APEC Breaking Ground on Local Content Requirements Ahead of High-Level Meetings
By Camille Sheehan, Office of Public and Media Affairs
As part of its global initiative to address localization barriers to trade, the Office of the United States Trade Representative (USTR) is leading efforts to consider the impacts of local content requirements (LCRs) on regional integration and economic growth at the Asia-Pacific Economic Cooperation (APEC) forum’s Committee on Trade and Investment (CTI). The CTI, meeting last week in Surabaya, Indonesia, held an in-depth discussion on LCRs, which require businesses to produce a certain level of content (materials, parts, etc.) within the country where the end product will be sold. Last week’s CTI meeting marked the first time the economies of APEC collectively addressed LCRs to gain a better understanding of how they distort trade and investment flows and decrease the competitiveness of domestic industries.
Gary Clyde Hufbauer with the Peterson Institute for International Economics, Kristin Paulson with General Electric’s Association of Southeast Asian Nations (ASEAN) Government Affairs and Policy group, and Wei Fang of Kitakyushu University in Japan made presentations to the members of the committee, many of which focused on new cases of LCR implementation around the world. The presentations detailed the negative effect of LCRs on commercial opportunities and competitiveness, and suggested alternative measures that economies could use in place of these onerous requirements. An APEC endorsement of alternative measures that facilitate trade and investment is particularly important in light of the estimate by the Peterson Institute that LCRs implemented since 2009 are estimated to have a total negative impact of $2.8 trillion on global trade (17 percent of total global trade) in 2010.
USTR strives to eliminate LCRs and other non-tariff barriers in all of its negotiations and partnerships, because they limit GDP growth potential, increase costs to U.S.-based businesses, and impair international trade and investment. The next meeting of the CTI will be held in Medan, Indonesia, and will explore alternative measures to help APEC economies achieve their domestic economic objectives.
Ambassador Demetrios Marantis will lead the U.S. delegation at the APEC Meeting of Ministers Responsible for Trade next week, where trade ministers from APEC countries will address LCRs and other related trade and investment topics.