In a joint statement issued last week, industry associations from around the world representing a multitude of sectors urged G20 trade ministers to address the rapidly growing challenge of “forced localization” – a harmful protectionist trend they contend is threatening to undermine the very foundation of a successful global trade market.
So-called “forced localization” policies seek to impose location-specific conditions on global production, procurement, investment, and data flows. They are non-tariff barriers designed to protect, favour, or stimulate domestic manufacturing industries, service providers, and/or intellectual property (IP) providers at the expense of foreign competitors, particularly those operating in innovative industries.
The Peterson Institute for International Economics estimates that, since 2009 alone, local content requirements implemented by various countries have had a total negative impact of more than $3 trillion on global trade.
The trade groups said the world’s largest advanced and emerging economies must “resist measures that isolate their own markets through forced localization policies and actively work to encourage other governments to do likewise.”
“The rise of forced localization policies, notably in important sectors such as manufacturing, services and information and communication technologies (ICT), marks a troubling shift in global trade and economic policies,” the letter said.
According to the National Association of Manufacturers, “Unless policymakers raise forced localization policies as a global economic priority and agree to take united action to address it, the impact on the U.S. economy and economies across the globe will be substantial.”