The well-known and proven recipe for continuous global productivity and competitiveness gains – namely, reduced barriers to trade and investment, allowing business and societies to benefit from global value chains – is being seriously challenged.
Should global business just accept that globalization and free trade are things of the past, and adapt to this new reality of nationalism and borders? I don’t think so. While the system is in need of reform, I believe that there are four ways within that system that can create economic growth to benefit the many, and not just the few.
Making the case for global supply chains
The first step is simple: global supply chains should not be broken up; rather, they should evolve. No business venture has ever grown to be a global competitive player from a base in a fully protected market (I know, some would argue there are Chinese examples, but that situation is far from clear). And literally billions all over the world have benefitted from access to mobile communications, thanks to the scale advantages enabled by a true global market, bringing affordability of devices and connectivity, even to some of the world’s poorest.
That’s because the ICT industry is global: global products produced for a truly global market. Made in the World. Countries that have embraced this globalized ICT – Vietnam, Thailand and the Philippines, for example – are already reaping the benefits. Those that have preserved protective barriers in their ICT sectors have lost out.
Recent country moves towards enforced localization requirements on production, R&D or patents will most likely lead to an expensive learning experience, at least in the ICT industry. The winning formula is competitiveness, which simply cannot be mandated by governments.
The evolution of global supply chains needs to be strengthened, not undermined by such misguided initiatives. Ensuring people understand why this is should be our first priority.
Data flows across borders
In today’s fast-growing digital economies, enabled by the cloud, the internet of things and 5G, most innovation will be data-driven. All industries, whether they’re in manufacturing or services, will soon be – if they’re not already – heavily reliant on the collection, use and analysis of data.
That is why it is necessary to protect cross-border data flows and limit data localization requirements, my second priority.
And yet our efforts to reduce or eliminate the remaining barriers to trade tend to focus on physical goods and services. While this is happening, policy-makers all too often take a parochial approach to the data issue, putting in place policies that require the localization of data and prohibit cross-border data flows. Perhaps it feels safer this way, but it’s a false sense of security. Business must speak out in favour of trade agreements that continue to protect privacy, but enable businesses and societies to fully benefit from technological advancement.
There are very real concerns related to the protection of data and privacy. These have to be addressed. But we must focus on doing so in a way that still allows for the flow of data – the lifeline of all future businesses and societies – across borders.
In this increasingly networked, connected world, one of the biggest threats to not just businesses but society more broadly will be cyber-attacks and cybersecurity in general. That’s why the third step must focus on mitigating these new threats.
From now on, ICT will be the platform and critical infrastructure for sectors far outside a narrowly defined ICT industry – for utilities, healthcare, transportation and public safety, to name just a few.
But the frequency and scale of cyberattacks and cyber espionage, many of them possibly government sponsored or encouraged, is growing at a frightening pace.
Governments need to define the many existing cybersecurity gaps, increase international cooperation, engage in international treaties and clearly define how true national security interests can be protected in this brave new world.
Responsible business performance
For all the businesses that create jobs, produce innovations that benefit society more broadly, and boost wider economic growth, there are the exceptions. And it’s those businesses – the ones that put their profit margin before all else, whether that be the environment, human rights or the communities in which they operate – that reflect badly on us all.
That’s why it’s up to the rest of us to set the bar high, and lead by example. How can we continue to use a supplier that has regularly been involved in corruptive practices? Should we not think twice about supplying products and solutions that risk contributing to the abuse of human rights?
The response of global business needs to be clear, and here in Davos we should signal our commitment to these core values – and act on them.
Creating a system that works
The future of responsible free trade relies on all these steps being taken. My hope and my challenge to business leaders is that we join in this mission together. Do not allow the zeitgeist of “new nationalism” or “de-globalization” to take hold. We must continue to ensure global productivity and competitiveness, supported by a clear set of principles and rules of the game.