Key textile and clothing producers Turkey, Egypt, Israel and Jordan are likely to benefit from the update

Key textile and clothing producers Turkey, Egypt, Israel and Jordan are likely to benefit from the update

New and simplified rules of origin should boost trade between the European Union and neighbouring countries in the Pan-Euro-Mediterranean (PEM) region – including key textile and clothing producers Turkey, Egypt, Israel and Jordan.

Adopted by the European Commission on 24 August 2020, the proposals will modernise the origin rules in EU bilateral trade agreements with 20 PEM trading partners by making them more flexible and business-friendly. The countries that will benefit also include Iceland, Liechtenstein, Norway, Switzerland, Faroe Islands, Lebanon, Palestine, Georgia, the Republic of Moldova, Ukraine, Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, Serbia and Kosovo.

Trade with these countries accounted for EUR677bn (US$803bn) in 2019, which is almost half of the EU's preferential trade. For the EU textile and clothing sector, the region represents 29% of its exports.

These provisions will make it easier for products to benefit from trade preferences, such as:

  • Simpler product-specific rules, such as the elimination of cumulative requirements, thresholds for local value added, more adapted to EU production needs – and new double transformation for textiles;
  • Increased thresholds of tolerance for non-originating materials, from 10% to 15%;
  • The introduction of "full" cumulation, under which the manufacturing operations needed to acquire origin for most products can be split among several countries;
  • The possibility of duty-drawback (repayment of duties on imported components) for most products to help EU exporters compete.

The new rules, which are the result of ten years of negotiations, will apply alongside those of the Regional Convention on pan-Euro-Mediterranean preferential rules of origin (PEM Convention), pending the review of the Convention, which is currently underway. Business and industry will have the option to apply the new rules for the goods they trade rather than the current PEM ones, whenever this suits them.

They have been welcomed by the European Apparel and Textile Confederation (Euratex), which says they will facilitate the integration of textile and clothing supply chains and boost production and trade within the region.

'Rules of origin' are necessary under any trade agreement because they determine which goods can benefit from preferential treatment and the requirements to do so, such as minimum local processing, contents or value added. 

The European Council now needs to adopt the new proposals, which will enable the EU to agree with each of the trading partners on the introduction of the new rules in the origin protocols of the relevant agreements. 

The new rules could come into force in some countries as early as the first half of 2021.