|
||
|
TWN Info
Service on WTO and Trade Issues (Nov19/10) Concerns
over local content, localisation measures under TRIMs Geneva, 14 Nov (Kanaga Raja) - A meeting of the WTO Committee on Trade-Related Investment Measures (TRIMs) on Wednesday saw several Members again voicing concerns over investment-related measures adopted by China, Indonesia and the Russian Federation. According to trade officials, reiterating concerns made earlier in June at a meeting of the TRIMs Committee, several Members posed questions over local content provisions by China in cybersecurity measures, localization requirements adopted by Indonesia in several sectors, and Russia's measures implementing import substitution policies. CHINESE LOCAL CONTENT REQUIREMENTS According to trade officials, the US voiced concerns over what it said are local content requirements imposed by China for goods related to cybersecurity measures, which it claimed restrict the ability of Chinese companies to procure the technology of their choice and reduces market access for foreign investors. According to the US, these restrictions are set out in China's new cybersecurity law which entered into force on 1 June 2017 as well as subsequent implementing measures. Although it had raised these concerns previously, the US said that China continues to move ahead with these measures, including with its new cybersecurity review regulation. The US asked China to explain how these measures address the concerns raised by the US and other members in previous meetings. The European Union and Japan said that they share the concerns voiced by the US. The EU said that it is still concerned with measures that could lead to discrimination against foreign firms, including the new cybersecurity protection scheme which classifies information systems in China according to their relative impact on national security, social order, and economic interests. According to the EU, foreign vendors would de-facto be excluded from providing systems classified at level 3 - the highest protection level - and be subject to reviews at protection level 2 (covering most European firms) that would delay their entry into operation networks. Japan also voiced concerns over the cybersecurity protection scheme which it said would subject certain services to inspection and could lead to domestic producers being given preferential treatment. According to Japan, some of these provisions appeared to be inconsistent with provisions under the General Agreement on Tariffs and Trade (GATT) and the TRIMs Agreement. In response, China said that neither its cybersecurity law nor other relevant measures contain any local content requirements. According to China, the measures are not intended to restrict market access for technology producers but rather are intended to safeguard cyberspace sovereignty and national security, maintain public welfare, and protect the rights and interests of Chinese citizens and organizations. In view of the concerns expressed, China said that it would provide more information about the cybersecurity review scheme. China explained that the draft scheme is established in accordance with the national security laws of China and its cybersecurity law. Its aim is to enhance the security of critical information infrastructure. Systems shall be subject to security review in accordance with the potential impact on national security, China said. Non-discrimination is a key principle of these cybersecurity measures and they will not target any specific member, producer and/or services, with domestic and foreign entities treated equally, China argued. INDONESIA'S LOCALISATION MEASURES According to trade officials, the US once again expressed deep concern with what it said were a variety of localization requirements, adopted by Indonesia, related to sectors such as telecommunications, energy, agriculture, retail, and franchising. The US said that some of these concerns date back a decade or more. The US claimed that the "seemingly endless flow" of measures mandating local goods was extremely damaging to Indonesia's reputation among investors. Among the specific concerns highlighted by the US were local content requirements for 4th generation (4G) LTE broadband cellular network and base stations (including an increase in minimum local content requirements for the 2300 MHz frequency 4G LTE subscriber stations and base stations), increased restrictions in the oil, mining, natural gas and renewable energy sectors, the requirement that a minimum of 80% of products sold in retail outlets be of Indonesian origin, and the reported expansion of local content requirements in the pharmaceuticals and medical devices sectors. Sharing the concerns voiced by the US, the EU highlighted the "arbitrary" local content requirements being set which it said create "impossible conditions" and bar most foreign players from the market. Such requirements were particularly worrisome in the pharmaceutical sector, where Indonesia imports 95% of the active ingredients used in the production of drugs, it added. Also expressing support for the US, Japan said that the Indonesian measures that are related to mobile telephony, retail and mining appear to be inconsistent with WTO rules. Sharing the concerns voiced by the US, the EU and Japan, Chinese Taipei noted that some of the concerns expressed, particularly with regards to 4G broadband cellular, have been on the Committee agenda for some time. Switzerland encouraged Indonesia to respond to questions posed regarding its measures. Australia also expressed concerns about Indonesia's localization requirements in sectors such as 4G broadband cellular, energy and retail, and questioned their compatibility with WTO requirements. According to trade officials, Indonesia said it was committed to improving the investment climate in the country and making Indonesia a better investment destination in the region. According to Indonesia, the measures taken to simplify and facilitate foreign investment are beginning to bear positive results, with FDI (foreign direct investment) inflows increasing by over 12% between January and September this year compared to the same period in 2018. Import growth has also been positive, including in sectors where Members have raised concerns, it said. Indonesia said that the localization measures that were put into place relate to: (1) government procurement, which is exempt from WTO non-discrimination requirements; (2) policies ensuring essentials to life; and (3) policies involving strategic resources controlled by the state. Indonesia also informed that it was undertaking a comprehensive review of its localization measures aimed at harmonizing current practices, with the review still under way. RUSSIA'S IMPORT SUBSTITUTION POLICY According to trade officials, both the EU and the US expressed ongoing concern with various import substitution policies adopted by Russia. The EU focused on what it said were preferences granted to Russian state-owned enterprises (SOEs) in commercial procurements, which were not covered by the exception in WTO rules relating to government procurement. The matter was raised at the previous committee meeting in June, with Russia explaining its amended rules governing procurement by SOEs. However, these amendments raise additional concerns, the EU said, by providing exceptions to the WTO's national treatment rule and expanding SOE commercial purchases. The EU called on Russia to revise its procurement rules for SOEs to clearly differentiate between purchases for government purposes and purchases for commercial purposes. The EU also raised concerns with Russia's legislation on fisheries and conservation of aquatic biological resources under which subsidies in the form of fishing quotas appear to be granted to companies that use Russian-made ships. The US said that the outstanding questions that it had regarding various Russian measures remain unanswered, including those concerning the apparent expansion of localization requirements and exceptions from the national treatment principle. In response, Russia said that its measures were consistent with WTO requirements, which don't completely prohibit establishing preferences for domestic purchases, such as for government procurement. According to Russia, its measures are aimed at developing innovative, high-tech industries and improving the competitiveness and reputation of Russian goods. They do not violate WTO rules and are not intended to displace foreign goods from the domestic market, it argued. The next meeting of the TRIMS Committee is scheduled for 27 May 2020.
|
||
