What is in this article?:
- Innovation Mercantilism's Dangerous Consequences for American Manufacturing
- Effects of Localization Barriers to Trade
Countries’ use of local content requirements reduced global trade by almost $100 billion in 2010.
Over the last decade, a growing number of countries have come to embrace a new kind of protectionist trade policy that seeks to expand domestic innovation capacity and technology exports by manipulating the international trading system and subverting the intent of free trade.
ITIF calls these practices “innovation mercantilism,” and they cover a wide range of methods, including localization barriers to trade (LBTs), indigenous innovation, currency manipulation, and intellectual property theft. Together, these policies drastically inhibit the ability of U.S. enterprises to effectively compete.
For example, countries’ use of local content requirements reduced global trade by almost $100 billion in 2010.
Furthermore, in 2009 alone, Chinese theft or infringement of U.S intellectual property cost almost one million U.S. jobs and $48.2 billion in U.S. economic losses. And unfortunately for American manufactures, these policies are becoming more prevalent.
The World Trade Organization reported the number of such “technical barriers to trade” implemented by countries in 2012 reached an all-time high.
As ITIF argued in a recent report, among the most damaging and fastest growing of these mercantilist practices are localization barriers to trade.
LBTs are designed to pressure foreign enterprises to “localize” economic activity in order to create domestic jobs and promote local production in lieu of imports. Only in exchange for local production are foreign firms granted access to local markets. These practices include local content requirements, discriminatory government procurement, forced offsets, and forced technology transfer.