INNOVATION
Trade Wars And Impact
On Global Innovation
By Senorine Wasike
T
he global economy is deeply
integrated today more than ever
before thanks to the emerging
and rapidly growing technologies. At the
center of this growth is the internet and
mobile phones which have brought people
together. The global communication
network has made the world a small place.
One of the key benefits of globalization is
access to foreign markets through foreign
trade. To ensure fair trade, world leaders
advocate for free trade agreements which
allow for increased cross boarder trading
by all participating countries. This has
not always been the case. In the past,
trade tariffs have been used as a way of
protecting countries’ local economies,
however, the outcome has not always been
positive.
Trade Tariffs and Impact on
International Trade
Trade tariffs are taxes imposed on
imported goods and are used to restrict
the import of goods and services.
The objective is usually to protect the
domestic industry and to create jobs for
the citizens. The short term impact may
be profit for the local industries and
revenue for the government imposing the
tariff. On the long term consumers end up
paying more for the goods or services and
businesses may have declined profits as a
result of less competition. The country or
countries experiencing the effect of this
trade restriction may retaliate as a way of
trade protectionism. If this escalates, the
result is a trade war, one similar to the
current US-China trade war.
Lessons from the Past
One of the worst trade wars was as a result
of The Smoot-Hawley tariff of 1930. The
act was introduced with the key objective
of protecting American farmers from
the worst drought that America had ever
experienced. America increased import
tariffs which resulted to increase in food
prices for the American consumers.
Trade wars bring with them global tit-for-
tat protectionism. In the quest to flex eco-
nomic muscles, countries engaged in trade
wars lock out potential ideas from outside
markets crippling cross boarder innovation
initiatives. Free flow of information and in-
ternational knowledge spill over is a trigger
for innovation which may not be possible
when trade wars exist.
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MAL30/19 ISSUE
Retaliation from other countries had a
negative impact on international trade
which reduced by 65%. The end result
was a worsened economy (the great
depression) and many argue that this
trade war was a trigger of World War
II. Historically, trade wars have failed at
some point during implementation.
The Global Innovation
Index
Patents, Technology Transfer, and
Research & Development are some of the
measures used to check innovativeness of
countries. The Global Innovation Index
(GII) ranks the innovation performance
of nearly 130 economies across the
globe. Its advisory board is made up of
a cross section of leaders from public
sector, international organizations, non-
governmental organizations, businesses,
and academia. The key objective of
the GII is to assist countries assess
their innovation performance based on
international innovation metrics such as
patent filed and to empower countries
with regards to improving innovation
policies.
Global Patent Activity
According
to
Bloomberg’s
2019
Innovation Index, China was a big
mover on the rankings thanks to China’s
increased patent activities. Over the
past decade, China has filed 650% more
patents compared to the US’s 22% filed
over the same period. And although
China ranked seventeenth on the 2018
global Innovation List, China’s growth