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Maximizing the Opportunities of the Internet for International Trade Maximizing the Opportunities of the Internet for International Trade Policy Options Paper TheE15Initiative STRENGTHENING THE GLOBAL TRADE AND INVESTMENT SYSTEM FOR SUSTAINABLE DEVELOPMENT Acknowledgements With the support of And ICTSD’s Core and Thematic Donors: MINISTRY FOR FOREIGN AFFAIRS OF FINLAND Published by International Centre for Trade and Sustainable Development (ICTSD) 7 Chemin de Balexert, 1219 Geneva, Switzerland Tel: +41 22 917 8492 – E-mail: [email protected] – Website: www.ictsd.org Publisher and Chief Executive: Ricardo Meléndez-Ortiz World Economic Forum 91-93 route de la Capite, 1223 Cologny/Geneva, Switzerland Tel: +41 22 869 1212 – E-mail: [email protected] – Website: www.weforum.org Co-Publisher and Managing Director: Richard Samans Citation: Meltzer, Joshua P. 2016. Maximizing the Opportunities of the Internet for International Trade. E15 Expert Group on the Digital Economy – Policy Options Paper. E15Initiative. Geneva: International Centre for Trade and Sustainable Development (ICTSD) and World Economic Forum. ©ICTSD and World Economic Forum®, 2016. Readers are encouraged to quote this material for educational and non- profit purposes, provided the source is acknowledged. This work is licensed under the Creative Commons Attribution- Non-commercial-No-Derivative Works 3.0 License. To view a copy of this license, visit: http://creativecommons. org/licenses/by-nc-nd/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. ISSN 2313-3805 REF 181215 Maximizing the Opportunities of the Internet for International Trade Joshua P. Meltzer on behalf of the E15 Expert Group on the Digital Economy January 2016 * The author would like to extend a particular thanks to Merit Janow who was the Theme Leader for the Expert Group on the Digital Economy and who provided leadership throughout the process as well as invaluable comments and insights on the paper. Thanks also to all participants in the Expert Group for their engagement and comments on the paper. Note E15Initiative The policy options paper is the result of a collective Jointly implemented by the International Centre for Trade process involving all members of the E15 Expert and Sustainable Development (ICTSD) and the World Group on the Digital Economy. It draws on the active Economic Forum, the E15Initiative was established to engagement of these eminent experts in discussions over convene world-class experts and institutions to generate multiple meetings as well as an overview paper and think a credible and comprehensive set of policy options pieces commissioned by the E15Initiative and authored for the evolution of the global trade and investment by group members. Joshua P. Meltzer was the author of system to 2025. In collaboration with 16 knowledge the report. While a serious attempt has been made on partners, the E15Initiative brought together more than the part of the author to take the perspectives of all group 375 leading international experts in over 80 interactive members into account, the policy recommendations dialogues grouped into 18 themes between 2012- should not be considered to represent full consensus and 2015. Over 130 overview papers and think pieces were remain the responsibility of the author. The list of group commissioned and published in the process. In a fast- members and E15 papers are referenced. changing international environment in which the ability of the global trade and investment system to respond to The full volume of policy options papers covering all new dynamics and emerging challenges is being tested, topics examined by the E15Initiative, jointly published by the E15Initiative was designed to stimulate a fresh and ICTSD and the World Economic Forum, is complemented strategic look at the opportunities to improve the system’s with a monograph that consolidates the options into effectiveness and advance sustainable development. overarching recommendations for the international trade The second phase of the E15Initiative in 2016-17 will and investment system for the next decade. see direct engagement with policy-makers and other stakeholders to consider the implementation of E15 The E15Initiative is managed by Marie Chamay, E15 policy recommendations. Senior Manager at ICTSD, in collaboration with Sean Doherty, Head, International Trade & Investment at E15Initiative Themes the World Economic Forum. The E15 Editor is Fabrice – Agriculture and Food Security Lehmann. – Clean Energy Technologies – Climate Change – Competition Policy – Digital Economy – Extractive Industries* – Finance and Development – Fisheries and Oceans – Functioning of the WTO – Global Trade and Investment Architecture* – Global Value Chains – Industrial Policy – Innovation – Investment Policy – Regional Trade Agreements – Regulatory Coherence – Services – Subsidies * Policy options to be released in late 2016 For more information on the E15Initiative: www.e15initiative.org Digital Economy 3 Abstract The last decade has witnessed remarkable developments in cooperation among countries. Following a discussion of the digital economy, creating new opportunities for cross- the impact of the Internet on the nature of international border trade and investment and the ongoing emergence of trade and an overview of important regulatory and other novel and disruptive businesses models. At the same time, barriers, the paper outlines recommendations on how the Internet is transforming how goods and services are policy-makers and interested stakeholders can address produced, delivered, and consumed both domestically and existing constraints and help create an enabling environment internationally. The transformation in the character of cross- to realize the opportunities of the Internet and cross- border trade in goods and services, which are increasingly border data flows for growing digital trade. The policy embedded, is also resulting from global value chains, options are grouped under four categories: maximizing and made possible by the flow of immense amounts of data updating WTO rules; negotiating a digital trade agreement; across borders. This has given rise to a growing overlap expanding and deepening regulatory cooperation on key between the trade regime and other areas of domestic related policy issues; and enhancing collaborative efforts regulatory intervention—notably with respect to privacy and between governments, the private sector, and civil society. security. The present paper examines the challenges and The objective of this broad range of options is to gradually opportunities that growth of the digital economy creates develop a comprehensive set of international trade rules and for trade and development. It seeks to identify supportive norms to ensure that the opportunities of the Internet for trade policy measures to enhance the benefits of digitization inclusive growth and development are exploited. globally as well as avenues to establish regulatory practices that permit cross-border data flows and improved regulatory 4 Policy Options for a Sustainable Global Trade and Investment System Contents 6 Executive Summary Abbreviations 8 1. What is Digital Trade? APEC Asia-Pacific Economic Cooperation B2B business-to-business 9 2. Enabling Digital Trade and Data Flows ECJ European Court of Justice 9 2.1 Internet Expansion and its Impact on FTA free trade agreement International Trade GATS General Agreement on Trade in 10 2.2 The Trade Implications of a Global Internet Services GATT General Agreement on Tariffs and 12 2.3 How the Internet is Changing Trade Trade 14 2.4 Increase Internet Access ICT information and communications technology 1 2.5 An Enabling Environment for Digital Trade IoT Internet of Things 18 3. Policy Options to Maximize Trade IP intellectual property in the Digital Economy ISP Internet service provider 18 3.1 Maximize and Update WTO Rules Both in the Near IT information technology and Long Term ITA Information Technology Agreement 21 3.2 Negotiate a Digital Trade Agreement ITU International Telecommunication Union 22 3.3 Expand and Deepen Regulatory Cooperation on Digital KORUS Korea-US Free Trade Agreement Trade Issues MFN most favoured nation 23 3.4 Governments, Businesses, and NGOs Working Together MLAT mutual legal assistance treaty to Support Digital Trade NGO non-governmental organization 25 4. Concluding Note OECD Organisation for Economic Co- operation and Development 26 References and E15 Papers R&D research and development 29 Annex 1: Summary Table of Main Policy Options RFID radio frequency identification 34 Annex 2: Members of the E15 Expert Group SDGs Sustainable Development Goals SME small and medium-sized enterprise List of Boxes TFA Trade Facilitation Agreement TFP total factor productivity 10 Box 1: Improving the Global Delivery of Renewable Energy TPP Trans-Pacific Partnership 11 Box 2: Growing Strawberries in India TPRM Trade Policy Review Mechanism 12 Box 3: As Trucks Become Services TTIP Transatlantic Trade and Investment Partnership 19 Box 4: Existing Digital Trade Rules in US Trade Agreements UNCITRAL United Nations Commission on International Trade Law UNCTAD United Nations Conference on Trade and Development USITC United States International Trade Commission WHO World Health Organization WTO World Trade Organization Digital Economy 5 Executive Summary Growth in Internet access globally, often over mobiles Consumer use of the Internet is also growing globally. phones, is having a profound impact on economies and Using Internet platforms and other services
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