for trade in services, as regulations follow sector‐specific liberalization commitments.

The use of local content requirements in particular has increased in the wake of protectionism triggered by the global financial crisis. As a subcategory of performance requirements, local content requirements typically regulate the minimum amount of local goods and services used in production by foreign firms. These requirements can take several forms, including local content requirements for goods and services; tax, tariff, and price concessions conditioned on local procurement; import licensing procedures designed to encourage domestic purchases of certain products; and certain lines of business that can be conducted only by domestic firms (Hufbauer and others 2013).

The international debate on the appropriateness and effectiveness of local content performance requirements has been dominated by political economy concerns rather than by economic facts. Case studies suggest that the effects of local content performance requirements on trade, investment, jobs, and business efficiency are often at odds with host countries’ development goals, including participation in global value chains by restricting access to intermediate inputs. A big challenge in drawing conclusions is the variety of policy instruments applied, as well as the almost complete lack of econometric evidence. Thus, these measures should be subjected to more research.

UNCTAD (2007) finds that local content performance requirements— and also other performance requirements, such as trade balancing, and export requirements—have had largely negative effects in Argentina, Ethiopia, Pakistan, the Philippines, and Vietnam, especially in the automotive industry. Indeed, they can undermine the long‐term competitiveness of the sectors involved, as well as linkages to local firms.

Moran (1998, 2006, and 2011) investigates spillovers in the manufacturing sectors of several developing countries. The author suggests that local content performance requirements and others, such as joint venture requirements, generate technical, economic, managerial, and political economy problems for host countries.

Looking at China’s experience with joint venture requirements, Long (2005) finds that their imposition hinders foreign affiliates from reaching the technological frontier in China, as in other emerging markets. Blonigen and Ma (2010) also find that foreign investors’ share of exports by product category and foreign unit values relative to Chinese unit values have been increasing, not decreasing. Their data suggest that forced joint ventures with foreign firms may not have led to a greater catching‐up phenomenon in output sophistication.

Hufbauer and others (2013) review 117 local content requirements introduced around the world between 2008 and 2013. They identify their adverse effects on trade, investment, and employment. The authors argue that in 2010, the requirements affected $928 billion of trade in goods and services—5 percent of global trade—and lowered global trade by $93 billion. Additional case study evidence shows the various detrimental effects of local content requirements in specific countries and sectors. For example, Canadian wind turbines, which were subject to local content requirements, cost about $386 more to install per 28