Domestic preference: Overview, definition, and example
What is domestic preference?
Domestic preference refers to policies or practices that prioritize or favor goods, services, or workers from within a country over those from other countries. These preferences are often seen in government procurement, trade policies, and labor regulations where domestic products or services are given preference in purchasing decisions or hiring practices. The goal is to support the local economy, create jobs, and strengthen domestic industries.
For example, a government may have a policy that requires federal contracts to be awarded first to businesses based in the country, rather than to foreign companies.
Why is domestic preference important?
Domestic preference is important because it helps protect and promote local industries, supports national economic growth, and creates job opportunities for citizens. For businesses, understanding domestic preference laws is essential, especially if they are involved in government contracts, international trade, or hiring practices. It ensures compliance with legal requirements and helps take advantage of opportunities that favor local businesses.
For consumers, domestic preference can also lead to the availability of goods and services that are better suited to local needs and conditions.
Understanding domestic preference through an example
Imagine a U.S. government agency issues a contract for construction work on a federal building. Under the principle of domestic preference, the agency might be required to award the contract to a U.S.-based construction company, even if a foreign company offers a lower price. This ensures that U.S. businesses benefit from government spending and that jobs remain within the country.
In another example, a country may have a law requiring that a certain percentage of employees in a company must be locals, especially in sectors like hospitality or manufacturing, to ensure job opportunities for its citizens.
An example of a domestic preference clause
Here’s how a domestic preference clause might look in a contract:
“In accordance with applicable law, the Supplier agrees to prioritize the use of domestically-produced goods and services and to comply with all relevant domestic preference regulations.”
Conclusion
Domestic preference policies help ensure that local businesses and workers are given fair opportunities in the marketplace, particularly in government contracts or industries critical to the economy. For businesses, understanding domestic preference is key to staying compliant with regulations and making the most of opportunities that prioritize domestic products and services. Clear clauses in contracts can help businesses navigate these requirements effectively.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.