Think Piece

Services, International Rulemaking, and the Digitisation of Global Commerce

April 2015
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Digital technology is significantly impacting the growth of modern services trade, and global trade more generally. Cross-border business and communications services have increased tremendously over the past few years as the Internet has lowered the cost of communicating and providing business services across borders. Nearly every type of cross-border flow now has a services-based “digital wrapper” that accompanies the flow and provides essential product information. This is the servicification of trade. Technology, in particular the Internet, is a driver of fundamental changes in traditional trade flows; these changes are bringing about tremendous economic benefits. Developing countries stand to gain the most from the digital economy. World Bank data demonstrates that a 10 percent increase in broadband penetration yielded an additional 1.21 percent in GDP growth in developed economies, while the same increase in emerging economies yielded an additional 1.38 percent in GDP growth. The economic growth driven by the digitisation of global commerce, while significant is not the only positive benefit of the digital revolution. The lowering of trade frictions due to digital services is creating a new form of global commerce that is revolutionary in its inclusiveness; leading to tremendous social benefits. The Internet is democratising access to the benefits of global trade and creating a parallel model for businesses to access the global market.

The General Agreement on Trade in Services framework is capable of handling many of these new developments. The principles of most-favoured nation and national treatment help to protect against trade barriers that might distort new digital marketplaces. But, the GATS could also use revisions in terms of the commitments that countries have made, as well as enhancing liberalisation mechanisms for newer types of services. The digitisation of the economy means that services negotiators should consider issues that go beyond the traditional concerns of market access for cross-border services.

Global platform services that have been created on top of the Internet provide marketing, enable trust, and facilitate transactions for even the smallest enterprises. In addition, the continued expansion of global logistics providers with a focus on the movement of packages around the world enables products to be delivered from anywhere in the world directly to an international consumer. The paper refers to the combination of the Internet, platform services, and logistics providers as the Global Empowerment Network. The Global Empowerment Network enables businesses of all sizes, including micro-businesses, to engage directly with customers around the world. It is not a replacement for traditional trade, but a parallel model by which smaller businesses can enjoy the benefits of the global market. Technology-enabled small businesses export at a higher rate, to more countries, and in a more inclusive marketplace than their offline counterparts regardless of where in the world they are physically located.

The paper offers three recommendations that combine technology and policy in an effort to best facilitate positive resolutions. They are improving encryption and reforming government bulk data collection practices; adopting dynamic performance privacy regulation and interoperable privacy regimes; and creating application programming interfaces and digitising customs submission. Trade policymakers can help to achieve important regulatory goals and create an effective global economic environment by adopting these suggestions.

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