OECD Trade Policy Papers

ISSN: 
1816-6873 (online)
http://dx.doi.org/10.1787/18166873
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This series is designed to make available to a wider readership selected trade policy studies prepared for use within the OECD.

NB. No. 1 to No. 139 were released under the previous series title OECD Trade Policy Working Papers.

 

Emerging Policy Issues

Localisation Barriers to Trade You or your institution have access to this content

English
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Author(s):
Susan Stone1, James Messent1, Dorothee Flaig1
Author Affiliations
  • 1: OECD, France

01 May 2015
Bibliographic information
No.:
180
Pages:
125
http://dx.doi.org/10.1787/5js1m6v5qd5j-en

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Despite the predominately negative evidence of the impact of local content requirements on trade, they continue to play a significant role in trade policy. This has been particularly true since the financial crisis of 2008. The work presented here provides new evidence of the detrimental effects these policies have on the imposing country’s own economy. Most empirical studies have focused on the long run inefficiencies associated with LCRs, notably in the effected sector. This paper highlights the costs to other sectors in the economy, the different impacts on intermediate versus final demand, and the declines in trade in third-party economies, despite not engaging in direct trade with the imposing country. Economies imposing LCRs experience a decrease in exports in non-LCR effected sectors and a growing concentration of domestic activity in a few targeted sectors, undermining potential growth and innovation on a broader scale. The paper concludes by offering policy alternatives.
Keywords:
Local Content Requirements, CGE, impact, trade policy
JEL Classification:
  • F14: International Economics / Trade / Empirical Studies of Trade
  • F47: International Economics / Macroeconomic Aspects of International Trade and Finance / Forecasting and Simulation: Models and Applications
  • F68: International Economics / Economic Impacts of Globalization / Policy
 
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