Increasingly Protectionist ICT Policies Pose Threats to Global Economic Growth, Security

WASHINGTON, D.C. —As world leaders prepare to meet at the G20 Summit in Hangzhou, China, the U.S. Chamber of Commerce released a report, titled Preventing Deglobalization: An Economic and Security Argument for Free Trade and Investment in ICT. The report examines threats to the global economy from emerging policies restricting open trade and investment in the information and communications technology (ICT) sector and attempts to quantify their impact.

“A highly connected and global ICT sector is the backbone of innovation and has arguably been one the most powerful drivers of global economic welfare over decades,” said Myron Brilliant, executive vice president and head of International Affairs for the U.S. Chamber of Commerce. “Today’s digital economy demands a free flow of data and ideas to make modern commerce and trade possible. From banking to e-commerce to managing a global supply chain, nearly everything requires complex transactions cutting across hardware and software platforms, industries, and jurisdictions.”

The Chamber conducted a comprehensive examination of ICT laws and policies around the world. As the report documents, many governments are pursuing laws, regulations, and policies ¾ justified on national security grounds ¾ that may impact the free flow of trade and investment in ICT. The report specifically examined China, Russia, India, Brazil, several European nations, and the EU itself, as well as the United States. The report also addresses the potential economic and security costs of restricting such trade and investment.

The Chamber is deeply concerned that a growing number of the measures documented in the report have the effect of advancing protectionist objectives in the name of national security. These laws and regulations are creating a competitive advantage for “indigenous” companies in the ICT sector, while pushing out “foreign” competition. The report identifies the costs of such rules, not only to the ICT sector, but to the countries themselves. The report provides a series of recommendations to assist all governments around the world in balancing their national security and economic interests and enable the free flow of ICT products, services and data.

Taking China as a case study, economic modeling in the report found that a decision to purge foreign ICT product and service providers from the market would result in annual reduction in China’s GDP anywhere from 1.77–3.44%, or at least $200 billion based on 2015 GDP. By 2025, this would equate to a reduction in China’s GDP of nearly $3 trillion annually. Earlier this month, business associations from around the world called on China to revise the draft Cybersecurity Law and pending China Insurance Regulatory Commission (CIRC) Provisions on Insurance System Informatization to encourage international policy models that will support China’s development as a global hub for technology and services. A copy of the letter can be found here.

“With nations still struggling to climb out of a global recession, we simply can’t afford to introduce growth-killing regulations and laws,” added Brilliant. “Consumers, businesses, and the public sector in every nation deserve choice and transparency when choosing technology products, services, and partners. Fractured markets lead to slower economic growth, less consumer choice and higher prices, higher operating costs for business, and less security.”

To reverse the deepening splintering of the ICT sector and the resulting economic costs, the U.S. Chamber of Commerce offers governments the following principles in their security-related regulation of the ICT industry:
•Embrace a globalized ICT sector.
•Promote fair market competition.
•Promote transparency.
•Allow companies to make their own purchasing decisions.

The Chamber is asking that government leaders move assertively to address these issues during the upcoming G20 Summit, embracing the goals of the meeting to promote an “innovative, invigorated, interconnected, and inclusive world economy.”

Preventing Deglobalization: An Economic and Security Argument for Free Trade and Investment in ICT was written in consultation with experts from Covington & Burling and the Rhodium Group.

A full copy of the study can be found here. For a report summary, click here, and a summary of the economic analysis is available here.

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations. Its International Affairs division includes more than 70 regional and policy experts and 25 country- and region-specific business councils and initiatives. The U.S. Chamber also works closely with 117 American Chambers of Commerce abroad.