digital economy

Designing Next Generation Trade Agreements for the Digital Economy

Designing Next Generation Trade Agreements for the Digital Economy

From a business perspective, getting an agreement on digital rules among the widest number of countries is best.  Such a decision will create conditions for improved stability, lowered risk and reduced compliance costs in engaging in trade and business everywhere, with similar or identical rules and regulations in place.  But there is a trade-off between getting an agreement with many parties and getting an agreement in a timeframe that businesses would view as helpful.  While governments can operate in cycles of years, companies are concerned about results every quarter.  This mismatch between expectations and timing is particularly acute in the digital world, where business developments are often made at light speed.  Governments are sometimes struggling to even understand the ideas and principles of digital trade and are faced with particular challenges in crafting sensible regulations. Digital trade was largely unregulated, or lightly addressed, in most places up until a few short years ago.  With few exceptions, firms were free to do whatever they wanted in the digital space, as long as they did not violate existing non-digital rules.  Governments tried to adapt physical rules, in some instances, to the digital realm.  This situation has grown increasingly untenable.  The exponential growth rates of the digital economy means that governments cannot go on trying to shoehorn analogue rules to digital products and services.   So how should governments manage the increasingly important digital world?  There are at least four broad responses so far.

Unpacking the Digital Economy Partnership Agreement (DEPA)

Unpacking the Digital Economy Partnership Agreement (DEPA)

The DEPA sits in the middle.  It sets out a series of modules covering a range of topics of relevance to firms that trade digital services, ship goods across borders via e-commerce, or are otherwise involved in the digital and technology space.  These modules are meant to be building blocks.  Countries could opt to dock directly onto the DEPA, expanding the agreement with new members.  Or governments could decide to pick up and use modules, in whole or in part, in various settings.  These include slotting them directly into other trade agreements or opting to align domestic policies to DEPA. The significance of DEPA does not sit with the current three members, who have largely already agreed to uphold the same commitments and principles in the agreement under their Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) membership.  Instead, DEPA matters if and when more governments agree to use the modules or align domestic policy with its framework and structure.  The spread of DEPA is key—if non-members who are considering problematic rules on the digital economy could be encouraged to join, the agreement will be seen as a critical turning point for policy on digital issues.

Data is the New Avocado?

Data is the New Avocado?

But as Søndergaard suggested, data is not like oil.  For one thing, oil doesn’t go anywhere.  It sits in the ground until it is brought up and used.  It can be used all at once or just some at a time while the rest remains waiting. Oil can be stored forever (or at least for a very long time) without significant problems.  Data, by contrast, is like an avocado.  It has a clearly defined shelf-life.  Data collected and used too early is pointless.  Data harvested too late is often of no use at all. Søndergaard’s company runs what is billed as the world’s largest online wine marketplace.  In his business, it does no good at all to rate a wine that does not exist as all the stock is gone or to recommend a wine to a customer that has already purchased something to drink for dinner.  What matters is knowing what is needed in the moment when the information is “ripe.”