by Kenneth Corbin

Ranking the World’s Least Friendly Markets for U.S. Tech Firms

News Analysis
Oct 09, 20145 mins
GovernmentTechnology Industry

A new study looks at policies hostile to multinational IT companies and calls on U.S. officials and allied nations to step up trade enforcement and prioritize the tech sector ahead of other industries. Some in the tech industry, though, want the U.S. to address problems at home before pointing fingers overseas.

global trade partners
Credit: Thinkstock

Multinational tech companies have long complained about restrictive policies in foreign countries that limit market access. Now a prominent Washington think tank is calling out names.

The Information Technology & Innovation Foundation has put together what it’s calling the “Global Mercantilist Index,” ranking U.S. trading partners on factors such as localization requirements and intellectual property theft that create trade barriers for the U.S. tech industry.

At the top of the list sit familiar players: China and India alone were designated in the “most egregious” quadrant based on a methodology that evaluated the impact of countries’ mercantilist policies on the U.S. economy, with a weighted emphasis on the tech sector. In the second, “moderate-high” category, the ITIF report places Argentina, Brazil and Russia.

Owing to what ITIF describes as widespread Internet piracy, solid U.S. trading partners such as Australia and Canada find company with Thailand, Vietnam and other countries with more restrictive policies on the “moderate-low” quadrant. The largest segment of the 55 nations ITIF evaluated, by far, was the “low,” or “least egregious,” list of countries. This was comprised mainly of European countries, as well as Hong Kong, Israel, Kenya, New Zealand and Taiwan.

[ Also: Open Internet Central to U.S. Trade Policy ]

The report also roundly criticized U.S. trade policy, which it describes as having “devolved into a fight between pure free traders and protectionists.” The authors add: “It’s a distracting struggle because it diverts attention from the most important trade policy issue today: Robust enforcement.”

In particular, the authors urge U.S. officials to recalibrate their trade agenda to prioritize the concerns of the technology sector over, say, agriculture, contending that “some industries are much more important to the future of the U.S. economy than others.”

Right now, U.S. trade policy “lacks a strategic component,” says Michelle Wein, trade policy analyst at the ITIF and the lead author of the report. “They consider potato chips as sort of being equivalent to computer chips, and that’s not necessarily true.”

Wein and her co-authors outline a menu of policy prescriptions to address the challenges of doing business in countries with policies that unduly burden foreign tech companies. This menu aims both at U.S. officials and the broader international community as it operates through the World Trade Organization and other bodies.

As a starting point, they hold out their framework as a more comprehensive view of the global market economy than any single report produced by the U.S. government, suggesting that the ranking system they have devised is a useful tool to “name and shame” other nations into abandoning protectionist policies.

The ITIF also calls on Congress to increase funding for the U.S. Trade Representative, and to task that office with developing an official ranking system, while funneling additional appropriations toward it and other agencies to focus on trade and customs enforcement. The White House, the authors argue, must develop an international trade enforcement strategy, and U.S. officials should band with “free-trade allies” to reorient the WTO toward enforcement efforts aimed at opening markets.

[ Related: Stop Spying on Us, European Parliament Tells U.S. ]

Some in the tech sector welcome the ITIF’s report for calling attention to issues that have been at the top of their agenda for some time. At the same time, though, they question the methodology of the study and some of its policy proposals.

For instance, the exclusion of the United States from the rankings smacked of “throwing stones from a glass house,” says Jennifer Sanford, senior manager of international trade and energy policy at Cisco Systems’ government affairs department. “I would like to see where the U.S. ranks in this set of categories.”

In this cloud computing era, many U.S. multinational tech firms face challenges setting up shop in foreign countries – in part due to the protectionist policies that ITIF identifies, but also because of real privacy concerns in those markets that data stored with companies such as Microsoft and Google could be subject to government surveillance.

“One might suggest that the U.S. has totally clean hands,” says Dorothy Dwoskin, senior director of global trade policy and strategy at Microsoft. “I can tell you in some of the issues that we’re wrestling with, even with our own government and the data-flow issue, that’s not exactly the case.”

Snowden NSA Revelations Hurt U.S. Tech Sector Abroad

The concerns that Dwoskin and others in the tech sector raise about the harmful impact of certain U.S. policies on overseas trade, which took on a fresh urgency amid the revelations about government surveillance from the disclosures of former NSA contractor Edward Snowden, have had some resonance in the administration and Congress.

President Obama, for instance, has ordered a review of the government’s intelligence-gathering activities. Meanwhile, the same day that ITIF released its report, Sen. Ron Wyden (D-Ore.), a leading critic of the mass surveillance operations that Snowden brought to light, planned to hold a meeting in Silicon Valley with top executives from Facebook, Google and Microsoft, among others, to discuss the impact those programs have had on the digital economy.

[ More: U.S. Faces Major Internet Image Problem ]

Dwoskin, who spent nearly three decades at the USTR before joining Microsoft, also takes issue with the calls in the ITIF’s report to position the tech sector as the focal point of the trade agenda while deprioritizing other, more traditional industries.

“Policymakers do need to take a look across the economy when they come up with the trade policies,” Dwoskin says.

“Having a lot of doors shut in your face could potentially be the result of saying, ‘Don’t worry about agriculture, just focus on the advanced tech sector,'” she adds. “What we need to do as an industry is … broaden what we mean by innovation, because there are a lot of agribusiness industries that feel that they’re innovative and depend on some of the same things that we do.”