Protectionism Looms: How Will High-Tech Fare?

The G20 economic meeting ended with a whimper and some ominous signs for the global high-tech community.

The participants returned home only to circle the wagons even more closely around their economies, threatening to stifle global growth as each region and country revamped policies that would benefit only their citizens at the expense of others worldwide.

The G20 discussions were held in an atmosphere of rancor: The US was berated for the decision to pour an additional $600 billion into its economy to spark export growth by indirectly weakening the dollar; China was harangued by the US for keeping the value of its currency artificially high; and Europe — ripped apart by a silent debt crisis that is now threatening to spread from Greece to Ireland, Portugal, and Spain — is still sulking over the US's role in triggering a financial and real estate crisis more than two years ago and declined to back its biggest trading partner in the spat over China's inflated currency.

Ahead of the summit, President Barack Obama was handed a No-Deal spanking by South Korea in talks to seal a free trade agreement. At home, shrill voices gained strength in calls for the president to protect manufacturing jobs that have been outsourced mainly to Asia and Eastern Europe, thereby hurting American workers.

All these added to a widening in the hairline fracture that has become apparent in global commerce as China's strong economic growth sucked jobs from the West. In response, Western politicians are loudly threatening to curb imports from China while quietly implementing policies that would stem the outflow of manufacturing activities to Asia. In the latest example, for instance, the UK wants to develop a high-tech center in East London to compete with similar locations in California, China, and India. (See: UK Wants Its Own High-Tech City in London – Will It Fly?.)

If the fissures continue, the high-tech market — an industry that tends to ignore national borders — could experience turmoil; national interest pressures could force executives to take publicly popular decisions that run counter to profit goals. Nobody should assume this is unlikely, because executives at high-tech companies are already feeling the heat. {complink 2657|Intel Corp.}, which recently announced plans to invest $6 billion to $8 billion in next-generation manufacturing facilities in the US, hinted the decision was partly in response to continued public outcry over the shifting of manufacturing jobs to Asia.

High-tech executives may soon be saluting the flag more and their corporate logo less.

9 comments on “Protectionism Looms: How Will High-Tech Fare?

  1. Barbara Jorgensen
    November 15, 2010

    You are spot on, Bolaji, protectionism would be a disaster for the supply chain. It's easy to understand why countries are circling the wagons. But a global economy is just that, and one you can't opt out of when things get tough. Supply chain relationships have already endured a number of crises and come out intact–the 2001 inventory “adjustment” was particularly painful for the electronics industry. Let's hope the relationships in the supply chain are strong enought to weather this particular storm.

  2. DataCrunch
    November 15, 2010

    Protectionism will be the side effect of the inability and impossibility of enforcing “free trade” agreements.  Without proper enforcement, fair competition becomes impossible.   From this point of view, it seems like the US has been practicing “free trade” while the rest of the world has been practicing protectionism.    Something’s got to give when many of the parties aren’t playing fair.

  3. elctrnx_lyf
    November 16, 2010

    The electronic indusry reached to a level that not only the companies are making their strategis but also the governements are hugely dependent on the industry. Because of the wide spread of the electronics in every application on earth it is even dictating terms to the leaders.

  4. g,dosvik
    November 16, 2010

    Protectionism will certainly have an impact, Barbara, but I really wonder how much of that is just pure hyperbole. Certainly the companies that have fostered outsourcing and offshoring have a vested interest in being against so-called “Potectionism”.

    By the way, isn't that word “Protectionism” a fascinating sound-bite? It's that darn “Protectionism” that is really hurting those profits – not the unemployed workers here – or for that matter, the underpaid and poorly treated workers overseas.

    Sorry, Barbara I'm not buying this.



  5. Ms. Daisy
    November 16, 2010

    Protectionism has been the game by EEU countries and the emerging economies of China and India in recent times. China's strong economic growth which sucked jobs from the West was partly built on protection of China's interest with the offer cheap labor to any one willing to move jobs to China. The offer was the bait the West bit on and are paying for it now in unemployment. US capitalism has also come home to roost – private ventures made decisions to move out the jobs and hoped competition in a free trade will help determine the prices.  

  6. Ms. Daisy
    November 16, 2010

    The G20 meeting has just made it apparent to us all, that governments have no control on determining distribution or prices, the private sector does. The governments are beneficiaries of the success of the private sector. Governments of the G20 are protecting these benefits and making sure they are not eroded hence the belt tightning to free trade. Fair or not is another matter.  The way to force China to play fair at this time is to curb imports from China while  implementing policies that would stop outflow of manufacturing activities from the West.

  7. bolaji ojo
    November 16, 2010

    Ms. Daisy, Your analysis is pinpoint correct. However, the transfer of jobs to Asia has already happened and it's unlikely these manufacturing positions will return anytime soon back to the West. But it's also not only the West that is suffering as a result of China's domination of global manufacturing. I believe the situation is even more acute in developing economies, which are unable to compete as well for investment funds. The problem here is figuring out the optimal way for the global economic regions to interact in such a way that one area does not benefit too much at the expense of the others. How will these economic leaders sort out this mess without resorting to national protectionist practices?

  8. Ms. Daisy
    November 16, 2010

    I don't believe individual government's protectionist practices will solve this mess. A collective action to create a balance is what will work. But each leader is also under tough scrutiny at home for the consequences of the melt down, so its going to take a while to resolve.

  9. saranyatil
    November 22, 2010

    daisy u have put it in the right way, goverments should take a strong call in solving this problem and to maintain balance in all sectors.

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