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Localization Barriers to Trade: Threat to the Global Innovation Economy

September 25, 2013

The use of localization barriers to trade, by numerous countries, threatens the global economy.

In the aftermath of the Great Recession an increasing number of countries, including China, India and Brazil, have come to embrace a new kind of protectionist trade policy that seeks to pressure foreign enterprises to "localize" economic activity in order to create domestic jobs. Not content to trust the global trade and investment system, these nations are putting in place an array of unfair trade practices to promote local production in lieu of imports. These practices, called localization barriers to trade, include measures such as local content requirements, forced offsets, and forced intellectual property or technology transfer as a condition of market access. These policies inflict significant damage on the countries affected by them, the broader global economy, and even, ironically, the very nations that implement them. This report offers an innovative typology of trade and development strategies, documents the extent of localization barriers to trade U.S. enterprises face in global markets, and offers policy responses that can assist in creating a new global trade regime that favors rules- and market-based trade while supporting the modern knowledge- and innovation-based global economy.

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