Australia forces foreign automobile makers to buy parts locally before they can manufacture cars there. France admits only foreign companies that purchase locally and export heavily. Taiwan forces a U.S. company to export much of the chewing gum it makes there to protect local manufacturers.
The Reagan administration cites such moves as a trend toward "new forms of trade restrictions" and lists the issue as one of its top three priorities for the ministerial meeting of the General Agreement on Tariffs and Trade later this month in Geneva.
A U.S. trade official said yesterday that the United States will request that the GATT ministers study for the first time "the growing distortions and growing barriers to international trade" caused by these practices. Opposition is expected from some of the more advanced of the less developed nations -- notably Brazil and India -- that use them to protect their own industries and markets.
If the GATT ministers refuse to accept the U.S. proposal, the trade official said, the Reagan administration will be forced to take unilateral steps to protect American industries doing business overseas. Those steps could include revoking trade preferences for less developed nations or slapping punitive duties on imports from countries that restrict American investment.
Moreover, the official said, GATT inaction will make it harder for the Reagan administration to fight the U.S. version of this restriction -- the labor-supported legislation now in Congress that would force the most popular foreign cars to be built substantially with American-made parts and by U.S. workers. This bill, which has gained popularity amid the continuing recession, is aimed most directly at Datsun and Toyota cars.
Local content legislation here, as well as nontariff restrictions abroad, go against the Reagan administration's free-trade philosophy, which it will be trying to sell to the rest of the world at the Nov. 24-27 GATT ministerial meeting.
The other two main thrusts of the Reagan administration at the GATT meetings will be in the area of service industries -- such as insurance, engineering consultants, accounting and medical and hospital consulting -- where the United States currently holds an edge on most of the world, and high technology, where America's worldwide lead is being challenged by the Japanese.
The U.S. already has moved through GATT-dispute-settlement mechanisms to stop Canadian restrictions on U.S. investment by requiring U.S. companies to buy Canadian products and to export their manufactured goods. The trade official said a decision on the Canadian case should come early next year.
Many of the less developed nations use local content restrictions as a way to build their own infant industries. These include nations such as South Korea, Brazil, Mexico and India, as well as Hong Kong, which have started on the road to industrialization, the trade official said. But, he added, these barriers can be harmful to other, smaller developing nations, which are thwarted from exporting their products to foreign manufacturers.
U.S. officials said their proposal has the support of less developed nations such as Jamaica and Chile.