Indonesia, Russia, Nigeria and India on the Mat at WTO for TRIMs on Local Content Requirements

The Committee on Trade-Related Investment Measures (TRIMs), on 16 April, considered 14 complaints about investment measures that have raised concerns on allegedly favouring domestic over imported products through local-content requirements. Five of these complaints were made in relation to measures taken by Indonesia, three concerned measures of the Russian Federation, and two addressed measures taken by India. Six out of the 14 complaints were discussed for the first time at this meeting.

The United States expressed for the first time concerns about Indonesia's draft regulations requiring products using the 4G LTE spectrum-including LTE smart phones-that are sold on the Indonesian market to meet local content requirements. It said that the regulations would make it significantly easier for Indonesian-owned companies to meet local content thresholds than foreign-owned companies. It said that by requiring companies to manufacture locally phone equipment, Indonesia would in effect be stealing investments from its smaller neighbours. Japan and Canada shared the US concerns.

Indonesia said its plan is to move up the value chain of manufactured products by requiring companies investing in Indonesia to develop domestic manufacturing. It said this plan will apply for the 4G/LTE sector, equally and non-discriminatorily between domestic and foreign investors. In undertaking this plan, it said it will ensure that the process would be in line with WTO provisions.

Four measures by Indonesia, discussed in previous meetings, were again raised in the Committee: certain measures addressing local content in investment in the telecommunications sector (placed on the agenda at the request of Japan); certain local content provisions in the energy sector - mining, oil and gas (at the request of the European Union, Japan and the US); the newly adopted Industry Law and Trade Law (at the request of the EU, Japan and the US); and minimum local product requirements in the modern retail sector (at the request of the EU, Japan and the US). The Indonesian delegation presented orally its replies to questions from members about all these measures, while written replies were also submitted to the Secretariat for circulation to members.

The US and the EU expressed new concerns about the Russian Federation's local content requirements which might be extended to purchases by state-owned enterprises. The US said it is concerned about what it described as a growing emphasis in Russia on local content requirements and import substitution policies. It said that Russia's recent "Anti-Crisis Plan" has taken steps to implement the import substitution strategy for medical devices. It said that Russia appeared to be preparing to expand these requirements to state-owned enterprises. The EU said there is a worrying trend in Russia for local content requirements in procurement, covering medical devices, textiles, machinery, vehicles, and software. Canada and Japan shared these concerns.

Russia said that on medical devices, the measure is clearly procurement by government, which is not covered by the national treatment provision of the GATT. It said there is no basis for concern about the "Anti-Crisis Plan".

The EU reiterated concerns about Russia's local content requirements for agricultural equipment. The US, Japan and Canada shared the EU concern. Russia said it had already provided detailed information on this measure.

The EU and Japan expressed new concerns about Russia's local content requirements for the automotive sector. The EU said it had submitted questions to Russia on this issue. The US and Canada shared these concerns. Ukraine said it is undertaking a countervailing-duty investigation on Russian automobiles. Russia said that under its Protocol of Accession to the WTO, its subsidies to industrial assembly benefit from a transition period until 1 July 2018. It added that the subsidies are being given to local automobile assemblers controlled by foreign investors.

On another new agenda item, the EU expressed concerns about India's local content requirements in solar power generation projects. It said that it is interested in understanding the rationale behind this measure because it believes Indian companies do not yet have the capacity to provide these types of equipment. India's representative said she had sent the EU questions to the capital, and maintained that the measure in question is consistent with the GATT and the TRIMs Agreement.

The EU reiterated concerns expressed at previous meetings about certain preferences of India to domestically manufactured electronic goods and telecommunications products. Japan, the US and Canada shared the EU's concerns. India noted that it had previously answered questions about this measure, adding that detailed information is available on the government website.

The EU and the US raised again concerns about certain measures taken by Nigeria for the development of Nigerian content in the oil and gas industry. Australia, Norway, Canada and Japan shared those concerns. Nigeria noted that it would provide a reply in due time.

The US and Japan expressed for the first time concerns about a recent measure by China which they claim place local-content requirements on information and telecommunications equipment used by the banking sector. The US, which submitted questions to China on this measure, said it was not questioning the right of WTO members to take steps to improve cybersecurity, but it is concerned about measures that would severely limit access to China's banking sector for many foreign ICT products. Japan said it is concerned about the consistency of the measure with the TRIMs Agreement, and requested China to provide more information about the measure. The EU and Canada shared the concerns by US and Japan.

China stressed the necessity to protect security in the banking sector, adding that many countries are doing this same thing. It said it is reviewing the measure in the light of views it has received.

Also on a new item, the EU expressed concerns about Turkey's local content requirements in electricity generation. It asked Turkey to explain how this measure would be in compliance with the WTO rules. Turkey said that its goal is to reduce import dependency in the energy sector; it does not aim to discriminate but rather to develop renewable energy. It said that investors are not required to buy local content.

India said that answers by the US to its questions about US local content requirements in some of the renewable energy programmes are still inadequate. The US then provided detailed information on the programmes by various state and municipal entities in question.

The Committee elected Mr Zaher Al-Qatarneh of Jordan as its new chairperson and Ms Marine Willemetz of Switzerland as its new vice-chairperson.

The TRIMS Agreement recognizes that certain investment measures can restrict and distort trade. It states that WTO members may not apply any measure that discriminates against foreign products or that leads to quantitative restrictions, both of which violate basic WTO principles.  A list of prohibited TRIMS, such as local content requirements, is part of the Agreement.

The TRIMS Committee monitors the operation and implementation of the Agreement and allows members the opportunity to consult on any relevant matters.