Will Stronger Borders Weaken Innovation  

6 March 2018:

The political rhetoric of economic nationalism has grown heated in recent years. The clarion call often sounds for more restrictive trade or immigration policies that supporters believe will promote growth and employment at home. Studies have shown that a number of countries have embraced this mind-set to varying degrees, adopting policies that favor domestic industry and companies.

According to Global Trade Alert, the U.S., India, Russia, and Argentina implemented the most protectionist measures from November 2008 to June 2017. The Information Technology and Innovation Foundation reported in early 2017 on “mercantilist innovation policies” from the previous year, citing local data storage and technology transfer measures in China, Russia, Indonesia, and Vietnam, among others. China, though it relaxed some of its restrictions in 2016 after the data was collected, was ranked second out of 62 nations (behind the Philippines) in the OECD’s 2017 FDI regulatory restrictiveness index, which measures various foreign investment constraints. Then there are the headline-grabbing events that have both been fed by and contributed to the rise of economic nationalism: the U.K.’s decision in June 2016 to leave the European Union, the election of U.S. president Donald Trump last November on an “America First” platform, and the rise in uncertainty surrounding the future of various multilateral trade agreements.

Economic nationalism is motivated by a range of intentions, many of which continue to be debated. But it has an unanticipated consequence that has received less attention to date: As many politicians and policymakers in the world’s major economic powers look inward, the realm of innovation has been thrown into uncertainty.

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