Tech Protectionism: Economic Risks and Rewards

 It is obvious that, in spite of global connectivity, countries are increasingly tending to focus on their own issues. Ever since the recession, the top 60 countries have put in place over 7,000 protectiveist trade measures. Many nations are strengthening their physical borders. Nationalist political parties are gaining popularity globally. Alongside this, digital and tech protectionism are rising, with countries limiting data flow and restricting foreign tech access to protect local industries.

Data localization requires companies to store duplicate copies of their data to ensure compliance, and authorities in some countries manage the data directly. Despite the increasing number of policies that limit global competition, technology continues to empower consumers by enabling individuals to access buyers worldwide. McKinsey Global Institute demonstrates that individuals are connecting across the globe by meeting online with loved ones and friends, studying, finding employment and doing business.

How do tariffs affect businesses?

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Digital tools like WU EDGE, as well as eBay, Amazon and Alibaba, are helping small firms to do business with both buyers and suppliers abroad. Over 900 million people use social media to reachout to friends and acquaintances from other nations. I consider this to be a positive result. I feel that when people all around the world are linked, positive outcomes follow. In my view such issues as inequality, climate change, unemployment, education and healthcare will not be tackled by one country or business on its own. It will take cooperation among many countries.

Some of what reaches me is just because of my own experiences. I can see clearly the positive effects that global links have made in mine and others’ lives. My Austrian-Catholic father and Turkish-Muslim mother raised me in Istanbul, where I celebrated both Christmas and Eid. I went to school in Vienna, had an Indian-Austrian wife and now live in America.Yet, even though I stand for global connections, I think the new globalism should be more open to all. Technology enables people to engage with the global economy, though it does not include everyone.

What is protectionism?

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For some years now, Western Union has been forming new partnerships to broaden the reach of the global economy to every part of society. A case in point is Western Union introducing a way for international consumers on Amazon to buy from Amazon Local and make in-person payments with cash using their local bank account, without the need for an international credit or debit card. Many people from underserved communities prefer to buy e-commerce products because these platforms offer good prices and a wide selection; however, they often struggle to make payments since they are not accustomed to online payment methods.

We are also driving Safaricom a Kenyan firm that introduced an e-wallet – to enable individuals in Kenya to simply transfer funds through Western Union worldwide. The pace of trade integration has slowed down during the last decade. Trade integration began after the Second World War. In the 1980s, globalization saw a boost and its popularity was at its peak 1990-2008, when worldwide trade of goods and services increased from 39% to 61% of the total economy.

Protectionism 2.0 is less visible

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Following that, trade has decreased (to account for 58% of world GDP) and, at the same time, protectionism has increased, pushed back in part by higher use of non-tariff barriers and lately, tariff barriers. At the same moment, public backing for globalization has dropped on both sides of the ocean. Even though Brexit and Euroscepticism have disrupted freedom of movement and economic integration in Europe, policymakers and commentators in the United States are now engaging in similar debates about the benefits of free trade.

In 2018, trade tensions kept increasing and as the US Administration made protectionist threats and its main trading partners retaliated, the danger of a trade war became very clear. Any increase in protectionism might affect international commerce and business activity. Most economists generally believe that open trade benefits the economy and that policymakers need to implement measures to support those adversely affected by certain aspects of trade. At the same time, putting up trade barriers will not solve the main problems. Removing trade integration could threaten the economic gains generated by integration.

Conclusion

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Companies and governments miss out on the advantages of free trade when deciding to become more protectionist. The past decade has seen big changes in trade policy. Trade growth has slowed down in recent years, something that reflects the less strong push to economic integration from before. While average imports as a percent of growth in GDP or trade income elasticity was much higher than 1 from 2004 to 2008, since 2011 the ratio has come back to around Many analysts agreed by 2016 that slowing trade growth was likely to stay in the world economy.

As an example, the European Central Bank does analysis. found that the world’s trading patterns would likely not regain their former level and that events since 2011 signify a new normal. Researchers have proposed many explanations to account for the recent decline in trade, including the effects of trade composition and underlying economic factors. Analysis performed by the European Central Bank and the International Monetary Fund (IMF) Doyle points out that when economic activity moves geographically and people buy more services (which are generally less involved in international trade, except for rising instances now) it can make trade less sensitive to changes in the economy.