WASHINGTON—In the global race for leadership in the most advanced technology industries of the future, many countries are resorting to “innovation mercantilism” to create unfair advantages for their local firms and industries at the expense of foreign competitors. But according to the “Global Mercantilist Index” released today by the Information Technology and Innovation Foundation (ITIF), the top-ranked think tank for science and technology policy, China engages in more mercantilism than any other nation in the world.
The 2019 Index, an update to the original 2014 Index, ranks 60 nations on 18 variables ranging from market access and forced localization to currency manipulation and intellectual property protections, documenting the extent to which nations’ policies unfairly limit imports and promote exports in ways that subvert free trade. The report finds that China is the world’s most innovation-mercantilist nation, scoring as the only nation in the report’s “high” mercantilist category.
“China’s mercantilist policies are in a class of their own, causing far greater damage to other economies and the global economy than even the worst policies of other nations,” said ITIF Vice President Stephen Ezell, co-author of the report. “The Trump administration has taken steps to put long-overdue pressure on China. But in the absence of a concerted effort by an international coalition, China and other nations will continue to abuse and endanger the global trading system.”
While China ranks as the most mercantilist nation, others such as India, Indonesia, and Russia also systemically engage in innovation mercantilist practices, placing them in the report’s “moderate-high” category. In contrast, the report’s “low” category shows that New Zealand, the Netherlands, Portugal, Sweden, and Singapore engage in the lowest levels of innovation mercantilism.
To counter global mercantilist policies, the report recommends that the U.S. government pursue three types of reforms: government restructuring, diplomatic pressure, and systemic funding. Additionally, the report calls on the United States Trade Representative to construct its own biennial index to better understand other nations’ mercantilist practices and identify which are the worst offenders. Such a ranking could be used to guide enforcement and other actions to place pressure on the worst nations.
“A handful of nations have implemented practices that are far more egregious than those of most of the rest of the countries in the world,” said ITIF Research Assistant Caleb Foote, co-author of the report. “Given the rise in mercantilist practices and the damage they do to the global economy, it’s critical that free-trading nations take stronger steps to stem the mercantilist tide. The United States has a unique opportunity to set a global standard by pushing back against innovation mercantilism.”