The Worst Innovation Mercantilist Policies of 2015

January 11, 2016

Innovation is the 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 uses protectionist and trade-distortionary policies to expand domestic production and exports of high-tech goods and services.

These practices do not just damage other economies; they damage the entire global innovation system, leading to less innovation. Moreover, they often do not even help the countries embracing the practices. Instead, mercantilist policies usually lead countries to neglect the greater opportunity of spurring growth by raising the productivity in all sectors of their economies, not just a few high-tech ones. Curbing the scourge of innovation mercantilism should be a top priority for the global trading system.

In its third year of publication, ITIF’s 2015 list of the worst innovation mercantilist policies includes:

  • Canada: Continued to misuse international intellectual property law to undermine pharmaceutical patents.
  • China: Introduced security and industry rules, especially requirements for “secure and controllable” equipment, which effectively exclude foreign technology products. China also expanded requirements for forced local data storage.
  • China: Used its semiconductor industrial policy to unfairly support domestic firms while discriminating against foreign firms.
  • India: Introduced local content requirements as part of its National Telecom Machine-to-Machine Roadmap.
  • India: Introduced local content requirements in solar power projects.
  • Indonesia: Introduced local content requirements for smart phones and forced local data storage.
  • Nigeria: Implemented local content requirements for information, communications, and technology products and forced local data storage.
  • Russia: Implemented forced local data storage requirements.
  • Russia: Forced the local production of pharmaceuticals and medical devices.
  • Turkey: Tried to misuse World Trade Organization safeguard protection measures in order to protect a nascent smart phone manufacturer.