Frontier Economics, jointly with the UK Trade Policy Observatory, today hosted a working session entitled “Rethinking Services Trade in a Digital World”, at the World Trade Organisation’s 2019 Public Forum in Geneva.
The session was chaired by Professor L. Alan Winters, and featured presentations by Cosmina Dorobantu (Alan Turing Institute), Ingo Borchert (Sussex University), and Amar Breckenridge (Frontier Economics).
The panel of speakers explained how digitisation has had fundamental effects on trade, primarily through changes to the way in which production is organised by firms and across sectors. This in turn affects how businesses and countries trade, and what they trade. Traditional distinctions between goods and services, and between different modes of services trade, were breaking down.
Digitisation lowered the fixed costs of market entry, and therefore had pro-competitive effects, notably by facilitating the emergence or expansion of smaller and medium scale businesses on a global scale. At the same time, concentration effects in platform services linked to economies of scale, scope and network effects raised deep concerns about market power and the treatment of super-normal profits. Complicated questions also arose in relation to the regulation of data flows, privacy, and consumer safeguards.
In his presentation, Amar Breckenridge emphasised that the existing architecture for global trade rules is anchored in a pragmatic response to the economics of services and the political economy of trade that prevailed at in the late 1980s and the 1990s. It is therefore ill equipped to deal with the realities of the digital era. Piecemeal applications of the principle of non-discrimination in services meant that trade commitments were difficult to interpret and favoured a form of regulatory arbitrage.
An overhaul of that architecture would also require that trade partners enter into a cooperative process to address regulatory issues. While traditional trade issues such as tariffs and discriminatory measures could be addressed through the normal horse-trading involved in negotiations, that approach is not very well suited to regulatory reform and institutional building.
The audio of the event is available here.
Frontier Economics regularly advises clients on international trade issues.
For more information please contact [email protected], or call +44 (0)20 7031 7000.