Nigeria, local content and WTO law - Issues of compatibility

Local content requirements are pretty much taboo under WTO law.It signifies "protection" to local goods over imported goods and is thus a violation of the national Treatment principle enshrined under the GATT, TRIMS and GATS. Countries violate this provision rarely, and when they do are immediately taken to the DSM by an aggrieved members.

It is in this context that I found the Nigerian Oil and Gas Content Development Act 2010 rather interesting. It explicitly supports the growth of the local industry in the oil and gas sectors in Nigeria. Section 12 of the Act states:

"Subject to section 7 of this Act, the Nigerian Content Plan submitted to the Board by an operator shall contain a detailed plan, satisfactory to the Board, setting out how the operators and their contractors will give first consideration to Nigerian good and services, including specific examples showing how first consideration is considered and assessed by the operator in its evaluation of bids for goods and services required for the project."

This provision, and many other provisions of the above Act seem to run contrary to the National Treatment principle which mandates that imported goods not be treated less favorably as compared to local made goods.This policy was supported by the local oil industry here.A succinct analysis of the Act by Humphrey Onyeukwu is found here.

However, the issue of the compatibility of the Nigerian law with WTO law has been raised here and here. However, no WTO member has challenged this legislation yet at the DSM of the WTO. Is this a matter of time?

Several questions come to my mind:

1. Is the local content requirements in violation of Nigeria's WTO obligations? if so why has there been no substantial challenge to this legislation? Are global business interests and international involvement in the Oil and Gas sector still nascent to necessitate this challenge? Is it a matter of time (when Nigeria's oil and gas industry has international participation) that a WTO challenge will become inevitable?

2. The Nigerian local content policy is restricted now to the Oil and Gas sector. Would the reaction of WTO embers be different if it extended to the economy as a whole rather than these sectors? Would that have prompted a WTO challenge?

3. Nigeria has employed this policy to ostensibly boost it's local economy, jobs and industry. It is part of its industrial policy. This is a clear instance where domestic policy pace, in terms of an industrial policy favouring local content, is in conflict with WTO rules.

4. Would it be justifiable for an LDC or a developing economy to adopt such policies as an aggressive industrial policy? Is it not a fact that the WTO law gives no leeway in matters of local content. As Ayodele Oni concludes in his piece questioning the Act:

"Although further research may suggest an arguable leeway, Nigeria appears to be, prima facie, in breach of its obligations under the WTO particularly as regards the National Treatment Principle. 

It should, however, be noted that a foreign company carrying on business in Nigeria, which feels strongly about these issues would need to take actions under the auspices of its country of origin. 

Where this is done, a Dispute Settlement Body (DSB) may request Nigeria to bring into conformity measures which are inconsistent with its obligations under the WTO. China for example, brought its trade measures into conformity with the DSB’s recommendations and rulings, within 8 months, further to a WTO decision in 2008."

5. Does Nigeria, and other developing countries, have a defense for this legislation? A WTO dispute, will perhaps, have some of these answers.

Is the Australian Plain Packaging legislation violating national treatment?

The Dominican Republic was the latest complainant to the Tobacco Plain Packaging dispute at the WTO against Australia. I had blogged about it here. The request for consultations of the Dominican Republic touched on aspects of alleged violations of the TRIPS, TBT and GATT Agreements. 

The gist of the request for consultation is found here:

"These measures regulating the plain packaging and appearance of tobacco products for retail sale appear to be inconsistent with Australia's obligations under the following provisions of the TRIPS Agreement, the TBT Agreement and the GATT 1994: 

 Article 2.1 of the  TRIPS Agreement, which incorporates the provisions of the  Paris Convention for the Protection of Industrial Property, as amended by the Stockholm Act of 1967 ("Paris Convention"), in particular, (i) Article 6quinquies of the  Paris Convention,because trademarks registered in a country of origin outside Australia are not protected  "as is"; and, (ii) Article 10bisof the  Paris Convention, because Australia does not provide effective protection against unfair competition, for example, creating confusion between the goods of competitors;

 Article 3.1 of the TRIPS Agreement, because Australia accords to nationals of other Members 
treatment less favourable than it accords to its own nationals with respect to the protection of 
intellectual property;

 Article 15.4 of the TRIPS Agreement, because the nature of the goods to which a trademark is 
to be applied forms an obstacle to the registration of the trademark;

Article 16.1 of the  TRIPS  Agreement, because the measures prevent owners of registered 
trademarks from enjoying the rights conferred by a trademark;

 Article 20 of the  TRIPS Agreement, because the use of trademarks in relation to tobacco products is unjustifiably encumbered by special requirements, such as (i) use in a special form,for example, the uniform typeface, font, size, colour, and placement of the brand name, and, (ii) use in a manner detrimental to the trademark's capability to distinguish tobacco products of one undertaking from tobacco products of other undertakings;   

 Article 22.2(b) of the  TRIPS Agreement, because Australia does not provide effective protection against acts of unfair competition with respect to geographical indications, for example, creating confusion  among consumers with respect to the origin of goods;

 Article 24.3 of the TRIPS Agreement, because Australia is diminishing the level of protection it affords to geographical indications as compared with the level of protection that existed prior to 1 January 1995;  

 Article 2.1 of the  TBT Agreement, because the technical regulations at issue accord to imported tobacco products treatment less favourable than accorded like products of national origin; 

 Article 2.2 of the  TBT Agreement, because the technical  regulations at issue create unnecessary obstacles to trade because they are more trade-restrictive than necessary to fulfill a legitimate objective; and, 

 Article III:4 of the GATT 1994, because the measures at issue accord to imported tobacco products treatment less favourable than accorded like products of national origin."

While the TRIPS and TBT violations require analysis, the Article III:4 GATT violation surprised me. The Plain Packaging Legislation is equally applicable to imported as well as domestically made products. Thus, locally made Australian cigarettes too must follow the same conditions. There is no de jure discrimination on this account. As far as defacto discrimination is concerned, does the imposition of plain packaging requirements on imported tobacco products have an impact on the competitive conditions in favour of local products? Does it accord less favourable treatment to imported products or are local products advantaged? To me, both imported and local products are treated in the same manner. It seems that the national treatment violation contention is not on very strong grounds. Am I missing something here? The rest of the contentions is set for a whole lot of jurisprudential interpretation by the Panel and Appellate Body.