The government should create a local content policy supporting competitiveness and protection within the parameters of the WTO

Mr. Editor,

Discontent appears to be growing in the private sector and other influential circles about the pace at which the formulation and implementation of local content legislation / policy is evolving. It is probably this dissatisfaction, expressed both publicly and privately, that has manifested recently in a number of statements on Local Content Policy (LCP) by government officials, the private sector and local ExxonMobil representatives as well. only by sections of the local media. A post from Mr. Timothy Tucker, president of the Georgetown Chamber of Commerce and Industry on his Facebook account expressing his views on the subject stood out.

Mr. Tucker was kind enough to release an excerpt from a World Bank report regarding LCP to the public. For the benefit of readers, I find it necessary to repeat his excerpt from the World Bank paper: “As with TRIMs, (Trade-Related Investment Measures), the GATS (General Agreement on Trade in Services) has provisions for “special and differential treatment” (S&D) of developing countries which allow certain exceptions to general rules. In addition, there are provisions that allow flexibility to encourage foreign suppliers to assist in technology transfer and training through offsets (which is particularly relevant for the design of LCPs). Compensatory transactions are contractual terms that oblige the seller (usually a foreign supplier) to transfer additional economic benefits to the buyer (usually a host government or a domestic company) as a condition of the sale of a good or a product. basic service. Compensation includes the preferential hiring and training of nationals, preferences for local sourcing, encouragement of foreign investment, support for domestic suppliers to develop future competitiveness and support for the development of operational infrastructure to be upgraded. available to the public (eg roads, roads, water supply, etc.).

Therefore, PCLs that encourage clearing activities in countries benefiting from SST would not violate those countries ‘WTO commitments.’ It is sound technical advice tinged with strategic and political connotations. Mr Tucker “rounded up” the excerpt with his own version which read: “Local content is (a) the right of citizens to benefit from” their “natural resources, but like everything in Guyana, we have to wait a long time, five months then the election results six years for local content. ‘ Based on the statements made, ExxonMobil is not expecting any local content legislation. It appears the company is rolling out its own local content policy through capacity development rather than legislation. As a minister who was Formerly responsible for overseeing the WTO negotiations on behalf of CARICOM (2002-2005), this case piqued my interest.

CARICOM countries have generally not made full use of WTO flexibilities. While the World Bank is correct in its interpretation of TRIMs and GATS, the key issue is to avoid violating WTO national treatment obligations and to ensure that local businesses do not become “wood cutters and water drawers” ​​operating on the outskirts of a dynamic area and the growing industry in particular and the Guyanese economy in general. LCPs can be designed in such a way that they do not violate WTO obligations, however, for the avoidance of doubt, a country’s LCP may be subject to careful scrutiny by other WTO members. . A few examples will suffice; At the WTO TRIMs Committee, China’s local content provisions on cybersecurity measures have come under scrutiny by WTO members following an allegation that measures could violate China’s WTO obligations. In addition, Indonesia’s local content measures have come under scrutiny following concerns expressed about its measures applicable to mining, oil, gas and solar energy in particular. Indonesia urged not to restrict the flow of foreign goods into the country, including from developing countries

Russia and Argentina have also come under scrutiny. Argentina on tax measures granted to private companies and Russia on import substitution and giving priority to products of Russian origin and price advantages. Legislation or no legislation, policymakers and private sector advocates of LCL / P should learn from the experiences of these countries and work together to create special exceptions for local businesses while ensuring that they do not. do not put the country at a disadvantage in the WTO. The recent statement released by GCCI raises the question of whether local content is best achieved through capacity development rather than legislation. Rather than allowing it to raise eyebrows, it should be subject to public debate. In this regard, the statement by the Acting President of September 24 that “the structured local content policy can be a driver of benefits for all Guyanese” is instructive, especially when juxtaposed with the concerns raised in this regard. ‘S / N editorial, October 1. 2021; “A jumble in an oil economy.

Ultimately, the fundamental question is whether local content policies are achievable through capacity development rather than legislation or both. Some countries have succeeded in developing their petroleum services sector by making it sustainable by offering some protection to local companies within the meaning of the S&DT. At the same time, the pursuit of such a policy on the basis of national treatment would allow local companies in the petroleum service sector to become a national industry and potentially an export industry in its own right. The export by Trinidad and Tobago of important segments of its petroleum services sector to Guyana, such as transport, insurance, logistics and human resources, are good examples to note. ExxonMobil’s announcement that it will move its T&T operations to Guyana has further compounded the problem. The realization of this movement will bring to light the whole issue of national treatment. The debate on the urgency / need for local content legislation has overlooked three important considerations: the first is whether such legislation is fundamentally necessary at this stage; second, should the policy be statutory for a specific period of time; and third, whether LCP should be conducted exclusively and unilaterally by foreign operators in the oil and gas sector.

In my opinion, the government should create sufficient leeway to allow it to implement its local content policies which, on the one hand, support competitiveness while offering some protection, within the meaning of WTO flexibilities. , to indigenous infant industries in the oil and gas sector enabling them to grow and develop their future competitiveness. Competitiveness aside, amid all the excitement over what ‘makes good business sense’ (and what doesn’t), the biggest challenge is avoiding ‘Dutch evil’ which some already think are emerging. In this respect, it is in the concubinage between public officials, “oil men”, baggage handlers and crooks that the danger lies.

Truly,

Clement J. Rohee