The Multivocality of Policy Instruments: The Resurgence of Local Content Requirements in Public Regulation

The growing resurgence of local content requirements – a government policy that necessitates foreign direct investment to involve a set percentage of local employment and sourcing – poses a challenge to the consensus in development theory that neoliberalism and private regulation governs the global economy.  Drawing from document analysis and secondary scholarship, we test competing theoretical explanations for the recent re-implementation of this specific form of public regulation.  We find that the return of LCRs typically has been explained in scholarship as resulting from local governments' embrace of a traditional and long-standing form of industrial policy in which LCRS are adopted, among other policy instruments, as part of a larger strategy to grow infant industries in the host economy.  While LCRS were formally restricted by the WTO and in many bilateral and multilateral trading agreements , the financial crisis of 2008 and an ambiguous regulatory environment has facilitated developing nations' re-implementation of a long-standing pattern of public regulation of the local economy.  

In contrast, we argue that the return of LCRs requires attention to the changing meaning of this policy instrument, in that LCRS are deemed of value contingent upon a new configuration of the institutional norms of the global economy concerning the project of international development based around poverty alleviation through market inclusion. LCRs are now understood as one stand-alone strategy of regulation in a new collaborative form of governance of the global economy, where the state and international market actors, such as MNCs, carry distinct and interrelated responsibilities for addressing the problem of poverty by providing indigenous employment opportunities and faciltilating local entrepreneurship.  Our paper thus highlights the possibility of the multivocality of policy instruments across different historical contexts in the national and international domains of regulation and governance.