The top threat to global business: protectionism
Barely a day goes by without consultants and politicians urging businesses to embrace innovation or be left behind in the AI apocalypse.
But while it is never a good idea to take your eye of the technology ball, there is a greater threat to the world of business: the rising tide of protectionism. KPMGs 2018 CEO survey is out this week, with 1,300 business leaders from the UK and abroad polled on the biggest threats facing their companies.
And what keeps the majority of them awake at night is a disturbing return to “territorialism” and “economic nationalism”. This isnt just about Brexit, although as the negotiations grow increasingly fraught, the government must continue to resist any isolationist calls for Britain to turn inwards.
Read more: Protectionism isnt just bad economics – its also immoral
When Donald Trump threw down the trade war gauntlet in March with his threat of steel tariffs, China and the EU were quick to retaliate. While cooler heads work to lower the temperature, economists have estimated full tit-for-tat tariffs could cost the global economy £400bn in the first year alone.
At the same time, one of Italys new governing parties, the populist Northern League, was whipping up protectionist sentiment and promising in its manifesto to curb Chinese imports. It came second in the elections, and is now set to be the minority partner in the new Italian administration. But it isnt only about cheap steel and Chinese manufacturing.
We have also observed the spread of nationalistic attitudes to immigration, in Britain and elsewhere, which see skilled workers tangled in red tape under the guise of “control”, preventing businesses from getting the talent they need and dampening growth for the whole economy.
Read more: Stop sacrificing free trade by banging the protectionist drum
Earlier this month, the European Central Bank reiterated its caution that escalating protectionism would threaten global growth.
That warning may or may not have been heeded by the US President and his advisers – the America-China trade war appears to be on hold for the moment as the leaders attempt to come to a deal.
Nonetheless, it is certainly on the radar of chief executives – more so than emerging technology or climate change, according to the survey. In recent years, the backlash against globalisation has grown stronger, with valid concerns about those left behind overtaken by calls to close off nations entirely to the benefits of free trade.
The results of the KPMG survey should serve as a warning to politicians looking for easy answers: solutions that may look attractive have the potential to hamper growth, frighten investors, and wreak economic havoc.
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