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Global Trade Rules Need to Catch Up with the Digital Economy

Posted January 22, 2016

The last decade has witnessed remarkable developments in the digital economy, creating new opportunities for cross-border trade and investment and the ongoing emergence of novel and disruptive businesses models. At the same time, the Internet is transforming how goods and services are produced, delivered, and consumed both domestically and internationally.

The transformation in the character of cross-border trade in goods and services, which are increasingly embedded, is also resulting from global value chains, made possible by the flow of immense amounts of data across borders. This has given rise to a growing overlap between the trade regime and other areas of domestic regulatory intervention—notably with respect to privacy and security.

A policy paper released today at the World Economic Forum in Davos, Switzerland examines the challenges and opportunities that growth of the digital economy creates for trade and development. It seeks to identify supportive trade policy measures to enhance the benefits of digitization globally as well as avenues to establish regulatory practices that permit cross-border data flows and improved regulatory cooperation among countries.

Following a discussion of the impact of the Internet on the nature of international trade and an overview of important regulatory and other barriers, the paper outlines recommendations on how policy-makers and interested stakeholders can address existing constraints and help create an enabling environment to realize the opportunities of the Internet and cross-border data flows for growing digital trade.

The policy options to address what has been dubbed “the newest battleground in international trade” are grouped under four categories: maximizing and updating WTO rules; negotiating a digital trade agreement; expanding and deepening regulatory cooperation on key related policy issues; and enhancing collaborative efforts between governments, the private sector, and civil society.

The unifying idea behind the paper’s broad range of recommendations is “that designing and maintaining a rules-based international trading system supportive of the digital economy is crucial,” Ricardo Meléndez-Ortiz, chief executive of the International Centre for Trade and Sustainable Development, and Richard Samans, managing director of the World Economic Forum, said in an introduction to the report from the E15 Initiative, a joint project of the two groups.

The objective of the proposals made by the authors is to gradually develop a comprehensive set of international trade rules and norms to ensure that the opportunities of the Internet for inclusive growth and development are exploited.

Click here to download the complete report.