Digitalization vs Protectionism
Global value chains (GVCs) have enabled the much faster, cheaper, and easier way of creating a product. Gone are the days, when a product was developed entirely or wholly in a single country. Businesses are now increasingly leveraging on several countries to bring a product to market.
The movement of the product from being manufactured to being assembled adds value to the end product, thus being a powerful driver for economic growth, job creation, and better living standards.
GVCs are now being further reshaped through AI and digital tools. Traditional GVCs faced several challenges such as difficulty in managing multi-tiered supply chains and issues in navigating through regulatory and compliance requirements across different jurisdictions. Moreover, GVCs are also prone to impacts from natural disasters, political instability, and trade conflicts.
AI has been a gamechanger in automating routine and repetitive tasks across the value chain, such as inventory management, production scheduling, and quality control, which can be effortlessly streamlined and optimized. By implementing AI algorithms into their operations, businesses have been able to respond to changing customer preferences and uncertain market fluctuations.
Amid growing geoeconomic turmoil, businesses are increasingly leaning on to AI’s transformative capability of predictive analytics. US software firm, Salesforce is using the Harmonized Tariff Schedule—a 4,400-page document of tariffs on goods imported to the US—to develop an AI agent to analyze all 20,000 product categories in the US customs system, to help navigate changes to the tariff systems.
“The sheer pace and complexity of global tariff changes make it nearly impossible for most businesses to keep up manually,” said Eric Loeb, executive vice president of government affairs at Salesforce. He further added that, “in the past, companies might have relied on small teams of in-house experts to keep pace.”
AI is helping businesses to pivot their supplier strategies, adjust trade lanes and manage their tariff exposure amid growing uncertainties. “There are a number of ways AI can assist companies dealing with the tariffs and resulting uncertainty. But any AI solution’s success will be predicated on the quality of the data it has access to,” said Ajay Agarwal, partner at Bain Capital Ventures.
Protectionism Hampering Growth
AI’s ability to help GVCs is being critically sidetracked through emerging protectionist policies. Data localization rules are being imposed by countries to safeguard data generated locally. But it is quite the opposite, as data is more secured in international data centers, equipped with multiple layers of digital and physical security measures than dubious server rooms in physical domestic locations. Moreover, data localization restricts businesses to benefit from core capabilities of cloud services such as redundancy, scalability, and disaster recovery.
Increasing techno-nationalism seen between the world’s top two economies has been detrimental to free speech and open access to internet which is vital, if we are to close digital divides and foster innovation. Furthermore, techno-nationalism has impacted market competition which is needed to avoid the growth of monopolistic businesses, hampering economic growth and product innovation. Techno-nationalism gives access to growth and opportunities to a handful of leading companies, while stopping the enablement of open market, growth, and innovation.
A Better Alternative
Emerging technologies hold a gamut of capabilities to answer some of the crucial, most pressing problems of our times—be it in GVCs, trade, healthcare, education, or climate change.
What is required is a better alternative to realize the myriads of benefits that technological advancements such as AI promises. A better alternative warrants a change in mindset among global leaders to disallow protectionist policies that hamper the growth of techno-optimist policies.
Focus should be put on developing and implementing a more robust, inclusive, and transparent digital framework, encompassing both the developed and developing economies to participate equally.
Policymakers should invest in leveraging public-private partnerships to develop digital infrastructure; nurture digital upskilling and foster innovative startups. Economies should now focus more on multilateralism, opening their markets to foreign innovation and knowhow. This will not only bring competition to their local markets, but also be a source for learning and development for local companies.
This is one of the topics being discussed at the upcoming Horasis Global Meeting, scheduled to take place in São Paulo, Brazil, between 7 to 10 October 2025. The meeting will draw together opinions and experiences of global leaders from various backgrounds on finding a more holistic, inclusive, and sustainable framework to our present challenges.
Not just in macroeconomic areas, digitalization has strong linkages to our 2030 Agenda. According to Sanda Ojiambo, executive director and CEO of the UN Global Compact: “If we don’t focus on the appropriate development and deployment of digital technologies to help bridge divides and scale innovations, we will fall far short of achieving the 2030 Agenda.”
Photo Caption: Emerging technologies hold a gamut of capabilities to answer some of the crucial, most pressing problems of our times.