Rules of origin delay FTA tariff discussions with EU

Source: The post is based on the article “Rules of origin delay FTA tariff discussions with EU” published in Business Standard on 3rd July 2023

What is the News?

India and the European Union (EU) have not been able to make major progress in the tariff negotiations under the ongoing free trade agreement (FTA) discussions due to differences over the rules of origin criteria.

This is because India wants a conservative rule of origin, while the EU wants us to follow liberal criteria. 

What is Rules of origin?

Source: Business Standard

Rules of origin criteria are critical to determining the country of origin of a product. The country of origin refers to the country where the products were manufactured or substantially transformed. 

What are rules of origin used for? 

— to implement measures and instruments of commercial policy, such as anti-dumping duties and safeguard measures;

— to determine whether imported products shall receive most-favored-nation (MFN) treatment or preferential treatment;

— for the purpose of trade statistics;

— for the application of labeling and marking requirements and

— for government procurement.

Criteria used to qualify for the rules of origin requirements: Tariff level changes and minimum value additions are the two most commonly used criteria for a product to qualify for the rules of origin requirements. 

– Most developed countries prefer the flexibility to use either of the criteria, as it allows flexibility for exporters. India has traditionally preferred the use of both criteria and is not given the flexibility to use either of them.