WTO Agreement on Trade-Related Investment Measures

A local-content requirement obliges or induces an enterprise to use a specified amount or proportion of domestically produced goods. It is generally inconsistent with the TRIMs Agreement because it favours domestic products over like imported products and thereby alters their competitive conditions.

Legal basis

Under Article 2.1 of the TRIMs Agreement, members may not apply trade-related investment measures inconsistent with GATT 1994 Articles III or XI. The Agreement's Annex contains an Illustrative List of measures that violate these obligations.

Why local-content requirements violate national treatment

• The Illustrative List covers measures requiring the purchase or use of products of domestic origin or source, whether expressed as particular products, a volume or value, or a proportion of local production.
• Such requirements accord imported goods less favourable treatment than domestic goods and are therefore inconsistent with GATT Article III:4, which requires national treatment for internal laws and requirements affecting the use or purchase of products.
• A measure is covered whether it is legally mandatory or enforceable, or whether compliance is necessary to obtain an advantage, such as an investment incentive.

Scope and qualification

The Agreement applies only to investment measures related to trade in goods, not to investment regulation generally. The word "generally" is important because inconsistency depends on the measure's design, while Article 3 of TRIMs preserves the exceptions available under GATT 1994.