Opinion

Protectionism and the Internet. Will this be possible with the technology that knows no boundaries?

During the height of the dotcom boom, at a Work-the-Web conference, an American got very angry that European web-sites were registered as *.com. “Dotcom is American”, he flustered “Stop trying to muscle in on our turf”.

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More information‘British Jobs for British Workers’ echoes the same protectionist sentiment that lurks below the surface of globalisation. Historically the incumbent rich tell the poor to adopt a liberal policy stance but when the rich become impoverished expect the weather to turn. Right now the protectionist wind is blowing and its advocates are in the ascendency.

What will be the knock-on effect to the Internet - the technology that knows no boundaries?

Censorship

The Great Firewall of China is an example where strict censorship is both cultural and political protectionism. At the other end of the spectrum filtering at home is a way of protecting your family. Businesses do the same. Who knows when democratic governments may decide it is better for you not to visit certain websites by way of carefully camouflaged protectionist measures designed to help their nation's workers or companies at the expense of those next-door.

Protectionist Tendency

A spat of such protectionism was seen in the internet gambling restrictions passed by United States, with the World Trade Organization (WTO) saying the provision was illegal. This issue, clouded with hypocrisy, since the US government legalised the gambling they have a financial interest in , for example, online gambling on horse racing, while they outlawed international companies from competing in internet gambling market.

Digital Revival

If the internet has been a driver of globalisation and the world economy is now in turmoil, partly because of its ubiquity in the financial sector, what restrictions may we expect? On both sides of the Atlantic political rhetoric is predicated on the fact that digital industries will pull us out of the current slump.

Just about every developed country’s leaders claim their economy will be leading the "Great Digital Revival". This shift to a digital, knowledge-based economy, prompted by new goods and services, may be the engine for future growth, competitiveness and jobs but will it be a collaborative world or one where self-interest will prevail?

If e-commerce is seen as the route out of depression and if everyone is after the biggest slice of pie then we’re in for a zero sum game that will get dirty.

European Directive

The European Union (EU) placed the information society at the heart of its strategy for the 21st Century and launched a series of grand support and promotion actions like the eEurope action plan.

As early as 2000, it set up three pillars of a strategic goal to strengthen employment, economic reform and social cohesion as part of a transition knowledge-based economy.

They proposed:

  1. An economic pillar i.e. preparing the ground for the transition to a competitive, dynamic digital industrialised market.
  2. A social pillar designed to modernise the European social model by investing in human resources and combating social exclusion.
  3. An environmental pillar, to draw attention to the fact that economic growth must be decoupled from the use of natural resources.

Digital Initiatives

A socio-regulatory framework is set for Gordon Brown’s UK Digital Industry initiative. However, while e-commerce has a positive impact on the business sector; there are doubts about productivity growth in particular.

In previous techno-industrial revolutions, efficiency gains have helped to improve living standards - one of the goals of progress. Looking at the successes and failures of internet businesses shows that the value of information communication technology (ICT) for development lies not so much in the share of the global economy that this sector represents but in the changes that ICT introduce in the efficiency of businesses that incorporate them.

Regulated Competition

The purpose of competition law is to maintain free competition, not to restrict business models and practices but as tariff barriers have fallen, standards, technical regulations and conformity assessment procedures have become increasingly visible as impediments to international trade.

The European Union (EU) and the World Trade Organization (WTO) have been working on removing obstacles to electronic commerce by establishing clear rules for online trade.

The US government's view that no duties should be imposed on the import of online products and services seems to be in line with this, though the EU takes a tougher line than the US in calling for data protection rules to ensure the protection of privacy of individuals.

Crisis Management

The financial crisis has now affceted the whole economy, hitting the service sector as much as manufacturing and services with only consumer staples and healthcare holding-up well.

With factories closing, unemployment rising, Governments are intervening in their economies as a matter of ‘economic security’.

Expect them to protect domestic industries from imports and global markets threats. Trade protectionism differs from legal measures to protect trade. It is an abuse of remedies provided by multilateral trade rules.

This kind of protectionism is morphing into more complex and disguised forms, ranging from conventional tariff and non-tariff barriers to technical barriers to trade, industry standards and industry protectionism.

Beggar thy neighbour

The internet was mainstream in the election of President Barrack Obama (UK political parties will have noted this), who started his campaign from scratch with few resources and little name recognition. His Presidency is spawning multiple websites mainly directed to the domestic market.

But this internet savvy Barrack Obama, hails Abraham Lincoln as his hero. Lincoln called himself a "Henry Clay" tariff Whig, opposing free trade and implementing a 44% tariff during the Americam Civil War in part to pay for infrastructure and protect American industry.

The economic principle was the law of self-preservation. With the tax dollars the US is going to spend - spawning massive debt – it is not surprising if their sentiment is to keep money inside the country and not enrich foreign interests.

Protectionism though is a whole different ball-game if there's a round of beggar-thy-neighbour policies and a war of subsidies - everybody will be worse off as it has been a feature in driving past economic downturns into deep . Let’s hope we’re not treading a path to conflict. Until then sell as much as you can.

For more information:

  • Rules and Regulations for Online Trading

There are specific regulations associated with online trading in the UK, apart from those concerning payment processing. For example, it is illegal to take payment for goods before they are dispatched and you must provide a data protection consent form

  • The Electronic Commerce (EC Directive) Regulations 2002
  • The Consumer Protection (Distance Selling) Regulations 2000
  • The Data Protection Act 1998

 

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This was first published in March 2009

 

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