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Industrialists call for expanding rules of origin deal with EU

By Omar Obeidat - Jul 20,2016 - Last updated at Jul 20,2016

AMMAN – The Jordan Strategy Forum (JSF) on Tuesday issued a study on the EU plan to relax the required rules of origin for Jordanian industries, describing the move as a necessary step towards supporting the Kingdom's exports, but still not enough. 

As Jordan and the EU are scheduled to sign an agreement Wednesday to ease the entry of Jordanian-made products into the European market, the 30-page study said the deal would not be sufficient because the relaxation would only cover industrial firms operating in a number of pre-identified development zones and in a selected number of sectors over the span of 10 years.

Restricting the relaxation of rules of origin to a select number of development zones excludes numerous industrial firms that currently operate outside these zones and are ready to export to the EU market immediately.

The JSF said the methodology adopted for the purposes of the research included conducting semi-structured interviews with industrial firms operating in and outside development zones. The interviews covered 15 factories in different sectors.

For example, food manufacturing firms said they have the potential to compete in the EU market, but according to the EU’s Proposal for a Council Decision on relaxing rules of origin between Jordan and the EU –– issued on June 16, 2016 –– food related products are not included in the list of items that will be covered by the relaxation of the rules of origin, according to the research. 

The research project included six food manufacturing firms in the sample, the JSF said in its study, e-mailed to The Jordan Times, adding that all six factories have expressed their interest in exporting to Europe but also stated that they find the strict rules of origin a major challenge. 

A respondent from a food manufacturing firm was quoted by the study as saying: “There is a big market for us to compete in the EU as we would target Muslims residing in European countries, who often find it difficult to purchase ‘halal’ meat. It is easy for us to enter the market as a large proportion of the target group already knows about our products and is acquainted with our brand.”

The study called on Jordanian and European officials to take into account several other factors, highlighting that Jordanian exports face other challenges when exporting to Europe such as high shipping costs, the lack of adequate market information, high electricity prices, and legislative instability. 

The findings showed that Jordanian exporters do not have any reservations regarding the hiring of Syrians. Almost all factories affirmed that they do not discriminate against nationalities in their hiring process and that Syrian labour would substitute for migrant labour. 

But the more Jordanian exporters are able to expand their production, the more Syrian labour they will be willing to hire, said the study, which also quoted owners of several factories who said that they were ready to export their products to Europe and expand their operations but will not be able to benefit from the relaxed rules of origin due to their confinement to certain industrial zones. 

“Many renowned Jordanian manufactuers who can meet the quality demanded by the European market and do already produce in large quantities are ready to begin immediately exporting to Europe, which makes them instantly able to create jobs for both Syrian and Jordanian labour. These firms, however, are not willing to move to industrial zones to benefit from relaxed rules of origin due to the costs associated with relocating their factories,” said the study. 

 

Recommendations

 

The JSF made a number of recommendations in the study. 

It urged the Jordanian government to invest in finding ways that would make shipping more efficient and less costly for exporters, as many factories have listed shipping as a major hindrance to trade.

It called on Jordan and the EU to link Jordanian exporters with agents in the European markets, help them find distributors, understand the competition and learn the facts about trading with the EU. This could be possible through creating an EU Market Information System.

It also urged Jordanian and EU officials to make acquiring specific certifications clearer and easier for local exporters. 

The forum also urged the government to re-assess the impact of the current electricity tariff on Jordanian industries through exploring more sustainable alternatives that would not be costly to the government but would also reduce the burden on industries.

The study said that the relaxation of rules of origin should be expanded in terms of geographical location beyond the boundaries of the industrial zones listed in the EU’s Proposal for a Council Decision. 

The forum also called for considering food manufacturing as one of the sectors covered by the relaxation of rules of origin agreement due to its potential in the European market. 

 

Based on figures by the Central Bank of Jordan, the study indicated that Jordanian exports to the EU dropped by 47.6 per cent between 2008 and 2015 to reach only JD123.5 million last year, adding that Jordan’s imports from the EU reached around JD3.1 billion in 2015.

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