Britain has entered the World Trade Organisation system as an independent player. One of the next big things on the WTO’s agenda is to decide on the rules that will govern digital trade. In the first of a series of posts, Steve Woolcock (LSE) discusses the state of the plurilateral negotiations taking place between 86 WTO Members including the US, the EU, and China on the future of the international trading system

Woolcock, Stephen

English

LSE Research Online

Steve Woolcock April 21st, 2021A big challenge for ‘Global Britain’ is digital trade0 comments | 9 sharesEstimated reading time: 10 minutesBritain has entered the World Trade Organisation system as an independent player.One of the next big things on the WTO’s agenda is to decide on the rules that willgovern digital trade. In the  rst of a series of posts, Steve Woolcock (LSE)discusses the state of the plurilateral negotiations taking place between 86 WTOMembers including the US, the EU, and China on the future of the internationaltrading system.The growth of digital trade can be seen as the latest phase of globalisation. In theperiod after the establishment of the General Agreement on Tariffs and Trade(GATT) in 1948 it was trade in goods that raised questions about the balancebetween open markets and regulatory sovereignty. In the period after 1979, it wasforeign direct investment.  In the 2020s it will be digital trade. Digital trade isgrowing from an estimated US$ 150 bn in 1999 to US$ 26 tn in 2019 and growing at8% a year.  In 2019 digital trade was put at an estimated 6 per cent and rising ofglobal exports. The COVID pandemic has accelerated the trend with on-line salesincreasing further from the 17 per cent of global retail they were in 2020. Thisgrowth in digital trade raises questions about the su ciency and suitability ofexisting trade rules, such as the General Agreement on Trade in Services (GATS)that was negotiated in the 1990s, before the advent of the internet. But the currenteffort to de ne ambitious but inclusive rules for digital trade comes at a time whenthe international trading system in the shape of the World Trade Organisation(WTO) is going through its most troubled period since 1948. Strategic competition– essentially concerning China – and the political and security implications of theuse of data are also a signi cant complicating factor.Boris Johnson Digital Cabinet Meeting. Picture by Pippa Fowles / No 10 DowningStreet.This growth in digital trade also has implications for political economy on thebalance of costs and bene ts of engaging in international trade. Physical goodsthat used to cross borders and be subject to tariffs are increasingly digitalised,which bene ts human capital-rich economies but reduces tariff revenue fordeveloping countries. The provision of services that once required a physicalpresence in a market, such as banking or business services, are increasinglydigitally enabled. As a result, the broad balance of bene ts between countriesincorporated in the schedules of commitments to open trade in services in theGATS is in danger of being undermined. Digitalisation and the growth of digitalplatforms such as Google, Facebook and Amazon also have distributive effectswithin national economies as they gain at the expense of established, conventionalsuppliers.  For example, Amazon’s growth at the expenses of high street retailers.Whilst there have been discussions on e-commerce in the WTO since 1998, thecurrent e-commerce negotiations started with a ‘Joint Statement Initiative’ (JSI) in2017 supported by a group of 71 WTO members that has subsequently expandedto 86. The agenda includes the very practical means of facilitating digital trade suchas recognising e-signatures as equivalent to ‘signed documents’ or efforts tostreamline border controls by introducing digital trade documentation. It alsocovers consumer protection online, anti-fraud and anti-spam provisions and themuch more sensitive question of personal data protection. As in any ‘trade’agreement market access is on the table in the form of free cross border data ows, fair access to networks including those operated by the digital platforms.However, when dealing with access to digital markets, the state is concerned aboutthe political and security implications of wide access to the endless  ow of dataand information. The challenge, therefore, is to balance domestic concerns withdata privacy, cybersecurity and market access.  Some parties to the negotiationsalso wish to protect certain commercially strategic activities from internationalcompetition. The table lists the main topics raised by the series of position paperssubmitted to the WTO.With the stagnation of multilateral negotiations on trade in the so-called DohaDevelopment Agenda (DDA), the question is whether progress can be made indigital trade with fewer than the total 164 WTO members involved, albeit whenthese account for 90 per cent of world trade? This format of ‘likeminded’ countriesnegotiating is termed a plurilateral negotiation. It is favoured by those WTOmembers that wish to press ahead with the negotiation of ‘high standard’ rules fordigital trade.  The di culty of course is that there are different views on what thesestandards should be. In very broad terms these different approaches can becharacterised as follows:  the USA approach could be said to be industry-ledliberalisation with US origin companies having a  rst-mover advantage in much ofthe digital sector. The EU is pursuing a more state-and-market led approach in thatit sees the creation of a Digital Single Market in the EU as the best means ofachieving the right balance between liberalisation and regulation. China, the third ofthe so-called ‘three digital realms’ is pursuing a much more state-led approach.Many developing countries remain uncertain of the costs and bene ts of digitaltrade rules and are concerned about  nding themselves on the other side of apermanent digital divide in the world economy.Although the USA, EU and China, as well as a number of other OECD and developingcountries, are involved in the JSI negotiations, India and South Africa have comeout against such a plurilateral approach on the grounds that it underminesmultilateralism. These two countries, along with other developing economies areconcerned that the rules for such a vital and growing area of the economy shouldnot be shaped by the more developed economies as they would argue was the casefor goods and services. The challenge, therefore, is to  nd a balance between thedesire for a rigorous set of ‘high standard’ rules that will provide the predictabilityneeded for digital trade to grow on the one hand and the need to be inclusive ofeconomies at different levels of development on the other?If a way forward cannot be found at a multilateral level the expectation must be thatpreferential agreements will be seen as the best alternative, as has been the case inother areas of trade and investment over the past 20 years. In this respect the three‘realms’ approximated by the divergent approaches to the topic centred around theUS, EU and China will be important. The US has already established a relatively highstandard agreement in the renegotiated North American Trade Agreement (NAFTA)now entitled US-Mexico-Canada (USMCA). The US has also had a major role inshaping the Comprehensive and Progressive Transpaci c Partnership (CPTPP).The Trump Administration withdrew from this, but the e-commerce chapter remainsthat negotiated with the US included. The EU preferential trade agreements have yetto include extensive, comprehensive provisions on digital trade, due to the desire tode ne common EU standards  rst. China’s much more limited approach tocommitments on digital trade are arguably compatible with the e-commercechapter in the Regional Comprehensive Partnership Agreement (RCEP). This wasrecently adopted, but only after India opted out, in part due to the provisions on e-commerce.The JSI along with other plurilateral agreements are on the trade agenda leading upto the next WTO Ministerial Conference scheduled for later this year. Progress on allthe issues above is very unlikely,  but keeping the show on the road will beimportant for the future of the international trading system.This blog post introduces a series on digital trade that emanates from an extendedand detailed simulation of the current WTO negotiations on e-commerce by LSEMasters students in the International Relations Department. This is the  rst of aseries of posts informed by these discussions.This post represents the views of the author(s) and not those of the Brexit blog, norof the LSE. [1] Digital trade here means trade in physical goods via the internet, as well as tradein digitally-enabled goods and services (i.e. goods and services in a digital form).Share this:• •About the authorPosted In: #LSEThinks | Featured | Foreign policyLeave a ReplySteve Woolcock is Associate Professor of International Relations at theLondon School of Economics and Political Science.Steve Woolcock

A big challenge for ‘Global Britain’ is digital trade

http://eprints.lse.ac.uk/110554/1/brexit_2021_04_21_a_big_challenge_for_global_britain.pdf

A big challenge for ‘Global Britain’ is digital trade

Abstract

Similar works

Full text

Available Versions

LSE Research Online