Industry 4.0

The digitalisation of world trade

So far, the World Trade Organization (WTO) does not have a mandate for digitally-en­abled trade and related regulations. Many innovations are still evolving, moreover, and that adds to insecurity. A group of experts has made proposals on how the G20 – the group of 20 major economies – should rise to these challenges.

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The G20 must rise to the challenge of digitally-enabled trade. Valentin Wolf/Lineair The G20 must rise to the challenge of digitally-enabled trade.

The expert report first assesses the challenges G20 members are facing. Multilateral regulations for digital trade are only evolving very slowly. Since the implications for global development in the world economy may turn out to be serious, the scholars argue that WTO efforts in this area deserve support. They also insist that the risks of the digital divide widening further must be controlled.

The global trade order is not currently designed for advanced technological applications. To close the gaps, the expert group calls for more and more effective international coordination. In its view, national governments must promote this cause. One danger they identify is tax avoidance as profits are shifted from country to country. Clear rules are needed concerning issues like this, they insist.

The experts propose that the G20 presi­dency convene the ministers in charge of trade. They should be given the assignment to negotiate a Memorandum for Cooperation on Digitally Enabled Trade. That could happen at the summit in Buenos Aires in late November.

The experts also propose to use the term “digitally-enabled trade” because terms like “e-commerce” or “digital trade” can be confusing. “Digitally-enabled trade” is more precise because it includes all trade related applications of digital technology. The authors explicitly refer to block chain technology, which facilitates transactions that cannot be manipulated ex post, and to distributed ledger technology, which allows for falsification-proof cooperation with several partners working all over the world.

The report emphasises that the Memorandum should tackle numerous feedback loops because digital technology and trade are becoming ever more intricately intertwined. Moreover, it points out that the digital divide between highly-developed and less-developed countries deserves attention. The expert group’s vision is a comprehensive deal on trade and investments. It would give market participants great scope for action, ensure legal certainty and improve digital infrastructures. Public-private partnerships could contribute to ensuring worldwide access. Moreover, the expert team calls for aid for trade and other forms of support to low-income countries.

The team wants the G20 to confirm the leading role of the WTO on digitally-enabled trade. In their eyes, the WTO needs an expert office to facilitate international cooperation and coordination on the matter. The authors stress that all parties must assign experienced staff to deal with related tasks.

The report explicitly tackles taxes. The international community is said to need a coherent system, but obstacles include the lack of consensus on how to deal with digitalisation. The expert group suggests the G20 should establish an Intergovernmental Panel on Taxation in the Digital Economy. This panel could then advise policymakers and draft expert reports.

Meléndez-Ortiz, R., et al., 2018: New industrial revolution: upgrading trade and investment frameworks for digitalization.

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