TWN Info Service on WTO and Trade Issues (Oct16/20)
25 October 2016
Third World Network

Concerns voiced over WTO Members' local content requirements
Published in SUNS #8336 dated 19 October 2016

Geneva, 18 Oct (Kanaga Raja) -- A meeting of the WTO Committee on Trade-Related Investment Measures (TRIMs) on Monday heard several Members voicing concerns over a new law instituted by Argentina on auto parts that is seen to favour the use of locally-made components.

The meeting also saw several Members reiterating their concerns over measures imposed by China, Indonesia and the Russian Federation that purportedly favour the use of local products or home-grown technologies.

According to trade officials, Mexico, the European Union, Canada, Japan, Chinese Taipei and Korea voiced concerns over a new law instituted by Argentina that offers tax incentives to auto-makers that give preference to the use of local auto parts.

Some argued that such ‘local content requirements' may run counter to commitments made by Members under the Agreement on Trade-Related Investment Measures (TRIMs).

Mexico said that the tax incentives offered by Argentina in its new law on auto parts, which was published on 1 August 2016, could run contrary to the TRIMs agreement.

Mexico also pointed out that Argentina has not informed the WTO of its measure.

The EU said that it had raised this same issue in the Committee on Market Access last week.

The EU charged that the new law on auto parts contradicts Argentina's obligation to treat imported components no less favourably than local products.

Canada said the proliferation of local content requirements in the auto sectors is of broader concern.

Japan, Chinese Taipei and Korea shared these concerns, saying that they will closely monitor this issue.

According to trade officials, Argentina said that it would convey the comments made by Members at the meeting back to its capital.

It however underlined that the law was mandated to promote the development of its auto parts sector, and that it has not been implemented.

Argentina said that it is willing to discuss this issue bilaterally with members.

The meeting also heard several Members reiterating their concerns over measures imposed by China, Indonesia and the Russian Federation that they say favour the use of local products and home-grown technologies.

According to trade officials, the US voiced concerns over a draft regulation in China, which requires insurance companies to procure "secure and controllable" information technologies (IT).

According to the US, the draft measure "seems to be implying a preference to indigenous technologies".

According to trade officials, the concerns voiced by the US were shared by the EU and several other members.

Australia called on China to act in line with its national treatment obligations. It asked China for clarification on the objectives and key terms of its measure.

Canada said that excluding foreign providers would only decrease cyber-security.

Japan said that the draft measure could potentially be WTO-inconsistent.

According to trade officials, China responded that this issue was not relevant to the TRIMs Committee.

It argued that the issue had already been raised in the Committee on Technical Barriers to Trade.

The meeting also heard several Members reiterating their concerns over implementation by Russia of an import- substitution policy.

The EU said that Russia seems to be extending its localization requirement.

In this context, it referred to a new measure in Russia that would give a price preference of 15% for domestic products.

These concerns were echoed by the US, which maintained that the preference to commodities or services purchased by state-owned enterprises in Russia runs contrary to the WTO's national treatment requirement.

Canada and Japan shared similar concerns.

According to trade officials, Russia said that many of the items at issue are merely proposals that may or may not be implemented.

It pointed out that there appears to be an over-emphasis on public debates taking place in Russia on the import substitution policy.

Russia argued that the policy is a necessary response to external shocks.

It further said that it will shortly submit a written response to the questions that have been posed.

Several members also reiterated concerns that they had raised previously over Indonesia's local content requirements for mobile devices, the telecommunications sector, mining, oil & gas, and retail enterprises.

According to trade officials, concerns were voiced over Indonesia's measures by the EU, the US, Canada, Australia, Japan, Korea and Chinese Taipei.

They said that many of these concerns have been on the Committee's agenda for years.

Indonesia argued that the overall objective of its measures is to promote economic development, and that some of the measures do not relate to investment.

Meanwhile, the Chair of the Committee, Ms. Marine Willemetz of Switzerland, announced her intention to hold consultations on how the work of the Committee can be reinvigorated.

The next meeting of the Committee will take place on 12 May 2017. +