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Commentary: We may be in the early stages of a new Cold War

2 0 280
12.07.2018

SINGAPORE: Disputes about global trade practices have reached a tipping point.

The Trump administration has just rolled out new tariffs on US$34 billion of Chinese goods, and Beijing has responded, in kind, with retaliatory tariffs. It’s looking more and more like a series of tit-for-tat retaliatory tariffs are going to disrupt global value chains.

But a looming US-China trade war is only a small component in a much larger, more important narrative: Beijing and Washington’s intensifying geopolitical rivalry.

Technological innovation and intellectual property are now at the centre of this competition. The world is witnessing the early stages of a digital arms race — some would even call it a new Cold War.

The inconvenient truth is that policymakers in both Washington and Beijing have linked technological capability directly to matters of national security, and, consequently, companies will need to start preparing to rethink how they do business around the world.

THREE EMERGING TRENDS

Three key trends are emerging from the Sino-American technology war.

First, there will be an increase in export controls, export licensing and sanctions — aimed at individuals, companies and entire industries. This will cause non-compliant, black-listed parties to be excluded from business ecosystems and strategic partnerships.

There will be extensive collateral damage throughout supply chains when companies violate any of these rules. There will also be an increase in blocked mergers, acquisitions and licensing deals in the tech sector. This will be disruptive to existing value chains.

Second, global businesses will need to localise operations. Unilateral policy measures and non-tariff barriers focused on “national security” will push enterprises to accelerate the localisation of operations.

This transformation is already underway as businesses leverage automation, robotics, 3D printing and artificial intelligence (AI) to meet consumer demands in specialised and rapidly evolving local markets. Data localisation laws regulations will also influence new operational decisions — especially in emerging markets.

President Donald Trump's announcement of China tariffs brings the world's two largest economies to the brink of all-out trade war. (File photo:........

© Channel NewsAsia