Introduction

Local content requirements (LCRs) have been used by many countries, both developed and developing, to promote the use of local inputs and support the growth of domestic industries. Initially, the term LCR (or, equivalently, “content protection”) was used to refer to a mandate that a certain fraction of domestically produced inputs, by value or by volume, be incorporated in any final good sold in the domestic market. Over time, the range of policies covered by the term has expanded alongside the increased range of localization practices used by various national and local governments. Now, outcomes may be legally mandated or aspirational. The outcomes may reference input shares, employment, firm-ownership shares, location of R&D, or technology transfer. LCRs may include restrictions on the provision of certain services, eligibility for government contracts, local performance of compliance tests, or the location of data storage. Aspirational targets might be incentivized with subsidized export or investment financing, with tax breaks, with price concessions for government-supplied energy or infrastructure, with conditional bailouts, or with other financial inducements. In this book, we use the term LCR broadly to include any laws or regulations that require or encourages the use of locally produced inputs or services in a multi-stage production process.