XML 1.0's use of Unicode may have eased many internationalization problems, but localization - across countries, organizations, or people - is a separate issue. XML's foundations are flexible enough to support localization, but many of the layers built on top of XML are designed to remove or reduce that flexibility.
W3C XML Schema offers some obvious examples of this reduction, particularly in its numeric and date/time types. All content which uses these types must be in formats which are inconvenient for large parts of the world, and W3C XML Schema offers no option whatsoever for issues as simple as changing the decimal separator from a period to a comma, not to mention the complete lack of support for calendar systems other than the Gregorian.
Localization issues go beyond the classic problems of working in different countries and cultures, however. A particularly local view of localization might look at the different understandings held by different organizations, parts of an organization, or even individuals. The classic answer to information interchange with XML is to stamp out variation to the greatest extent possible, demanding conformity to particular vocabularies and a type system blessed by the W3C. While this may force everyone into a style which makes life easier for programmers, it also substantially reduces the flexibility of markup approaches and makes the stakes in standardization processes much much higher.
Is there a way out? There may be. Relying exclusively on the markup contained in a document to interpret its structures (rather than calling out to schemas for additional information) makes documents more portable, reducing the processing mismatches that are easily created with the many layers of XML specifications. Using markup to identify rather than constrain makes it simpler for recipients to interpret the information in a document as they need, in a context which reflects their needs and the relationship between the recipient and the document (and the document's sender) rather than simple obeisance to a fixed and often brittle set of rules. Formal descriptions of those structures can then be applied as local sanity-checking, rather than as global straitjackets.
Monastic XML Copyright 2002 Simon St.Laurent.