imports from S. Korea represents 2% of its total imports and EU’s share of exports to Korea also represents 2% of total EU export.

• However, for specific sectors, such as automobile and machinery, S. Korea is an important player

3. EU – South Korea

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• Textile products: South Korea is not a major exporter of textiles to the EU. Main markets are in Asia – Mainly Japan and China

• FTA will provide DFQF EU market. However, RoO are quite strict for textile products (double stage transformation – value tolerance 8 – 10% of the weight of basic materials used)

Overview of preferences granted to S. Korea in selected products

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 Fish fillets, fresh,

frozen, chilledTuna, skip jack

fish prepared and preserved

South Korea 13.5% 16.0% 16.0%

Fish and fish products – S. Korea exports mainly prepared and preserved fish to EU (15.5% of its total exports go to EU). No DFQF; derogation; RoO: vessel and crew requirement; value tolerance 10% of ex-works price)

  Tshirt cotton Shirts CottonT Shirts man-

made Trousers Denim fabricCotton Fabric

Pullover cotton

Pullover wool yarn

MFN 12% 12% 12% 12% 8% 8% 12% 12% 3.8%GSP 9.6% 9.6% 9.6% 9.6% 6.4% 6.4% 9.6% 9.6% 3.8%FTA  0% 0% 0% 0% 0% 0% 0% 0% 0%

Beef, fresh, chilled and frozen (no DFQF, but 50% lib)

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Meat of bovine animals, fresh and chilled

Carcasse / half carcasse (02.01.20)

Other cut with bone (02.01.20) other (02.01.20.90.10)

Boneless incl buffalo (02.10.30)

MFN 12.5% + €176.80/100 kg 12.5% + €176.80/100 kg 12.5% + €265.2/100 kg 12.5% +€176.1/100 kgNon Pref TRQ n/a n/a n/a n/aGSP n/a n/a n/a n/a

South Korea 6.4% + €88.4/100 kg 6.4% + €88.4/100 kg 6.4% + €132.6/100 kg 6.4% + €88.4/100 kg

Meat of bovine animals, frozen

carcasse/ half carcasse (02.02.10) Other cuts 02.02.20) Boneless (02.02.30) Others (02.02.30.90)

MFN 12.8% + €176.8/100kg 12.8% + €176.8/100kg 12.8% + €221.10/100kg 12.8% + €304/100kg)Non Pref TRQ n/a 20% 20% 20%

GSP n/a n/a n/a n/a

South Korea 6.4% + €88.4/100 kg 6.4% + €88.4/100 kg 6.4%+€110.55/100kg 6.4%+€152.5/100kg

EU current FTA negotiations and potential impact on Africa

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US represents 16% of the total trade of EU, mostly in industrial pdts

1. EU–US Trans-Atlantic Trade & Investment Partnership

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Composition of trade and tariffs

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Key issues to watch out for Africa

1. Discussions on agriculture:- EU regulations against GMO crops;- Restrictions on import of beef, chicken that are fed with

ractopamine, an additive that promotes the growth of lean muscles in livestock;

- Other food safety rules in EU 2. NTMs linked to investment and procurement restrictions (in the US buy-America; in EU support to SMEs)3. RoO are likely to be very flexible to foster integration of global value chains

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2. Other EU trade partners: Which regimes apply?

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  IndiaThailand, Philippines,

Malaysia, VietnamPakistan

RegimeGSP - some products are

excluded from preferences

GSPSpecial regime for 75 products, GSP

for the rest

State of play of EU trade policy:

- India, Thailand, Malaysia, Vietnam: Currently negotiating FTAs- Philippines: Considering negotiating FTAs (not started yet)- Pakistan: Special incentive

a. India: currently negotiating an FTA

Why? - An important partner for the EU, a high potential emerging economy- Middle class is rising (currently 150 million, expected to reach 600

million in 2020) – HUGE market potential for EU products

Current state of play:• India is a beneficiary of the EU's GSP scheme. In 2010, around 85% of

Indian exports to the EU entered under a zero or a preferential tariff. But average tariffs is high in India for EU products (31.8 % for agric and 10.1% for industrial products)

• FTA launched in 2007 - expected to cover 25% of world population and 30% of world GDP

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• EU not expected to provide DFQF – will liberalise 95% of its market (with an exclusion list of 226 products, mostly chemicals, petrochemicals, plastics, ceramics and glassware.

• India expected to liberalise 90%, with an exclusion list of about 150 agricultural goods (including dairy products, sugar, fruits and vegetables, meat products, fish and fish products) and 250 manufactured products such as some textiles and clothing, textile machinery, cars, and wines and spirits.

Key challenges: India is inflexible on tariffs on automobiles (peak of 60%); access to wines and spirit; want to exclude products where EU has subsidies (dairies).

• Concerns regarding clauses on human rights, social and environmental; labour standards.

• Strict requirements on Intellectual Property Rights issues from EU, which may curtail the production of cheap generic drugs, especially AIDS drugs which India exports to Africa.

• Concerns in Services – movement of people, liberalisation of services such as professional services

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India exports under the Generalised system of preferences. Big producer of textiles

Rate of duty applied to Indian textile products

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 T-Shirt Cotton

Shirts - Cotton

TrousersT-Shirts

man madeDenim fabric

Pull Cotton

Cotton Fabric

YarnPull Wool

Duty applied to Indian products

9.6% 9.6% 9.6% 9.6% 8.0% 9.6% 8.0% 3.8% 9.6%

Scheme GSP GSP GSP GSP MFN GSP MFN MFN GSP

GSP preferences are suspended for yarn and fabric because the value of EU imports from India for 3 consecutive years exceeded 14.5% of total EU imports of yarn and fabric from all GSP countries. Here India pays the normal tariff (non-preferential).

RoO: GSP Rules apply: double transformation

b. Viet NamEU signed a Partnership and Cooperation Agreement with Vietnam in June

2012. This is a political agreement.

Negotiations have started on a FTA in June 2012. Main Vietnamese textile products are cotton pullovers, t-shirts (cotton, man made and trousers. Vietnam is not an LDC and benefits from GSP Scheme.

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 Pull

CottonT Shirt Cotton

TrousersT Shirts

man madeShirts Cotton

Cotton Fabric

Pull WoolDenim Fabric

Tariff applied to Vietnam

9.6% 9.6% 9.6% 9.6% 9.6% 6.4% 9.6% 6.4%

Regime GSP GSP GSP GSP GSP GSP GSP GSP

c. Thailand and PhilippinesImportant producer of numerous textile products and fisheries

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  Pull CottonT Shirt Cotton

TrousersT Shirts

man madeShirts Cotton

Cotton Fabric

Pull WoolDenim Fabric

Tariff applied to Thailand

9.6% 9.6% 9.6% 9.6% 9.6% 6.4% 9.6% 6.4%

Regime GSP GSP GSP GSP GSP GSP GSP GSP

  Tuna, skip jackfish prepared and

preservedFish fillets, fresh,

frozen, chilledTariff applied to Thailand and

Philippines 20.5% 20.5% 14.5%

Regime GSP GSP GSP

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Rules of origin

1. Fish fillets: Wholly obtained

2. Tuna, skipjacks and prepared fish: all materials from fresh fish are wholly obtained

Value tolerance: 15% ex-works price

Derogations: No derogations

Vessels: Registration and flag requirements;Either 50% owned by nationals or owned by company with head office in country or EU + at least 50% ownership Possibility to use Regional cumulation to vessels of different beneficiary countries (product will have origin of country which flag the vessels)

d. Pakistan (Special arrangement)

• Pakistan is an important partner for the EU, although trade and investment remain below its potential.

• In 2011, after a severe flood resulting in a serious impact on Pakistan's economy, EC agreed on a package of measures to assist in the recovery of Pakistan's economy.

• One element of this package is the granting of 2 years unilateral trade preferences on a number of goods (75 products) imported into the EU from Pakistan. Duty free for 55 products; tariff rate quotas for 20 products

• Most products are textile products. These include yarns, fabric and apparel – but most products on interest to Africa are NOT INCLUDED. The normal GSP applies to these products and Pakistan pays the same duties as Vietnam above.

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With the exception of wool pullovers, Pakistan’s main market for textiles products is in fact the US, with the EU representing less than 25% of Pakistan’s exports

 Pull

CottonT Shirt Cotton

TrousersT Shirts

man madeShirts Cotton

Cotton Fabric

Pull Wool

Denim Fabric

Tariff applied to Pakistan

9.6% 9.6% 9.6% 9.6% 9.6% 6.4% 9.6% 6.4%

Regime GSP GSP GSP GSP GSP GSP GSP GSP

What then for Africa?

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1. Strengthen and stimulate internal (i.e intra and inter-regional) demand:a. Boost intra-Africa trade; b. Support and encourage regional value chains; c. Boost industrialisation

2. External trade: Work on export competitiveness (c.f China); a. This includes having a foreign trade policy, based on national and

regional realities and priorities; b. Focus on standards; c. Address unnecessary trade and investment barriers;d. Enhance trade facilitation (both soft and hard infrastructure; behind

and beyond the border measures; beyond the continent)

A 2-pronged approach

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Thank youwww.ecdpm.org

www.slideshare.net/ecdpm

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Cumulation explained:

Bilateral cumulation: Applies to members of a single FTA, operated between 2 partners.

Diagonal cumulation: • Applies between 2 or more countries. • Requires a network of FTAs containing identical RoO and diagonal cumulation

involving all the countries of the zone. • Allows originating materials to be further processed in the region• Value added in the last stage of production should exceed the highest customs

value of any of the inputs used from countries in the regional grouping• The Pan-Euromed System (42 participating countries) is based on the application

of a common set of RoO within all RTAs concluded among countries in the region

Full cumulation (EEA, EC, Algeria, Morocco, Tunisia)• Operating between 2 or more countries;• Countries must have identical RoO and provide for full cumulation• Working or processing may be done on non-originating material in any partner

country (cumulation of processing is possible). Therefore any processing in a participating country can be counted as qualifying content, regardless if processing is sufficient to confer originating status.