Letter IEDI n. 903–Digital Technologies and International Trade: Opportunities and Challenges
In its World Trade Report 2018, the World Trade Organization (WTO) examines the impacts of digital technologies on global commerce both in terms of business opportunities for large and small companies, and current and future challenges for governments and the multilateral trading system.
This Letter IEDI summarizes key aspects of the chapter devoted to analyzing how governments and the international community are facing the digital technology-driven trade transformations in areas such as investment in digital infrastructure and human capital, trade policy, competition and regulation.
According to the WTO, digital technologies not only create new markets, new forms of trade and new products, but also reduce costs and change trade patterns. Governments can play an active role in ensuring that companies can take advantage of the opportunities and the commercial gains brought about by these changes. The WTO argues that:
• First, governments can invest or encourage investments in digital infrastructure and digital skills, and contribute to the development of digital infrastructure services.
• Secondly, they can also adopt measures that encourage the use of digital technologies to facilitate trade operations and customs cooperation. Additionally, they can introduce trade policy measures that reduce the cost of trade in goods and services.
The report also highlights that another important area of government action is to defend competition. While digital technologies create new opportunities for small businesses to participate in world trade by broadening the offering of goods, digital innovation results in a new "the-winner-takes-all" type of dynamic. This is due to the emergence of digital technology giants like Amazon, Alibaba and Google. Therefore, many governments and regulatory authorities are adopting competition policy measures to address the perceived excesses of market power and/or to ensure a level playing field for smaller companies.
In addition, as digital technologies raise concerns about loss of privacy, consumer protection and threats to security, the WTO believes that governments should develop a national regulatory framework to achieve legitimate public policy objectives such as consumer protection, cyber security and data privacy. However, in a context of strategic trade rivalry, they must be careful not to distort trade more than necessary.
Thus, in order to fully reap the potential benefits of digital commerce, most governments are adopting digital development strategies that translate into cross-cutting policy measures aimed at improving infrastructure, establishing an adequate regulatory framework, reducing the cost of doing business and facilitating the development of relevant skills.
The WTO notes, however, that government policy priorities depend on the level of development and the extent of digitalization in the economy. In general, developing economies seek to facilitate connectivity and adopt digital technologies, while developed economies emphasize regulatory issues related to competition, data protection and consumer protection.
Developing digital skills and promoting the involvement of micro, small and medium enterprises in electronic or digital trade seem to be common concerns for both developing and developed economies.
According to the WTO, the evolution of digitization and the shift from trade in intermediary products to cross-border data flows, including content with intellectual property rights, can bring challenges to the multilateral trading system. The report highlights the consequences of additive manufacturing technology and the increasing "servitization" of the manufacturing industry.
With technological advance, e-commerce has become an increasingly debated aspect of international trade relations. Issues related to digital technologies are explicitly addressed in 276 of the 286 Regional Trade Agreements notified to the WTO and in force in August 2018.
While the existing trade regulation does not normally refer to specific innovations or technologies, the cross-border nature of digital businesses reinforces the need for international cooperation and progress towards common standards. Issues related to privacy protection and cyber-security, for example, should gain prominence in discussions on the future governance of digital commerce.