Digital trade policy and inclusive growth

Digitalisation has the potential to support inclusive growth, because it reduces the fixed costs of entry into global markets.

At the same time, it is clear from trade policy research that businesses self-select into trade: they need to have a certain level of capabilities in order for them to take advantage of opportunities that arise, both from digitalisation and the liberalisation of market access more generally. Addressing disparities between and within countries in such capabilities is partly a matter for broader initiatives that lie outside trade. At the same time, trade policy measures, particularly in services, could help meet some of these deficits in capability.

How can international trade rules deliver?

The value of international digital rules is that they increase predictability of trading conditions and reduce fragmentation, which is particularly valuable for small businesses. But for international trade rules on digital to deliver, and to play their role in addressing shortfalls in capacity, it is also important to ensure the diffusion of regulatory best practice, particularly given the array of issues that arise in relation to digital markets. There is a body of evidence on how to develop sound regulation: the challenge is now to translate that into modes of international cooperation.

Looking beyond digital provisions

In considering digital trade, it’s important to look beyond purely digital provisions and to consider other measures – such as restrictions on foreign entry and on the movement of people – this has a material impact on the trade of digital sectors. This is critical for two reasons: from an economic perspective, these restrictions often hold countries back in developing their digital capabilities. From a trade negotiations perspective, the prospect of a reduction in these restrictions could be an incentive to countries so far reluctant to engage on digital rules.

Amar Breckenridge, senior associate at Frontier Economics, recently spoke at a meeting organised by Tech UK on the relationship between digital trade policy and inclusive growth. The meeting was part of the annual WTO Public Forum, an event that brings together trade policy experts from around the world.

Frontier Economics regularly advises on trade and digital markets.  

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