Global IT Trade Barriers Threaten Cloud, Software Providers

Trade protectionism is hurting the tech sector. The Business Software Alliance is trying to raise awareness among policymakers about the restrictive policies some foreign nations have adopted that limit market access for software and cloud providers.

WASHINGTON -- An increasing number of countries, particularly those in emerging economic regions, have been erecting trade barriers that have restricted access to lucrative foreign markets for U.S. IT firms, software leaders warned on Wednesday.

The market-access restrictions have taken many forms, including government mandates supporting domestic companies, regulatory hurdles, tariffs and the manipulation of technology standards.

"Protectionism is not new, but the scale and the scope ... is unprecedented," said Robert Holleyman, president and CEO of the Business Software Alliance (BSA), a leading trade group representing the software sector. "The challenge we face is steep. It is particularly challenging in what should otherwise be the fastest-growing markets."

BSA   report Lockout

The BSA recently released a report, entitled "Lockout," enumerating various instances of market restrictions in nations such as China, India and Brazil, and has been working to raise awareness of the issue among policymakers.

In that spirit, the BSA convened a panel discussion here on Capitol Hill where Holleyman and other industry representatives argued that lawmakers and administration officials must consider the impediments to global trade that have hindered technology companies and the industries they serve as they hammer out new trade agreements or revise existing ones.

Also on hand was Rep. Kevin Brady (R-Texas), who chairs the House Ways and Means Committee's subcommittee on trade. Brady professed concern at the numerous instances of digital protectionism the BSA study outlined, warning, for instance, that restrictions on cross-border data flow threaten to roll back the gains in efficiency and computing capacity that cloud computing has achieved.

"I am troubled, as you are, to see that governments in several of these fast-moving markets are coming up with new ways to shut off world- leading IT products and services to promote their own companies," Brady said.

In August 2011, for example, authorities in Indonesia issued a draft amendment to that country's law governing electronic transactions that would require data service providers to establish a physical presence -- including data centers -- in the country. A similar provision described in the BSA report that is under consideration in Vietnam would establish new cross-border restrictions on IT services and require cloud service providers to set up shop within the country.

Alternatively, some countries, including China and India, have been establishing their own laws and policies that seem designed to circumvent global efforts to achieve consensus on open standards.

Chinese authorities, for instance, have undertaken an effort to modernize that country's standards which, in some cases, invites conflict with existing standards promulgated by groups like the International Organization for Standardization or the Internet Engineering Task Force.

"What we're seeing in some countries is actually an intrusion in the standards-setting process," said Cheri McGuire, Symantec's vice president of global government affairs.

At the same time, McGuire warned that if the United States is to take an anti-protectionist message into trade talks with other nations, policymakers must make absolutely sure that they are not elevating domestic standards, such as those from the National Institute of Standards and Technology, over international efforts, or backing other restrictive policies.

"We have to be very, very careful I think not to enact similar regulations," she said.

BSA's report includes many other examples of protectionist efforts, including strict licensing regulations for cloud service providers in China that tilt the marketplace toward domestic companies, and rigorous security testing requirements for telecommunications hardware and software in India.

The group, which of late has been highly visible in advocating for anti-piracy measures and other intellectual property protections, is redoubling its focus on trade policy and opposing foreign market restrictions that affect its members.

"Every new trade agreement going forward has to be judged by a digital trade test," Holleyman said.

The protectionist policies can also have a spillover effect, both to other nations that might seek to prop up their own domestic companies in retaliation, and to other industries. Dorothy Dwoskin, Microsoft's senior director of trade policy and strategy, pointed out that the tech sector contributes a tremendous network effect that benefits all other industries that rely on IT services, both at home and abroad.

"We are enablers for the rest of the economy and the global economy," Dwoskin said. "It really is all-encompassing."

Kenneth Corbin is a Washington, D.C.-based writer who covers government and regulatory issues for CIO.com.

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