EU Introduces New "Preferential Rules Of Origin"

The EU has recently introduced new "preferential rules of origin" and other reform measures for the pan European Mediterranean region. The analysis shows that the EU's trade facilitation reform will have a certain boosting effect on regional economic recovery and supply chain integration. However, due to the large differences among regional economies and other issues, the promotion of regional integration in the future will still face many challenges.

The European Commission recently launched a new package of reform measures for regional trade facilitation, focusing on adjusting the existing "rules of origin" to promote more effective integration of regional supply chains. European Commission Economic Affairs Commissioner gentinoloni said that through the reform, the EU hopes to further expand economic and trade exchanges between the EU and regional countries and enhance the degree of regional economic integration. This will help to open up a larger overseas market for EU enterprises and help regional countries to accelerate economic recovery and reconstruction.

The new rules are more convenient and flexible

The package of reform measures for regional trade facilitation includes 21 items, involving 20 neighboring countries and regions around the EU. In addition to Iceland, Norway, Switzerland and other members of the European Free Trade Association, it also includes turkey, Egypt, Israel, Lebanon and other Mediterranean coastal countries and regions, as well as the western Balkan countries and regions such as Serbia, Albania and Montenegro, as well as the "Eastern Partnership countries" of the European Union such as Georgia and Ukraine.

The focus of the reform is to introduce a new "complete accumulation" principle in the production and processing of goods of origin, that is, goods can be produced and processed in the above-mentioned 20 countries and regions in a decentralized manner, and the accumulated ingredients include non originating materials. Finally, they can still enjoy tariff preferences in accordance with the "preferential rules of origin" in the export to Europe. The reform measures also include allowing a larger proportion of non originating materials to be used in the production and processing of goods of origin, allowing the application of tax refund for imported materials used in the production of goods of origin, and simplifying the procedures for issuing certificates of origin by the customs.

Rules of origin is an important part of international trade policy. It plays an important role in bilateral trade because it is closely related to customs treatment such as tariff preference and quota restriction. This reform plan is an important adjustment and supplement to the "preferential rules of origin" in the pan European Mediterranean Regional Convention. The new "preferential rules of origin" will be more convenient and flexible.

Tim bell, a researcher at the Jacques Delors Institute in Europe, said that for a long time, the pan European Mediterranean region has used different rules of origin and accumulation principles, and different standards have led to the formation of non-tariff barriers. European enterprises have been hoping to amend the relevant agreements as soon as possible, establish a single legal framework, unify different preferential rules of origin, and establish a set of rules with wider coverage and more flexibility to meet the needs of regional economic development and supply chain integration. The new regulations are in line with the relevant reform needs.

As soon as the new rules were introduced, the European Union of clothing and textiles immediately welcomed it, saying that the upgrading of preferential trade agreements between the EU and relevant countries would bring good news to the whole industry. Dirk vandiheim, Secretary General of the alliance, said that the new regulations mean that textiles will have more opportunities to enjoy preferential trade treatment. Not only can the production link be dispersed to different regions, but also there will be more choices for the import of raw materials, so that relevant enterprises can obtain greater cost advantages. Rosente, a senior lawyer of Baker McKenzie, a multinational law firm, said that the new EU regulations would bring textiles into the tariff free zone to the greatest extent, creating new opportunities for the development of European textile industry.

Promote the integration of supply chain in the region

The pan European Mediterranean region has always been of great value to the economic and trade development of the EU. According to EU statistics, in 2019, the total trade volume between the EU and the above-mentioned 20 countries and regions will reach 677 billion euro, accounting for about half of the total value of EU preferential trade in the whole year.

Under the epidemic situation, the pan European Mediterranean region has been hit hard. According to the latest forecast of the International Monetary Fund, the economy of the Middle East and North Africa will face a comprehensive recession in 2020, with an average shrinkage of 5.7%, the largest decline in nearly 50 years. According to the assessment of the European Mediterranean Region Institute, the economies of the Mediterranean coastal countries are faced with such unfavorable factors as the decline of exports, the rise of unemployment rate and the surge of debt level.

The focus of EU's supply chain integration and diversification is to ensure supply chain stability. Yuliu Winkler, vice chairman of the International Trade Committee of the European Parliament, stressed that the epidemic showed that solving supply chain stability was a top priority for the EU. The EU should realize the offshore development and diversified construction of key supply chain through industrial strategy and trade policy.

Experts pointed out that the new EU policies, especially the application of the new accumulation principle, will effectively stimulate investment and employment in the pan European Mediterranean region and have a positive impact on regional economic recovery and supply chain integration. International trade expert Nikolai deldvizi said that the new rules contain more contents conducive to regional trade facilitation, which will further promote the export of eastern and southern neighboring countries to the EU, and the more flexible accumulation principle will make the integration of regional supply chain more effective.

Fasala sigermasi, former Secretary General of the Mediterranean Union, said that the epidemic situation has made the construction of Pan European Mediterranean regional integration more important than ever, and the strengthening of economic and trade cooperation will make the regional economy more resilient. Paul tosteven, head of Savills, an international asset management advisory body, said that research shows that countries in the pan European Mediterranean region will benefit from the integration of regional supply chains, and the trade facilitation policy recently launched by the EU will further promote the integration process.

There are still many challenges ahead

The study shows that the advantages of Mediterranean coastal countries lie not only in their geographical location, but also in the aspects of labor force, resources and technology. The introduction of the new policy will attract more foreign investment in local manufacturing industry. With the technology transfer and the improvement of labor quality, the speed of regional supply chain integration will be further accelerated.

Since the 1960s, European countries have been committed to increasing economic and trade relations with the eastern and southern Mediterranean countries. Especially after the Barcelona process was launched in 1995, the development of Pan European Mediterranean economic and trade cooperation has been further accelerated. However, due to the great differences between the relevant countries and the instability of regional politics and security situation, the regional integration process failed to achieve the desired results. According to the ministerial meeting of the Mediterranean Union held in 2018, the development level of economic integration in the pan European Mediterranean region is still relatively low compared with other regions in the world.

However, most of the EU's agricultural trade barriers are still excluded from the EU's trade agreements with the EU's founder, Alem. In addition, EU's investment in Mediterranean coastal countries is too single, most of which are concentrated in the energy sector represented by oil, which results in the limitation of supply chain integration and the slow process of regional economic integration.

Bell believes that, on the one hand, the stagnation of service industry reform in Mediterranean coastal countries has made it difficult for transportation, telecommunications, finance and other industries to connect with the EU and realize the transfer of supply chain; on the other hand, the two sides also lack mutual coordination in macroeconomic policies such as exchange rate and interest rate, which hinders the entry of foreign investment. The report of EU Mediterranean 2030 vision proposed by the European Commission shows that the main challenges facing Pan European Mediterranean regional integration include common vision, lack of mutual trust and resources, and weak institutional guarantee.

Ayadi said that in the future Pan European Mediterranean regional integration, more attention should be paid to non-tariff issues and the docking of laws and regulations on public procurement, intellectual property rights, competition and sustainable development. At the same time, the Mediterranean coastal countries need to further improve the business environment, infrastructure, labor quality and so on.