Russian technology companies have been formally warned by Pres Putin that the use of overseas software in their systems could prevent them from bidding on state contracts. This would seem to indicate that overseas software companies will be at risk of reduced sales in Russia but will this really make a difference?
Protectionism v Protectionism
While the US authorities continue to criticise Russian policies, and the recent annexing of parts of the Ukraine, what about the recent decision regarding the use of overseas software. In many ways the US is introducing various layers of protectionism and their Russian counterparts are doing likewise. Each party continues to claim the other is using software to spy and gather information without actually putting forward any cold hard evidence. In many ways Donald Trump has prompted this response from the Kremlin although we will see if Pres Putin actually follows through with the threat.
Russia in isolation
While the Russian authorities still have significant sway over many of their neighbours, the country has been isolated in recent times due to aggression in the Ukraine and allegations of spying. The reality is that an effective ban on overseas software for companies bidding for government contracts will not have a major impact upon worldwide software companies. Those in Russia who do not bid on government contracts will still likely use imported software services and, if you think about it, how would the Russian authorities be able to detect the use of imported software?
Spying is rife
The main reason why governments around the world often fail to put forward any real evidence of spying is because the likelihood is they are using the same techniques. The introduction of the Internet, email and more complex software packages has in reality opened the doors of homes and businesses around the world to potential hackers. We know there are excessive hacking attempts emanating from China and Russia is not too far behind. While the Western press tends to overlook this, the US government has its own individual spying projects which have been ongoing for many years now.
More trade restrictions on the way?
While Donald Trump has introduced some policies which encourage protectionism he has yet to push ahead with his threat of high tariffs on steel imports. He was quite happy to grab the headlines when “thinking about the policy” but so far nothing concrete has emerged from the White House. Is Donald Trump thinking again about poking a stick at the Russian government? Does he have more pressing issues on his hands?
The problem for Donald Trump is that many people voted for him because he promised to do right by the US workforce. There was already a growing backlash at the snail’s pace at which new policies have been introduced and the quiet dropping of previous headline policies. We have no doubt that Donald Trump will continue to grab the headlines but it seems more obvious today than ever before that much of this is just hot air with little action behind it.
Protectionism breeds protectionism
While the relationship between the US and Russia has always been “pragmatic” there are serious concerns that renewed attempts at protectionism will prompt similar actions across the globe. No government in the world could afford to sit back and be priced out of a particular market while encouraging imports. Whether this is the US and Russia, the US and Europe or any other countries around the world, history does show that protectionism does indeed breed protectionism which is counter-productive for free markets and international companies.