- Digital now the new weapon for protectionist policies
- China leads the way on digitally restrictive laws followed by Russia and India
- New report highlights fragmented picture governing movement of data, setting a new challenge for business
Countries which have historically driven protectionist policies through tariff and other trade barriers are now extending their agenda into the digital world, according to research by international law firm Gowling WLG.
A new report reveals a startling correlation between countries pursuing digitally protectionist policies and the level of mineral deposits needed to power the digital revolution; identifying China, Russia, India, Vietnam, Argentina and Turkey as the six global players when it comes to charging a digital economy.
Not only do the identified countries have a strong track record in imposing trade barriers and tariffs on imports, they also have a high number of restrictive data laws and large deposits of the vital raw materials needed to make smartphones, connected devices and batteries for electric vehicles.
China, for example, which in 2014 accounted for more than 90 per cent of global production of rare earth materials, has some of the largest deposits of lithium and manganese - materials needed for mobile phone batteries - and it also has in place rules that restrict or limit the use of data and intellectual property that favour local over foreign businesses.
In contrast, while the United States continues to impose more tariffs (it imposed twice as many as any other country according to a previous piece of research by the firm), its liberal attitude to data flows and lower global raw material deposits make it less digitally protectionist.
The report, Protectionism 2.0: Digital Forces Driving the New Protectionist Agenda, shows that 'traditional' trade barriers have made their way into the digital world, according to international law firm, Gowling WLG.
"This report reveals a new frontier in global trade. One that goes beyond the tariff and non-tariff barriers imposed, relaxed and then re-imposed between countries, regions and trading blocs, and into a world which many businesses may not yet have considered when setting an internationally focused and connected strategy," said Michael Luckman, lead partner at Gowling WLG.
Cross-referencing data from a previous report into global trade, the report examines both laws on the restriction of data between countries and the supply and demand of the raw materials that power our smart homes, smartphones and electric vehicles.
China has imposed 97 digitally restrictive laws, Russia 54 and India 61. Emerging markets such as Brazil (45) and Vietnam (46) also have high digital trade restrictions, such as not being open to digital related investment and high tariffs on digital goods.
Michael added: "Although the digital revolution has opened up new markets for international businesses, the laws governing the movement of data has created a fragmented picture - one which businesses need to factor into strategic decisions such as international expansion, M&A with foreign companies, or through which countries their data passes.
"Add to that the scramble for raw materials needed for tech hardware and how it is reshaping government policies and forcing businesses to rethink business models and supply chains, it makes for a challenging environment for businesses."
Protectionism 2.0: Digital Forces Driving the New Protectionist Agenda is now available.