Value‐Added in African Exports and Rules of Origin

ABSTRACT Rules of origin (ROO) are criteria determining when goods are eligible for trade preferences. A common feature of ROO is to require that products embody a minimum share of value originating in the exporting country or group of beneficiary countries. Using disaggregated trade data, we estimate the levels of restrictiveness of ROO that maximise the domestic or regional value‐added embedded in African preferential exports. We uncover significant heterogeneity in estimates of such ROO, ranging from a 10% domestic content rule for Uganda and Kenya to 60% in South Africa. Building on these results, we use firm‐level trade and domestic transaction data for Uganda to assess the restrictiveness of ROO in the EU. We find that the EU's ROO regime requires levels of domestic content in Uganda's exports that are too high. A reduction of ROO requirements would increase the total domestic value‐added embedded in Uganda's preferential exports to the EU.