Utilizing Blockchain to Enforce Rules of Origin in AfCFTA

Utilizing Blockchain to Enforce Rules of Origin in AfCFTA

The African Continental Free Trade Area (AfCFTA) is an initiative of the African Union to create a single economic market of 1.2 billion people and a $3.4 trillion dollar opportunity by eliminating the common frictions which affect intra-African trade.

The Rule of Origin states that only goods which are manufactured with local inputs in member countries can be exported to other territories that belong to the same market and enjoy tariff free status. Due to the fact that with the exemption of South Africa, most member states do not have strong industrial base to produce most of the goods their citizens consume locally and as such resort to imports majorly from the Western and Eastern markets. Due to this construct, some African countries have economic partnership agreements skewed against their favor which makes it possible for an industrialist in Europe, America or China to produce goods in their markets, ship them down to African states they have trade relations with and have them repackaged as locally manufactured products so that they can easily enter large markets on the continent such as Nigeria, Ethiopia, Kenya, etc without paying duties.

How blockchain works

This problem can be sorted out with the application of blockchain technology. The African Customs Union and African Manufacturers Association comprising the participating states will create a single digital distributed secure database which will contain information on all products locally manufactured according to the laws of each country in the regional alliance and monitor their logistics and supply chain up to their exports across the borders so that the Customs of every member state already has real time data of each product from neighboring and other distant African countries coming into their territories. 

The importance of this is to ensure that no local industrialist will collude with non-African countries to breach the rules of origin by bringing finished products and packaging them as indigenous manufactured leading to the creation of dumping grounds for smuggled products which is an economic sabotage that can make the common market to collapse.

The AfCFTA Secretariat needs to consider the adoption of this solution before the full implementation of the Pan African economic market to prevent unfair trade practices that could result in litigation and withdrawal of membership by aggrieved members.

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