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Lockout: How a New Wave of Trade Protectionism Is Spreading through the World’s Fastest-Growing IT Markets — and What to Do about It

We have reached a pivotal new phase in the information technology revolution. The biggest centers of growth for IT products and services are no longer established powers like the United States and Europe, but emerging markets such as China, India, and Brazil.

New personal computer sales in China already outstrip sales in the United States, for example, and Brazil recently became the third-largest market for new PCs, overtaking Japan. In fact, the four so-called BRIC countries (Brazil, Russia, India, and China) now account for a quarter of all PC sales globally, up from less than one-sixth just five years ago.

This shift should be good news — a harbinger of long-term vitality for the global IT industry and the millions of jobs it supports. But a new BSA report shows how multinational technology companies are instead faced with a new wave of IT-focused trade barriers, which threaten to lock them out of critical emerging markets. Worse, the study finds that as these IT-focused market barriers take hold in places like China and India, there is a domino effect as other emerging economies are emboldened to impose protectionist measures of their own.

This trend has dangerous implications for the global economy — for producers and consumers of IT alike — at a time when we can ill-afford any new barriers to growth. BSA’s report calls on the US, Europe, and other leading IT economies to press an eight-point trade agenda for the digital economy that removes IT-focused market barriers where they already exist and prevents them from spreading further.

The first challenge, however, is learning to recognize these IT-focused barriers, because they don’t always look like traditional trade barriers. In some cases, they are couched as policies to promote innovation. In others, they are ostensibly to enhance security or advance other domestic priorities. BSA’s study catalogues them in five groups, providing case studies for each one. The five categories include:

  • Stacking procurement by government or state-influenced enterprises in favor of domestic products or IP, or biasing particular technologies or business models.
  • Manipulating technology standards to bolster domestic firms and insulate them from foreign competition.
  • Invoking security concerns to block or tie up foreign IT products in red tape while giving advantage to local alternatives.
  • Inhibiting multinational cloud service providers with data-location requirements or restrictions on cross-border transactions.
  • In addition to pernicious new forms of protectionism, there are tariff barriers that persist because the WTO’s Information Technology Agreement doesn’t cover many new technologies or key markets.

Breaking down these new IT barriers will require a concerted bilateral, multilateral, and regional trade program. Among other steps, BSA calls on the US and other leading IT economies to champion transparent, nondiscriminatory procurement policies; promote market-led technology standards; set clear rules allowing data to flow across borders; lead an effort to modernize and expand the World Trade Organization’s Information Technology Agreement; and intensify engagement with emerging markets to promote best practices for spurring innovation.

Download the full report for more detail, www.bsa.org/tradelockout (PDF).

Robert Holleyman

Author:

As President and CEO of BSA | The Software Alliance from 1990 until April 2013, Robert Holleyman long served as the chief advocate for the global software industry. Before leaving BSA to start his own venture, Cloud4Growth, Holleyman led the most successful anti-piracy program in the history of any industry, driving down software piracy rates in markets around the world.

Named one of the 50 most influential people in the intellectual property world, he was instrumental in putting into place the global policy framework that today protects software under copyright law. A widely respected champion for open markets, Holleyman also was appointed by President Barack Obama to serve on the President’s Advisory Committee for Trade Policy and Negotiations, the principal advisory committee for the US government on trade matters.

Holleyman was a leader in industry efforts to establish the legal framework necessary for cloud-computing technologies to flourish. He was an early proponent for policies that promote deployment of security technologies to build public trust and confidence in cyberspace. And he created a highly regarded series of forums for industry executives and policymakers to exchange points of view and forge agreements on the best ways to spur technology advances and promote economic growth.

Before heading BSA, Holleyman was a counselor and legislative adviser in the United States Senate, an attorney in private practice, and a judicial clerk in US District Court. He holds a bachelor’s degree from Trinity University in San Antonio, Texas, a J.D. from Louisiana State University, and has completed the Stanford Executive Program at the Stanford Graduate School of Business.

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