Experts say the plan to require the use of US steel in US pipelines is a textbook case of a local content requirement, inconsistent with Article III Section 4 of the GATT/WTO rules:
“The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favorable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.”
The United States has a long history of contesting local content requirements. The seminal case was brought by the US against Canada in 1982, which mounted a successful challenge to Canada’s Foreign Investment Review Act. That law made investment approvals conditional on including the purchase of products from domestic sources. Observers note that the Trump administration’s plan to require pipeline constructors to use US-made steel has direct parallels to the Canada GATT case.
The US has brought more challenges to local content requirements, at 114, than any other member of the WTO (World Trade Organization). That compares to 97 brought by European Union, 23 by Japan, and 15 by China. The US has challenged content requirements applied by, among others, India for solar cells, Argentina for import licenses, China and the Philippines for auto parts, and Canada for wheat and auto parts.
Government Procurement Agreement
The GPA is a plurilateral agreement within the framework of the WTO, meaning that not all WTO members are parties to the agreement. At present, the agreement comprises 47 WTO members, with another 29 WTO members participating as observers.
“The fundamental aim of the GPA is to mutually open government procurement markets among its parties,” says a WTO document. “As a result of several rounds of negotiations, the GPA parties have opened procurement activities worth an estimated $ 1.7 trillion annually to international competition…”
The key provisions of the agreement are that governments must provide suppliers from any party to the agreement “treatment no less favorable than the treatment the party…accords to domestic goods, services and suppliers…”
The agreement also prohibits discrimination “on the basis of the degree of foreign affiliation or ownership” of a supplier or on the basis that a local supplier offers goods or services originating in another country that has signed on to the agreement.