Unfair trade practices mounting against U.S. cloud-service providers, software developers

Developing nations seeking to protect their indigenous IT industries, the Business Software Alliance says

The global information technology market is reeling amid tariffs and other trade barriers enacted by a handful of developing nations to insulate domestic business from global competition, particularly from multinational cloud-service providers.


Moreover, software sales could suffer further with an increase in countries adopting protectionist trade polices against technology imports, the Washington-based Business Software Alliance (BSA) said this week.

The BSA, an international trade group representing many of the world's largest software makers, said the growing tide of protectionist trade policies is alarming.

"The global scope of the problem poses immediate and long-term threats to the IT industry and the broader global economy," the BSA said in a report this week on the increasing global stress from IT-focused trade barriers.

China, Brazil, India and Indonesia are among developing nations that have sought to bolster indigenous IT development by enacting tariffs and slapping tough controls on information technology developed abroad.

"These threats cannot be overstated or ignored," BSA said, warning that there is a "contagion effect" for countries to enact tariffs and price controls to protect their industries.

"We are seeing a domino effect," BSA President and CEO Robert Holleyman said. 

Protectionist IT trade policies are often masked, something that can make the policies more difficult to challenge under World Trade Organization (WTO) rules, charges the BSA report, Lockout: How a New Wave of Trade Protectionism Is Spreading through the World's Fastest-Growing IT Markets -- and What to Do about It.

Emerging economies have gone so far as to manipulate technology standards to held domestic firms, the 20-page report noted.

"Government intrusion into and manipulation of standards-setting processes hampers innovation and creates artificial barriers to trade," the report reads.

Additionally, officials invoke security concerns to thwart foreign companies' access to markets, and place procurement restrictions on technology government entities may purchase.

Governments, for instance, mandate use of domestic IT products and impose location requirements on data centers,  aimed at keeping multinational technology companies, such as those from the United States and Europe, out of their developing, domestic markets. 

With emerging cloud technologies, some countries have blocked multinational cloud-service providers by imposing data-location requirements and restrictions on cross-border transactions.

Thwarting international cloud-service competition, China, Indonesia, Vietnam, Brazil, Argentina, Chile, Colombia, Peru, and Costa Rica have adopted or proposed rules that, at the least, significantly restrict companies from transferring personal information out of the domestic territory.

"[S]uch policies often have a disproportionate impact on foreign cloud providers, whose primary data centers are more likely to be located outside of a given country," the report argued. "At a minimum, foreign providers may mirror data on servers in other jurisdictions as backup in case a domestic datacenter or national network fails."

To help encourage international IT trade, the BSA report called on the U.S. government to use trade agreements and regional forums--such as the Pacific Rim's APEC--to press countries to jettison unfair IT trade restrictions.

"The US, Europe, and other governments should urgently elevate these market-access concerns in bilateral, multilateral, and regional trade discussions," the BSA report suggested.

Among other moves to encourage free IT trade is to overhaul the 1996 WTO Information Technology Agreement and for the leading IT economies to promote market-led technology standards.

For more:
 - read the BSA report (.pdf)

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