Start of menu
Search US website
Close Menu
G20 leaders addressed the impact of digital technology on international trade.

Considering Their Own Digital Currencies for Global PaymentsARTICLE

By Karen Lynch

Digital trade rose higher on the global policy agenda in July 2017, as G20 leaders for the first time directly addressed the impact of digital technology on international trade.1 “We will sustain and improve … predictable and transparent frameworks on digital trade,” said the closing declaration of the G20 heads of state.2

The commitment followed a meeting of the G20 ministers responsible for digital policy in their own jurisdictions. Earlier this year the ministers issued a detailed roadmap for tackling a wide range of digital economy matters, including workforce digitization, digital infrastructure development, and digital divides. As a first step in international trade, “G20 Members commit to work towards a common understanding and improved measurement of digital trade in order to foster informed and evidence-based policymaking in this area,” the ministers declared.3

By prioritizing digital trade, the G20 leaders are expected to spur momentum in such forums as the World Trade Organization (WTO) and the Organization for Economic Co-operation and Development (OECD), which would carry out much of the research and work on global policy guidelines. Specific milestones for progress have been identified by the G20, including the WTO’s Ministerial Conference in December 2017 and a digital trade report at next year’s G20 Summit.4

The stakes are high and growing higher. “The bit volume of cross-border digital flows has grown by 45 times in the past decade. The value of data flows has overtaken the value of global trade in physical goods,” according to Jacques Bughin, director of the McKinsey Global Institute.5

The global business community has been pressing for action on digital trade. “Hitherto, the global trading system barely contains rules governing digital trade. This fosters digital protectionism and legal uncertainty,” according to the B20, an international lobbying group. The B20 is calling for national e-commerce-related policies to be nondiscriminatory and interoperable and for the WTO to have a mandate to negotiate a global digital trade agreement based on principals including free cross-border data flows, trade facilitation and regulatory coherence.6 Critics argue that such a global trade agreement would benefit major multinational companies, particularly in the technology sector, more than any other group.7

What is Digital Trade?

Digital trade is broadly defined by the U.S. International Trade Commission as “trade in which the internet and internet-based technologies play a particularly significant role in ordering, producing or delivering products and services.”8 As such, it involves not only the cross-border flows of digital products and services, such as movies or communications, but also the means to enhance productivity, according to the U.S. Congressional Research Service (CRS). “Examples of digital trade include orders placed on an e-commerce website; information streams needed by manufacturers to manage global value chains; communication channels such as email and voice-over-internet protocol (VoIP); and financial data and transactions relied on for online purchases or electronic banking,” the CRS says.9

Various cross-border issues have been arising in the absence of international policy guidelines, the CRS says. “As with traditional trade barriers, digital trade constraints can be classified as tariff or nontariff barriers. In addition to high tariffs, barriers to digital trade may include localization requirements, cross-border data flow limitations, intellectual property rights (IPR) infringement, unique standards or burdensome testing, filtering or blocking, and cybercrime exposure or state-directed theft of trade secrets.”10

As of July 2017, it was not clear how digital trade might be addressed by the WTO at its December meeting. “Digital trade and e-commerce have been floated on various occasions as possible issues for discussion in the run-up to the Eleventh Ministerial Conference,” according to the E15 Initiative, a coalition of institutions led by the World Economic Forum and the International Centre for Trade and Sustainable Development. “The topic is, however, potentially very broad and so far, proponents have only started indicating specific areas where new disciplines could be devised in the WTO.”11

In the meantime, bilateral agreements such as a proposed Australia-U.K. accord are expected to include digital trade provisions.12 Regional trade agreements are also addressing some digital trade issues and could provide models, according to the E15 Initiative.13 For example, the Trans-Pacific Partnership (TPP), a proposed free trade agreement currently being considered by 11 nations (after the U.S. withdrew),14 includes extensive digital trade provisions.15 And while there is no comprehensive WTO agreement on digital trade, some aspects are covered in its General Agreement on Trade in Services, its Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and other accords.16

Next Steps

A G20 Trade and Investment Working Group on Measuring Digital Trade has been formed, and international organizations such as the WTO and OECD have been asked for proposals to expand the work. It will be a complex task, by all accounts. “G20 members acknowledge challenges in measuring digital trade, including such technical and complex issues as the definition and scope of digital trade, the collection of basic and new sources of reliable data, appropriate accounting frameworks, and the classification of certain transactions as trade in goods or trade in services or both,” the G20 digital ministers said.17 Specific proposals are requested, to:

  • Define digital trade in a way that is sufficiently broad and flexible;
  • Identify gaps and other issues with current approaches to measuring digital trade; and
  • Suggest ways to address these challenges and propose areas that could yield early progress.18

The Takeaway

Momentum is building to address digital trade in international policy forums, following recent G20 support. It will be a complex task, by all accounts.

Karen Lynch - The Author

The Author

Karen Lynch

Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners.

Sources

1. “Priorities of the 2017 G20 Summit,” G20; https://www.g20.org/Content/DE/_Anlagen/G7_G20/2016-g20-praesidentschaftspapier-en.pdf?__blob=publicationFile&v=1
2. “G20 Leaders’ Declaration,” G20; https://www.g20.org/Content/EN/_Anlagen/G20/G20-leaders-declaration.pdf?__blob=publicationFile&v=2
3. “G20 Digital Economy Ministerial Conference,” G20; http://www.bmwi.de/Redaktion/DE/Downloads/G/g20-digital-economy-ministerial-declaration-english-version.pdf?__blob=publicationFile&v=12
4. “G20 Digital Economy Ministerial Conference,” G20; http://www.bmwi.de/Redaktion/DE/Downloads/G/g20-digital-economy-ministerial-declaration-english-version.pdf?__blob=publicationFile&v=12
5. “Business Brief: The Ascendancy of Digital Trade: A New World Order?” McKinsey Global Institute; http://www.oecd.org/trade/ascendancy-digital-trade-new-world-order.htm
6. “Trade and Investment Recommendations,” B20; https://www.b20germany.org/priorities/trade-investment/ti-recommendations/
7. “State of Play in the WTO Toward the 11th Ministerial in Argentina,” HuffPost; http://www.huffingtonpost.com/entry/state-of-play-in-the-wto-toward-the-11th-ministerial_us_5951365ae4b0f078efd98399
8. Digital Trade in the U.S. and Global Economies, Part 2, U.S. International Trade Commission; https://www.usitc.gov/publications/332/pub4485.pdf
9. Digital Trade and U.S. Trade Policy, U.S. Congressional Research Service; https://fas.org/sgp/crs/misc/R44565.pdf
10. Ibid.
11. “Digital Trade-related Provisions in Regional Trade Agreements,” E15 Initiative; http://e15initiative.org/events/digital-trade-related-provisions-in-regional-trade-agreements/
12. “The UK and Australia: What Happens Next?” Sydney Morning Herald; http://www.smh.com.au/federal-politics/political-news/the-uk-and-australia-what-happens-next-20170710-gx8iz5.html
13. “Digital Trade-related Provisions in Regional Trade Agreements,” E15 Initiative; http://e15initiative.org/events/digital-trade-related-provisions-in-regional-trade-agreements/
14. “TPP Chief Negotiators Meet to Hash Out Deal With or Without U.S.,” Japan Times; http://www.japantimes.co.jp/news/2017/07/12/business/tpp-chief-negotiators-meet-hash-deal-without-u-s/#.WWZgx4jyuiM
15. “The Trans-Pacific Partnership,” U.S. Trade Representative; https://ustr.gov/sites/default/files/TPP-Promoting-Digital-Trade-Fact-Sheet.pdf
16. Digital Trade and U.S. Trade Policy, U.S. Congressional Research Service; https://fas.org/sgp/crs/misc/R44565.pdf
17. “G20 Digital Economy Ministerial Conference,” G20; http://www.bmwi.de/Redaktion/DE/Downloads/G/g20-digital-economy-ministerial-declaration-english-version.pdf?__blob=publicationFile&v=12
18. “G20 Digital Economy Ministerial Conference,” G20; http://www.bmwi.de/Redaktion/DE/Downloads/G/g20-digital-economy-ministerial-declaration-english-version.pdf?__blob=publicationFile&v=12

Make International Payments

Back to top