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Protectionist trends

from Maria Alejandra Madi

Throughout 2016, many countries around the world keep on competing for market share in high-wage, innovation-based industries. Indeed, these countries have turned to “innovation mercantilism” by imposing protectionist policies to expand domestic production and exports of high-tech goods and services.

In this setting, innovation mercantilist policies are being oriented to high-value tech sectors such as life sciences, renewable energy, computers and electronics, and Internet services. There are new “beggar-thy-neighbor” strategies adopted by nation-states, such as forcing companies to transfer the rights to their technology or forcing them to relocate their production, research and development (R&D), or data-storage activities. These strategies aim at   both replacing imports with domestic production or promoting exports.

At this respect, the 2016 Information Technology and Innovation Foundation annual report shows that:

  • China introduced a new cybersecurity law so as to impose local data-storage requirements, and forced intellectual property and source code disclosures.  This country also introduced new cloud-computing restrictions so as to exclude and prevent foreign firms from operating in the Chinese market.
  • Germany introduced forced local data-storage requirements as part of a new telecommunications data law.
  • Indonesia introduced forced local data-storage requirements for Internet-based content providers. The country also introduced a patent law amendment in order to force local production and technology transfers.
  • Russia introduced forced local data-storage requirements and encryption-key disclosure as part of a new telecommunications data law. The country also introduced new government procurement rules in order to ban the purchase of foreign software.
  • Turkey introduced a new data-protection law that, as a matter of fact, forced local data storage.
  • Vietnam introduced forced local data-storage requirements for Internet-based content providers. The country also introduced a new network-security law that forces disclose encryption keys and source codes a condition of market access.    read more
  1. patrick newman
    January 31, 2017 at 5:37 pm

    Only the neoliberals and the gullible actually believe that ‘free trade’ benefits everyone. The Chinese tore up the handbook on the theory of international trade long ago!

    • February 4, 2017 at 6:33 am

      Neoliberal economists (and not even all of them) believe that “free trade” benefits everyone. Actually, for most “conservative” politicians it is a basic assumption, one on which they depend that most of the benefits of free trade flow to the people who pay their salaries (and I don’t mean the American people). Corporate leaders only believe in winning. Often free trade gets in the way of that. As it would with China. Exxon and Rex Tillerson is an example of this strategy. But if asked, under oath if he supports free trade Tillerson will answer in the affirmative every time. It’s good and necessary politics, for his company. And make no mistake about, if Tillerson were to be Secretary of State for a 1000 years, he would still be Exxon’s man.

  2. February 3, 2017 at 5:24 pm

    The Chinese borrowed their strategy from South Korea and Japan 50-100 years ago, America of the 1800s, and England of several Centuries ago. The details differ, but the rule is simple. Sacrifice a small price delta today to create more capital for tomorrow.

    • February 4, 2017 at 6:50 am

      Just goes to show that for all the fancy theories of economists and political scientists, mercantilism still controls the world. It’s changed a bit from the 18th and 19th century versions. Now the protectionism is mostly in favor of private companies, which have merged into government, in many cases making the two indistinguishable. In the US for example, about 100 large multinational companies are the US government today. They’re upset with Trump not just because he’s an immature sociopath, but mostly because he’s forcing the “underneath” of US politics and government to the surface. Generally, the American people are aware their lives are controlled by large companies working in unison with Federal, State, and local governments. But knowing is one thing; being reminded of this daily is another. The pressure of the needs and control of these companies in the US has grown a hundred fold since 1970. It’s reaching the point where many Americans see only two options in their lives – suicide or rebellion. It’s the same choice forced on citizens of other nations by the US/companies for the last 100 years. Now Americans are being forced to make this choice. Trump is not a rebel. He is a fairly competent huckster, however who will use this rebellion to make himself and his friends a lot richer.

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