UK: Our Global Digital Future Is Under Threat - From Protectionism

The standard weaponry of so-called trade wars are tariffs and quotas - observe the most recent tensions between the US and China where both have been spurring each other on in increasing tariffs on aluminium, steel, and aircraft parts.

Our Protectionism 2.0 report considers something different in the trade landscape - the threat of digital protectionism - that is, those measures that restrict the data flows crucial to businesses in this digital age. As explored in the report, these measures pose as much a threat to international trade as their cruder 'traditional' tools of trade protectionism.

The parallel rise of both traditional and digital forms of trade protectionism means international businesses are now faced with a challenging regulatory environment comprising a double-whammy of measures that threaten the free trade of both goods, services and information. This briefing explores the principal findings of our report and sets out some practical suggestions for business in the light of those findings.

Digital protectionism

Our report shows that China's average tariff rate is a moderate 3.2%. So on that basis, China would appear to be one of the 'good guys'. However, as explored in the report, digital protectionism is on the rise in China, where it has recently passed a raft of measures restricting the transfer of intellectual property and new technologies. This includes legislation mandating the use of domestic technologies in public procurement projects, requiring data localisation1, and censoring foreign companies' websites.

China is not alone in imposing these types of measures; indeed, our report shows that many nations have imposed similar digital protectionist measures, including Argentina, India, Russia, South Africa, Thailand and Turkey. Data-driven businesses are and will be increasingly reliant on the flow of data between their international operations, suppliers and customers - such measures undermining data flows therefore threaten to stifle business innovation and expansion.

State measures that restrict the flow of data - such as those requiring data to be stored domestically - affect all businesses operating across borders, not just tech companies. Many countries have implemented data localisation laws on the belief that data is held more securely within their borders, without any protectionist motivation.

However, our research has indicated that these localisation measures can be coupled with burdensome bureaucratic procedures, such as setting up a local data processing centre, to create an unequal playing field for domestic and foreign businesses.

For instance, the report highlights the approach of Australia - a traditionally liberal country in the context of protectionism - to internet-enabled devices. Australian law requires that health data gathered on Australian nationals must be stored and processed domestically. Consequently, a foreign business selling fitness tracking smart watches, for example, must invest in local Australian infrastructure in order to offer health data analytics services to Australian consumers. Our report illustrates that, because Australian fitness trackers are not subject to this requirement - and the associated cost of compliance - Australian health-tech companies have a competitive advantage over non-Australian health-tech companies. 2

Resource nationalism

That all said, the impact of traditional protectionism should not be neglected when considering the digital economy - this applies in particular in relation to so-called resource nationalism. This occurs where resource-rich nations impose high tariffs and import quotas in order to maximise the economic benefit for themselves, often at the expense of importing nations.

Our report demonstrates that countries with vast reserves of the raw materials necessary for the manufacture of new technology are already enacting traditional protectionist measures, restricting the export and use of these materials.

In many cases, these same countries have imposed digital protectionist measures in parallel with traditional trade measures. China and India, for example, hold a combined 25% share of the global reserves of lithium, crucial for the manufacture of phone batteries and energy storage. As one of the world's largest consumers of new technology, China is also home to a vast amount of consumer data. China's deep integration within the global supply chain for the production of digital products - coupled with laws requiring that information is stored on local servers - put China in pole position in the digital resource race.

While Trump's 'America First' agenda is drawing media focus, our Protectionism 2.0 report notes that the US maintains relatively few digitally protectionist measures. Trade barriers therefore appear to be driven by two separate agendas - traditionalist measures targeting established industry, and digital measures targeted at the resources required for the digital economy.

Double whammy of traditional and digital protectionism

The blending of traditional and digital protectionism creates a pincer-like effect for businesses as they find themselves faced with a double-whammy of increased costs to move goods across borders and the burden of complying with complex regulatory landscapes in relation to the transfer data and knowledge between nations.

However, there are a number of measures that businesses can take today to minimise their exposure to rising protectionism. Importantly, the first step is to understand at a geopolitical level the approach that different countries are taking with regard to protectionism.

With this knowledge mapped out, businesses will be able to identify where protectionist threats are within their own supply chains as well as identify countries with low levels of protectionism. Understanding which countries adopt lower levels of protectionism is invaluable in the evaluation of future investments and will help reduce the costs imposed by traditional tariffs and digital trade barriers.

Equally, the separate digital and traditional protectionist agendas are driven at a political level. Ensuring that the voice of business is heard is vital to the promotion of free trade and shaping future trade policy. Trade associations have a key role in conversations around policymaking, lobbying governments, and assessing the impact of protectionism on their members.

Finally, in light of the constantly changing landscape, businesses should consider protectionism at the contract negotiation stage. Ensuring regular review points in long-term arrangements will grant businesses the freedom to navigate away from future protectionist policies if necessary.

Footnotes

1 Chinese cybersecurity: Questions remain despite new guidance

2 Protectionism - Digital forces driving the new protectionist agenda

Read the original article on GowlingWLG.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions