Local content requirements and their economic effect on shipbuilding

This study quantifies the significant economic gains that are expected to be revealed through the abolition or relaxation of local content based policies. The work analyses two specific local content policies affecting directly or indirectly the shipbuilding industry in two countries: Brazil’s local content requirement as part of national concession contracts in the oil and gas sector, and the long-standing US Jones Act obliging intra-US seaborne trade to be conducted on US built and US flagged vessels. The paper’s static simulation exploits OECD’s latest Trade-in-Value-Added (TiVA) data – a rich database on Inter-Country Input-Output relationships. The database has been disaggregated to the level of the shipbuilding industry, enabling an assessment of the effect of the two selected policies on inter-industry trade. The simulation results suggest large economic benefits for both countries in the long-term despite initial losses in the target industry.