FX International Payments
By Karen Lynch
Among its key findings of interest to international business executives is that, "as the digital transformation has progressively deepened, countries have also begun to include issues specifically related to trade in a digital world in bilateral and regional trade agreements."1
Half of the OECD's 35 member countries have included digital trade issues in international trade pacts, such as measures that prohibit the imposition of digital customs duties, protect the movement of cross-border data flows, prevent localization requirements for computing facilities, ensure data privacy and security, restrict certain types of internet content, and more.
The OECD projected that current and future international trade negotiations, including discussions within the World Trade Organization (WTO), would result in more digital trade provisions over time. Underlying issues that require attention are as basic as the difference between international trade in goods and in services. "Increasingly data flows allow a good to be offered as a complement to a service package," the report pointed out, such as a computing device packaged with "software as a service."
More generally, the report described the intangible nature of bits and their ability to be stored in any location. "[This] creates opportunities for policy arbitrage across jurisdictions and challenges policies that rely on the geographic location of the digital activity where value creation occurs." Examples include current international trade deliberations over rules of origin.
The bilateral and regional digital trade provisions cited in the report represent an addition to the wide range of existing WTO agreements that are considered relevant to trade in a digital world, such as the Agreement on Trade-Related Aspects of Intellectual Property Rights, the Agreement on Technical Barriers to Trade, the Information Technology Agreement, and the Trade Facilitation Agreement. Even in these areas, though, WTO members are discussing whether there is a need to update or clarify existing rules and commitments, the report said.
Separately, observers expect moves to address digital trade and e-commerce at the WTO Ministerial Conference in December 2017 in Buenos Aires. Calls for new WTO rules or at least clarification of existing rules have been raised in areas including cross-border data flows, data localization requirements, and tariffs on low-value imports typically associated with e-commerce.2 WTO Director-General Roberto Azevêdo addressed e-commerce and other possible topics in October, saying, "whether or not these issues will feature in Buenos Aires will be up to the proponents." 3
The OECD report noted that some countries have also forged international agreements that facilitate cross-border cooperation on e-commerce issues, such as consumer protection and data privacy. Generally, "consumers' concerns about privacy add to their concerns about online fraud, redress mechanisms, and online product quality, which could limit trust and slow business-to-consumer e-commerce growth," the report said.
At an international level, for example, one challenge is that goods banned in Country A due to safety concerns may be accessible to unwitting online buyers in Country B. National consumer protection agencies have been working together though the 60-nation International Consumer Protection and Enforcement Network, on activities that have included an internationally coordinated "sweep" of online pricing practices in travel and tourism. The report called for a strengthening of cross-border cooperation in such efforts as market surveillance and enforcement actions in the area of product safety.
The abundance of digital transformation statistics in the report include the fact that 95 percent of OECD country businesses had high-speed internet in 2016, up from 86 percent in 2010. Still, small and medium-sized companies lag their larger peers in terms of access to advanced digital tools, such as data analytics and cloud computing. The report called on countries to step up efforts to close that gap.
The markets that businesses address are also increasingly digital. In 2016, some 73 percent of adults in the OECD accessed the internet daily, up from 30 percent in 2005.
In the global supply chain, around 750,000 industrial robots were in operation in OECD countries in 2014, with over two-thirds located in just four countries: Japan, the United States, Korea, and Germany (in descending order).
And, in the international digital services market, Ireland is the leading exporter – with over 14 percent of global services, due to its high concentration of the overseas branches of multinational corporations. India follows, with 11 percent, and the Netherlands and the United States are tied for third place, with 8 percent each. Rounding out the Top 10 are Germany (7 percent), the United Kingdom (5 percent), China (5 percent), France (3 percent), Sweden (3 percent), and Switzerland (3 percent). These 10 countries account for two-thirds of total exports of global digital services, which the report defines as telecommunications, computer, and information services.
As digital transformation takes hold in businesses and markets around the world, international trade negotiators are also including more digital trade provisions in the agreements they strike. The fuller picture painted by the OECD's Digital Economy Outlook 2017 report shows businesses worldwide taking up digital tools at a growing, albeit uneven rate.
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.
1. Digital Economy Outlook 2017, Organization for Economic Co-operation and Development; http://www.oecd.org/internet/ieconomy/oecd-digital-economy-outlook-2017-9789264276284-en.htm
2. “E-commerce and Digital Trade for Development: Negotiations to Soft Launch at MC11,” International Centre for Trade and Sustainable Development; https://www.ictsd.org/opinion/e-commerce-and-digital-trade-for-development-negotiations-to-soft-launch-at-mc11
3. “Azevêdo updates ACP group on preparations for Ministerial Conference,” World Trade Organization; https://www.wto.org/english/news_e/spra_e/spra194_e.htm