Local Content Requirements: A Global Problem

by Gary Clyde Hufbauer, Jeffrey J. Schott, Martin Viero

In the wake of the Great Recession (2008–09) economists feared that protectionist policies might sweep the world economy, echoing the wave of tariff escalations during the Great Depression of the 1930s. To some surprise, officials were more restrained and largely avoided traditional forms of protection (tariffs and quotas). As a result, economists underestimated the incidence of new protectionism because policymakers increasingly turned to more opaque behind-the-border non-tariff barriers (NTBs).

Hufbauer et al. use a combination of statistical analysis and case studies to illuminate the rise of local content requirements (LCRs), an NTB form of growing popularity. How much was global trade actually reduced on account of LCRs? A conservative estimate might be $200 billion to $300 billion. Case studies featured cover the healthcare sector in Brazil, wind turbines in Canada, the automobile industry in China, solar cells and modules in India, oil and gas in Nigeria, and “Buy American” restrictions on government procurement.

212 pages, Kindle Edition

First published January 1, 2013