Local Content Requirements Research Articles

Home remedies: flexibilities to onshore pharmaceutical manufacturing under WTO rules

Abstract In the wake of the Coronavirus Disease 2019 pandemic, governments globally have intensified efforts to localize the production of pharmaceuticals, leveraging local content requirements and incentives to mitigate supply chain vulnerabilities. This shift has revealed tensions with World Trade Organization (WTO) regulations, notably highlighted in Turkey—Pharmaceutical Products (EU). This article explores policy-based flexibilities within the General Agreement on Tariffs and Trade (GATT) 1994, the Agreement on Trade-Related Investment Measures, and the Subsidies and Countervailing Measures (SCM) Agreement that may justify measures inconsistent with WTO norms under specific conditions. Analysing public health exceptions, national security imperatives, and government procurement policies, the paper elucidates how these flexibilities can be mobilized to support onshoring initiatives while adhering to international trade obligations. The findings suggest a nuanced approach to reconciling public health goals and economic strategies with global trade rules, providing a critical framework for policymakers navigating the complex interplay between national interests and international legal commitments.

Hometown Heroes: Onshoring, Promoting Local Content & WTO Law

Abstract This article examines the complexities and challenges associated with onshoring manufacturing through local content requirements within the context of World Trade Organization (WTO) law. Governments have intensified efforts to relocate production within their territories, leveraging local content requirements and incentives. This shift is primarily justified by the need for supply chain resilience, public health, and national security, aiming to mitigate risks associated with reliance on foreign suppliers during crises. However, these strategies may conflict with WTO obligations, particularly those concerning trade-related investment measures and subsidies. Using pharmaceuticals as a case study, this article explores the rationale, scope, and implications of WTO rules on local content policies. The analysis provides insights into how nations navigate the delicate balance between enhancing domestic capabilities and adhering to international trade laws.

Effects of operators’ strategic approach to local content and in-country spending requirements on financial performance of upstream petroleum sector firms, Ghana

Local content requirements and in-country spending mandates have emerged as crucial tools in the upstream petroleum sector, aiming to distribute socio-economic benefits derived from resource production to the general citizenry within the host economies. However, understanding how operators' strategic responses to these requirements affect firm financial performance remains limited due to data constraints. Consequently, drawing on resource dependence, social exchange, and linkage and spill-over effect theories, this paper develops a conceptual framework to elucidate the relationships among local content requirements, in-country spending, local linkage factors, operators' strategic approaches & business practices, and financial performance, including their implications. To address data limitations, a mixed-methods approach was adopted, combining content analysis of financial reports from 11 global upstream petroleum operators in Ghana and key informant interviews, with survey primary data collected via online questionnaires. This methodological triangulation enabled a comprehensive examination of how operators' strategic responses affect financial performance in the Ghanaian upstream petroleum sector. Analytical techniques used included factor analysis and Partial Least Squares Structural Equation Modeling (PLS-SEM) from SPSS and SmartPLS3, respectively. The study found that while local content requirements and in-country spending mandates do not significantly influence operator strategic approaches or financial performance, local linkage factors have a strong positive effect on strategic approaches, which in turn positively affect financial performance. Furthermore, local linkage factors partially mediate the relationship between local content requirements and strategic approaches, as well as financial performance. These findings underscored the importance of prioritizing investments in local linkage factors to stimulate industrialization and foster cross-sectorial outsourcing opportunities. The study contributes to resource dependence, social exchange, and linkage and spill-over effect theories by highlighting the role of strategic approaches and local linkages in promoting financial performance. It also offers insights for policymakers and industry practitioners, emphasizing the need to enhance competitiveness and capacity within the host economy. Additionally, the study confirms the predictive relevance of the model, indicating its robustness in explaining the dynamics of local content requirements and in-country spending mandates in the petroleum sector.

Optimal local content requirement under export share requirement consideration

This paper considers a Cournot model with a local content requirement and export share requirement. The analysis investigates the conditions under which the local content requirement may promote an intermediate industry and explores the optimal local content requirement and the key factors that affect it. The results show that while a small local content requirement has a promotion effect when it is first introduced, while if the local content requirement is further increased, the effect will depend on the intermediate industry's production efficiency. Furthermore, the optimal local content requirement should be higher as the domestic market expands or the export price increases. Finally, the export share requirement can be treated as a policy instrument that is supplementary to the local content requirement.

Protecting Protectionism in the WTO

The Inflation Reduction Act of 2022 (IRA), as part of the largest in-vestment the United States has made to mitigate climate change to date, amended the United States Internal Revenue Code to reduce the cost of shifting toward renewable energy. Specifically, the IRA expands tax credits available to taxpayers who invest in or produce clean energy and provides a new consumer tax credit for electric vehicles. However, the IRA has come under fire from U.S. trading partners because some of these tax credits contain local content requirements (LCRs)— that is, the Act requires beneficiaries to source products or materials domesti-cally in order to receive the full benefit. Several foreign governments have claimed that the IRA’s use of LCRs violates World Trade Organiza-tion (WTO) agreements to which the U.S. is a party. If another member of the WTO lodges a formal complaint with the WTO and the U.S. re-ceives an adverse ruling, the U.S. could be ordered to repeal the IRA or face sanctions, which would severely hamper U.S. and global efforts to meet emissions goals. Moreover, LCRs could be a very useful tool for countries other than the U.S. to use to facilitate the growth of prosper-ous new renewable energy industries, something essential to sustaina-bly avoiding climate catastrophe. This Note reviews the WTO rules which the IRA may violate and finds that the IRA would not pass muster under prevailing interpretations of WTO agreements. However, evi-dence in the relevant WTO agreements support an alternative that would allow the IRA to survive. This Note proposes such an interpreta-tion and argues that it would be prudent for the WTO to adopt it in light of the current climate crisis.

From battlefield to factory floor: enhancing movable factory deployment planning through military frameworks

Uncertainties in the global market, including supply chain disruptions, local content requirements, and geopolitical conflicts, pose significant risks to manufacturers relying on centralized production systems. Movable factories, mobile manufacturing systems (MMS), and associated frameworks have been proposed in the literature as ways to achieve resilient production networks. However, these deployable manufacturing systems’ planning and management aspects remain largely overlooked. This paper explores how manufacturing companies can enhance resilience by adopting military rapid deployment planning principles to deploy production capabilities to geographically dispersed areas swiftly.

Hurdles of Technology Transfer in Cameroon’s Petroleum Industry.

Technology (know-how) is a vital tool for the advancement and sustenance of any country especially in its petroleum sector as huge capital and technology is required to carry out crude oil extraction. In almost all African countries possessing petroleum, extraction is by multinational oil companies owned by developed countries. This is due to the fact that they possess the required technology. As such, many of these African states have included local content requirements in their petroleum legislations and one of such policies is technology transfers to enable them learn to extract their own resources. But over the years, these African states have still been unable to extract their own resources because of the lack of or obsolete technology acquired. Consequently, they still turn to multinational oil companies who are protected by international standards restricting performance requirements. Thus the desire of Cameroon and many other Africa states to tap from foreign technology has to an extent been a failure. Technologies are grouped into tangible technology such as tools, parts and finished goods, and intangible technology including patents, know-how and trade secrets. The transfer of these technologies can be achieved bilaterally, multilaterally, through commercial or non- commercial means by the use of Foreign Direct Investment (FDI) or licensing. Even though oil companies are not ready to part with their intellectual property (technology), Cameroon and many African states have hurdles preventing the assimilation, absorption and adaptation of their technology.

The Political Economy of Local Content Requirements Policy in Indonesia’s Telecommunication Manufacturing Industry 2015-2020

The Political Economy of Local Content Requirements Policy in Indonesia’s Telecommunication Manufacturing Industry 2015-2020

Trade Policy in Indonesia: Between Ambivalence, Pragmatism and Nationalism

Protectionism in Indonesia has been returning since the mid-2000s following a brief period of deregulation and liberalisation after the Asian financial crisis (AFC). This Survey reviews recent developments in Indonesia’s trade policy. It argues that the current approach to trade appears to vacillate between ambivalence, pragmatism and nationalism. Three cases are used to demonstrate the interplay between these characterisations: ‘downstreaming’ and local content requirement policies, Indonesia’s relationship with the World Trade Organization (WTO) and the proliferation of trade agreements, and the commodity balance sheet approach to trade. The paper argues that increasing trade and integrating further into the global value chains are important to have faster economic growth and one way to facilitate that is by improving logistics infrastructure.

Penetrating a market with local‐content and pricing decisions: Implications for a multinational firm in the competition with a local firm

AbstractThe internationalization of production requires multinational firms to determine a local content rate for their products made and sold in a foreign country. In this paper, we investigate the impact of a government's local content requirement (LCR) on the local content rate and pricing decisions of a multinational firm who competes with a local firm in a market. In an emerging market, the multinational firm increases his local content rate to comply with an LCR if the LCR involves a moderate threshold and a sufficiently large penalty tariff rate. Although a small penalty tariff rate cannot induce the multinational firm's compliance, a larger penalty tariff leads the firm to adopt a higher local content rate. When the multinational firm complies with the LCR, a higher LCR threshold or penalty tariff rate shifts away the multinational firm's demand and profit but may not benefit the local firm if the two firms' price competition is fiercer than their quality competition. In addition, if the two firms' quality competition is fiercer than their price competition, a large LCR threshold may still not benefit the local firm. In contrast, in a developed market, the multinational firm should increase his local content rate as the quality‐cost tradeoff ratio increases. The LCR plays the same effect on the multinational firm as that in an emerging market, whereas its effect on the local firm still depends on the relative intensity of the two firms' price competition versus quality competition, but under reverse conditions.

The Obligation Of Local Content Requirements (Lcr) Of Power Plant From The Perspective Of The World Trade Organization (WTO)

As a developing country, Indonesia requires foreign investments, particularly to improve the welfare of its people. Trade provisions are regulated by the World Trade Organization (WTO) mainly to reduce all potential barriers that emerge in the global investment realm. Along with the entry of various foreign products and investments, developing countries often apply local content requirements, which in Indonesian terms are known as the Tingkat Komponen Dalam Negeri (TKDN). Particularly in the field of electricity infrastructure development, the government of Indonesia regulates the minimum level of TKDN in the construction of power plants. The TKDN provisions normatively conflict with WTO principles, namely national treatment, because they are included in the illustrative list regulated in the Agreement on Trade-Related Investment Measures (TRIMS). In this article, the author uses a normative research method in which research is conducted by examining Indonesian TKDN regulations related to the construction of power plants against the WTO agreement for a more in-depth analysis. This article aims to examine whether the TKDN provisions made by the Indonesian government are parallel with the WTO policies. It can be concluded that Indonesia's TKDN policy could violate WTO provisions. Still, if the TKDN policy is for the welfare of the community and managed directly by the government, it could be excluded since it is conducted not within purely commercial profits purposes.

Key local factors, supplier and linkage effectiveness: Evidence from the upstream petroleum sector of Ghana

This paper examines the role of the key local factors, local supplier effectiveness on local linkage effectiveness to support local content requirements, in-country spending and value retention. Drawing on extant literature and linkage and spill-over effect theory, this study developed a conceptual framework and measurement items, which were validated by 205 responses from randomly sampled upstream petroleum firms supplemented with key informant interviews. Quantitative data was analysed using PLS-SEM with the help of SmartPLS3. Overall, all the results suggest highly satisfactory model fit. Furthermore, the results confirmed a statistically significant positive direct relationship between the key local factors and local linkage factors (0.573), key local factors and supplier effectiveness (0.699), supplier effectiveness and local linkage factors (0.369) and, indirectly, the key local factors impact local linkage factors via local supplier effectiveness (0.258). The policy and management implications of the findings are well noted, while further research is proposed based on the limitation of this study.

External analysis of local content dynamics in the upstream petroleum sector of Ghana and Ivory Coast

Ghana and Ivory Coast have an emerging oil and gas industry. Both countries aspire to strengthen the local oil and gas industry, maximize profit from exploration and production activities, as well as develop a strong local mastery of technology and skills. To achieve this, local content regulations have been developed and implemented in these countries. This study employs macroenvironmental and industry analysis to analyze growth strategies for indigenous companies. These growth strategies are relevant for indigenous oil companies to penetrate the upstream petroleum sector in Ghana and Ivory Coast. Business frameworks such as PESTEL, Porter's Forces and Strategic Group Analysis helped highlight the existence of a relatively favorable business environment for the oil and gas industry to thrive in both nations. A survey was conducted among oil industry stakeholders in Ghana and Ivory Coast. The findings indicate, that in spite of local content requirements in both countries, the upstream sector remains largely dominated by international companies.

Shaping trade in goods relevant to renewable energy generation: the RCEP’s potential and limitation

ABSTRACT The Regional Comprehensive Economic Partnership Agreement (RCEP) has shaped the legal regime of the ‘new Asian regionalism’ that emerged due to the region’s rising economic power and increased partnerships. However, the pact has been criticized to bypass rules dealing with environmental protection. This article demonstrates that the RCEP can potentially contribute to trade in certain renewable energy generation products through its tariff liberalization scheme. It also submits that the pervasive use of unilateral trade remedies and local content requirements could impede greater trade potential facilitated by these tariff cut commitments. Looking ahead, a number of proposals are tabled in this article to improve the quality of the RCEP in advancing regional trade partnership in green energy promotion.

Nurturing national champions? Local content in solar auctions and firm innovation

Rather than by an invisible hand, many industries are kick-started by a government policy. Despite little robust evidence, local content requirements are increasingly used to incentivize domestic manufacturing if imports are cheaper. To examine the effect of local content, we explore an unintended quasi-policy-experiment. Starting in 2013, the Indian government simultaneously held solar auctions with and without local content, providing an otherwise unobserved counterfactual. We digitize the results from the 41 auctions worth 8.65 billion $ in solar module demand and collect annual revenue and solar patents of the 113 participating firms between 2004–2020. For causal identification, we compare winners of local content with similar open auction winners in a staggered difference-in-difference estimation. While we observe an insignificant increase in the same and the following year after firms win LCR auctions, overall, we find winning local content auctions does not significantly increase firms’ solar patents or sales. We identify three reasons why the policy did not create stronger, lasting effects. First, local content did not create sufficient production to enable learning by doing. Second, local content did not generate enough revenue for re-investment into R&D. Third, local content reduced competition in auctions. The analysis underlines the predicament countries face as open auction winners, despite having won 9 times as much capacity, do not patent much (more).

The extractive industry and expectations of resource benefits: does CSR promote community well-being?

Purpose This paper aims to examine the effects of extractive activities on the well-being of local communities and assesses stakeholder expectations of resource benefits and the corporate social responsibility (CSR) practices of oil companies in Ghana. Design/methodology/approach The paper uses a qualitative approach based on an exploratory research design to investigate the opinions and experiences of stakeholders in the growing oil and gas industry in Ghana. Findings The empirical findings demonstrate that entry negotiated agreements and local content requirements in the offshore oil industry have minimal benefits because of the lack of linkages with the economies of local communities. Additionally, the nature of CSR practices within the extractive industry is directly traceable to the resource governance arrangements and plural logics in Ghana’s institutional context. Research limitations/implications This study only provides insights into natural resource governance and CSR issues in offshore oil and gas projects. Thus, the findings are not generalisable to the entire industry, including onshore drilling, which have other sustainability issues. Practical implications This research highlights the gap in natural resource management in Ghana and the effects of community expectations on CSR practices in the oil and gas industry. Therefore, this study posits the significance for including compliance requirements for improving the well-being of host communities in entry negotiated agreements and local contents. Originality/value By highlighting the nuanced issues in natural resource management within the oil and gas industry in Ghana, this paper makes significant contributions to the CSR and sustainability literature.

The ‘local content’ concept in public procurement: global trends in the development of public procurement law on the example of the USA, South Africa and Poland

In recent years, the approach to the functions of law in economy has significantly changed and is perceived more and more often as a tool (instrument) to accomplish various strategic goals of development policy. The aim of the paper is to discuss such legislative efforts as the latest and, given the EU perspective, the most interesting examples of instrumentalizing public procurement through the implementation of the ‘local content’ concept. Key observations from characterization of the US and South Africa relevant regulations were considered with respect to the legal environment in the EU and Poland. The main goal of this paper is to advance conclusions concerning the legal framework in which enacting local content requirements (LCRs) would be acceptable in the light of EU law. The paper shows that the applying of LCRs in public procurement procedures may be permitted in the EU, albeit to a limited extent. In the tender procedures taking place in the EU Member States, such solutions must respect the principle of proportionality in line with the EU public procurement law, stem from objectively justified needs of the contracting authority and – in all certainty – cannot pursue protectionist interests by limiting access to the procedure for contractors who do not meet certain LCRs.

A Review of the Challenges of Nigeria-China Economic Relations in Contemporary times

Nigeria finally established diplomatic ties with China in February, 1971, sine then both countries have opened embassies in each other’s capital. In this study, secondary sources of data was used which are drawn from books, newspapers, journals and other related materials on the topic under study. Data collected are descriptively analyzed to underscore the challenges of the economic and trade relations between China and Nigeria. One of the major challenges is the present state of infrastructural facilities especially in the areas of power, rail network systems and communication in Nigeria which is very poor and if urgent steps are not taken to address these, it may get worse. Moreover, Nigeria rises up to these challenges, foreign investment inflow will continue to elude the country. Another challenge is the wide trade imbalance that continues to be in favour of China. On the whole, the Federal Ministry of Trade and Investment and sister agencies can learn from the trend of reform in China and create policies in such a manner that the economy of Nigeria becomes the focus of development. For instance, during the Chinese years of reform, foreign direct investment inflows to China were subjected to various rules and regulations including extensive plans on technological capacity building of Chinese, stringent local content requirements.

Nigeria finally established diplomatic ties with China in February, 1971, sine then both countries have opened embassies in each other’s capital. In this study, secondary sources of data was used which are drawn from books, newspapers, journals and other

Nigeria finally established diplomatic ties with China in February, 1971, sine then both countries have opened embassies in each other’s capital. In this study, secondary sources of data was used which are drawn from books, newspapers, journals and other related materials on the topic under study. Data collected are descriptively analyzed to underscore the challenges of the economic and trade relations between China and Nigeria. One of the major challenges is the present state of infrastructural facilities especially in the areas of power, rail network systems and communication in Nigeria which is very poor and if urgent steps are not taken to address these, it may get worse. Moreover, Nigeria rises up to these challenges, foreign investment inflow will continue to elude the country. Another challenge is the wide trade imbalance that continues to be in favour of China. On the whole, the Federal Ministry of Trade and Investment and sister agencies can learn from the trend of reform in China and create policies in such a manner that the economy of Nigeria becomes the focus of development. For instance, during the Chinese years of reform, foreign direct investment inflows to China were subjected to various rules and regulations including extensive plans on technological capacity building of Chinese, stringent local content requirements.

Pengaruh Implementasi Kebijakan Proteksionisme Melalui Tingkat Komponen Dalam Negeri Terhadap Tender/Seleksi Internasional

The policy of protectionism has been adopted by a number of countries including Indonesia with the aim of protecting and improving the quality of domestic products. One form of the protectionism policy is through the Local Content Requirement which is realized by the Domestic Component Level (TKDN) policy. This policy affects the implementation of international selection process process (popularly known as ‘tenders’) which are a special form of government procurement of goods/services. This procurement is guaranteed by regulations due to the involvement of foreign parties in the selection process which can determine the outcome of the procurement. This research departs from the problem of international trade protectionism policies and the influence of TKDN policies in the regulations of the government procurement of goods/services which governs the international selection process. The research method used is normative juridical along with non-interactive qualitative. The results of the research conclude that the protectionism policy adopted by Indonesia encourages TKDN obligations in the procurement of government goods/services as one of the considerations to become one of the determining factors in the passage of international selection. This policy creates space for the use of domestic products to be applied in the process of government procurement of goods/services. Nonetheless, the TKDN policy on the one hand impedes the smooth running of the international selection process by limiting potential foreign participants in the international procurement mechanism. In addition, this research also concludes that in practice through cases there are conflicts with obligations regarding TKDN which are not fully considered in government goods/services procurement activities.