2019 Intensive Trade Seminar Digital Trade – Opportunities and Challenges for Trade Policy Makers Joshua P. Meltzer Senior Fellow, Brookings Institution Washington D.C.
2 Global Digital Trends • 3.7 billion people have access to the internet – but over 50% of the world does not have internet access • Internet access is mobile • Entire economies are becoming digital • Transformation in international trade
3 Digital Economy and Trade Opportunities • Global data flows raised GDP by 3.5%, or ~$2.8 trillion in 2014 and up to $11 trillion by 2025 (McKinsey 2016) • A 10 percent increase in internet penetration in the exporting country leads to a 1.9% increase in export (World Bank) • Ecommerce sales was over $25 trillion in 2015 (UNCTAD 2017) ➢ 90% B2B, 10% B2C ➢ Cross-border B2C was $189bn in 2015
4 Digital Transformation of International Trade • Platforms • Digital Services • Increased services value-add in manufacturing • Global Value Chains
5 Trade over Digital Platforms 100 100 100 100 100 99 97 96 90 95 88 80 70 60 50 40 30 20 10 2 2 22 16 10 3 20 48 4 0 Australia Canada China Germany India Indonesia South Thailand United Korea States Offline Businesses Businesses on eBay
6 Digitally-deliverable services
7 Data Localization Requirements • Growing in number and in complexity… Public All data 80 2 1 Health • Mainly but also 3 Telecommunications 70 3 60 Nubmer of measures Financial 6 50 Prohibition 40 Conditions - Combination 30 Conditional - One of 20 10 0 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 Personal 60 7 Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | tad.contact@oecd.org
8 Reasons for data localization • Privacy • Law Enforcement • Cybersecurity • Censorship • Protectionism
9 What is needed: Governing Digital Trade 1. A commitment to allow international data flows and no data localization. 2. Appropriate Exceptions for legitimate policy 3. Some convergence globally on appropriate regulatory standards » Privacy, cybersecurity, consumer protection 4. Interoperability mechanisms » e.g. Privacy Shield, APEC CBPR
10 1. Commitment to Global Data Flows CPTPP and USMCA • Financial services included in USMCA WTO • GATS » Technologically neutral as to delivery » But need a scheduled commitment • Annex on Telecommunications • Understanding on Commitments in Financial Services
11 2. Appropriate Exceptions CPTPP & USMCA • Data flow commitment subject to GATS Article XIV style exception • CPTPP exception for financial services information WTO • GATS Article XIV Necessity test – less trade restrictive alternative? » • Prudential exception for financial services
12 3. Convergence on global standards Privacy • OECD 2013 • APEC Privacy Framework Cybersecurity • ISO/IEC 27000 cyber and information security standards USMCA » Must have privacy protection, and take into account “the principles and guidelines of » relevant international bodies, including the APEC Privacy Framework and the OECD Privacy Guidelines
13 4. Interoperability Mechanisms • Unilateral action e.g. GDPR ‘adequacy” EU sets standards and » determines equivalence • Data source country determines privacy standards but conformity assessment in data destination countries » MRA e.g. Privacy Shield • Global privacy standards but conformity assessment in data source country » APEC CBPR
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