Economists anticipate that China will surpass the United States as the world’s largest economy sometime in 2016 or 2017. Some, such as Charles Kenney writing recently in the Washington Post, argue that this does not constitute cause for concern, primarily since per-capita U.S. incomes will remain higher. But ceding a position that the United States has held since 1871 should not be taken lightly. In fact, the United States’ loss of the global economic pole position is quite concerning, first because it brings into stark relief the economic underperformance of the U.S. economy over the past decade and a half—the fundamental causes of which have yet to be ameliorated by enacting policies that would improve the competitiveness of the U.S. economy, its firms and industries. Second, the country poised to take the lead, China, has grown so rapidly in no small part by practicing economic mercantilism on an unprecedented scale, embracing a broad and deep range of mercantilist policies, everything from massive subsidies for state-owned enterprises, abuse of anti-trust policy, currency manipulation, and standards manipulation, to the theft of intellectual property and forced transfer of technology as a condition of market access. But such innovation mercantilist policies harm other nations and cause them to seek to enact similar policies in response, leading to degradation of a global economy characterized by liberalized, market-based trade that will ultimately reduce global consumer welfare. Thus, the United States should not relinquish its position as the world’s leading economy without competing fiercely for that title. It should start by implementing a comprehensive range of innovation, productivity, and competitiveness enhancing policies, as ITIF has long argued, and by continuing to push back aggressively when other nations use trade-distorting policies while pushing for stronger global trade rules that promote market-based economic competition.
Canada Must Protect Intellectual Property
On a number of measures, Canada is one of the leading nations in the world. On several, they lead the United States: Canadians are better educated, more physically fit, enjoy more social mobility, and have greater economic freedom. And yet, surprisingly, Canada has a long tradition of providing intellectual property (IP) protections on a level with that of the developing world.
The 10 Worst Innovation Mercantilist Policies of 2013
Innovation is a central driver of growth. As a result, an increasing number of countries are seeking to become innovation leaders. Unfortunately, the methods that many choose are grounded in “innovation mercantilism”: a strategy that sees technology-based exports as the key to success while relying on distortive and protectionist tactics. These practices do not just damage other economies; they damage the entire global innovation system, leading to less innovation and productivity. Moreover, they often do not even help the countries embracing the practices; instead, mercantilist policies lead them to neglect the greater opportunity to spur growth by raising the productivity of all sectors of their economies, not just a few high-tech ones.
This first annual report documents what ITIF believes to be the ten worst innovation mercantilist practices proposed, drafted or implemented in 2013. Only one policy was chosen per country in order to document the pervasive nature of innovation mercantilism globally.
Advocates Should Focus on Our Real Competitiveness Problems
Manufacturing advocates are not aiding U.S. manufacturers by opposing trade agreements such as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP). These agreements, if done right, will strengthen the ability of the U.S. government to fight mercantilism, open up new markets to American businesses and create a more robust global innovation ecosystem.
Digital Trade Act of 2013 Instrumental to Protecting and Empowering the Global Digital Economy
Digital trade has become one of the global economy’s strongest drivers of growth, especially as it’s estimated that half of all value in the global economy will be created digitally by 2025. Unfortunately, an increasing number of countries are introducing digital barriers to trade such as local data center requirements, which mandate that Internet services companies locate data centers in-country as a condition of market access, or local data storage requirements mandating that companies must store and process data locally, thus cutting off cross-border data flows, and precluding the provision of Web-based services such as cloud computing. To address this, last week Senators John Thune and Ron Wyden introduced legislation in The Digital Trade Act of 2013 that articulates key principles U.S. trade negotiators should adhere to—such as prohibiting localization requirements for data and computing infrastructure—in order to protect the Internet from restrictive measures that obstruct the free flow of data in the global economy.
Canada at a Crossroads
While Canada currently lags behind many developed countries in terms of IP protections, the recently concluded Canada-EU Trade Agreement (CETA) and the ongoing Trans-Pacific Partnership (TPP) negotiations represent opportunities for Canada to adopt globally-accepted IP protections and to improve its enforcement efforts. Michelle Wein will participate in this panel discussion, which will explore Canada's weak IP environment and consider measures for improvement going forward. It is sponsored by the U.S. Chamber of Commerce’s Global Intellectual Property Center.