The increasingly rapid uptake of digital technologies, like 3D printing (3DP), artificial intelligence, cloud computing, 5G, and the Internet-of-Things, is launching the global economy into the “Fourth Industrial Revolution” and the next wave of globalization.
As new global supply chains are being constructed, this time for services, tasks are being divided more finely, opening new entry points for poorer countries’ services exports. Digitally enabled services are stabilizing global production networks, helping offset the reshoring thrust, and rejuvenating traditional exports across agriculture, fisheries, handicrafts, and tourism, including through better matching of sellers and buyers and finance access provision. New trade opportunities are emerging for developing and advanced economies alike.
Digitally enabled trade (henceforth “e-commerce”) has become the major global trade growth story. As the digital age takes hold, services (already dominant in most domestic economies) are growing in importance in international trade, both in their own right and as a support to trade in goods. Digitalization renders an ever-increasing range of services tradable across borders via digital networks1; roughly 50% of traded services are digitally enabled compared with 15% of traded goods.
Trade in digitally enabled services, in turn, depends crucially on cross-border data flows, which are growing exponentially and now contribute more to global GDP growth than trade in goods and services. The development of international rules on cross-border data flows and Internet-based activities is becoming critical to firm-level competitiveness, including for small and medium-sized enterprises (SMEs). These developments raise major new challenges for digital-age trade, investment, innovation, and industry policy settings. Harnessing the gains from digital technology in the realm of trade, especially in services, requires multilateral governance and regulatory frameworks geared for the 21st century.
The Group of Twenty (G20) must address these challenges and ensure the potential growth in international trade flows, so that consequent global gains in economic growth and development are facilitated rather than stymied.
As highlighted in the Appendix, the COVID-19 pandemic has impacted domestic economic activity and global value chains in both goods and services industries. Its most important short-run effect has been an intensive push toward digitalization. The adverse effects of widespread social distancing measures have been mitigated through a range of digital technologies and cross-border services (from online education to e-signatures and new modes of communication); many activities that would otherwise have been shut down have stayed afloat. While recent reliance on online interactions exposes new privacy threats that need to be addressed, the benefits of digitally enabled services, which rely on unimpeded cross-border data flows, for ensuring business continuity and agility, have been clearly proved. A push for international standards and disciplines regarding cross-border data flows would lock these benefits in and provide the ground for ongoing growth of digitized services.
Managing this transition to digital trade and fully realizing its benefits in a mutually beneficial way requires policy decisions that allow trade to flourish while achieving domestic public policy objectives. G20 members should assume leadership by implementing a best-practice policy and establishing interoperable regulatory settings so that every economy can reap the digital age’s productivity gains.
The following section presents our policy recommendations, which address challenges in the transition to digital trade and propose concerted action by the G20 on eight fronts.
T20_TF1_PB4Jane Drake-Brockman is an Industry Professor at the University of Adelaide and is an expert on international trade and regional integration and widely recognized as Australia’s foremost industry expert on services competitiveness and trade in services.
Ingo Borchert is a Senior Lecturer at the University of Sussex and a Fellow of the UK Trade Policy Observatory.
Nigel Cory is an associate director covering trade policy at the Information Technology and Innovation Foundation.
Ziyang Fan is the Head of Digital Trade at the World Economic Forum LLC.
Christopher Findlay is the Commissioner at South Australian Productivity Commission, and an Emeritus Professor at the University of Adelaide.
Fukunari Kimura is the Chief Economist at the Economic Research Institute for ASEAN and East Asia.
Hildegunn Kyvik Nordås is a Research Professor at NUPI where she works on trade and trade policy issues, focusing on the interaction between trade policy, trade, technology and labour market adjustments.
Magnus Lodefalk is an associate professor at Örebro University, Sweden, and affiliated to the Ratio research institute and the Global Labor Organization.
Shin-yi Peng is a Professor of Law at National Tsing Hua University in Taiwan.
Dr. Hein Roelfsema is an Associate Professor International Entrepreneurship, the Coordinator Master International Management, and the Coordinator Master Science and Business Management (Business Economics) at Utrecht University.
Yose Rizal Damuri is the Head of the Department of Economics at the Center for Strategic and International Studies in Indonesia.
Sherry Stephenson is a Senior Fellow at the World Economic Forum, and Member of the Services Network of the Pacific Economic Cooperation Council (PECC).
Dr. TU Xinquan is a Senior Fellow at the Center for China and Globalization. He is also a Professor and Dean of China Institute for WTO Studies, University of International Business and Economics.
Erik van der Marel is a Senior Economist at ECIPE.
Mustafa Yagci is a researcher for the Islamic Development Bank.
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