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26 November 2021

Why the future of trade is digital

The global rules around data and digital trade need significant upgrading.

By Linda Yueh

Years ago, when someone mentioned to me that the 21st century is synonymous with data, it seemed a bit exaggerated. Since then, and particularly due to the pandemic, the digitalisation of the economy has accelerated. Online purchases via e-ecommerce sites such as Amazon and food delivery services such as Deliveroo have rapidly increased in this country and elsewhere. The pandemic also led to a dramatic rise in the use of Zoom, Microsoft Teams and other platforms for work, meetings and presentations. These all involve transmitting data and are examples of the growth in digitalisation. When the Zoom meeting includes participants from other countries and the Amazon purchase crosses national borders, this is a part of digital trade.

It’s not surprising that digital trade has significantly sped up in the past few years. Even before the pandemic, it had been growing at a faster rate than the trading of physical goods. Between 2005 and 2017, digitally delivered services accounted for two-thirds of growth in the trade in services worldwide. Digital capabilities have enabled trade in services. When I teach students who are watching my lectures from around the world, the educational service I deliver is exported as digital trade made possible by technology that transmits my content across the UK border. In 2019, the UK exported digitally delivered services of some £207bn, which is almost two-thirds of our total services exports.

Digitalisation can enable trading in services, and that is the case within the UK’s borders as well. In other words, business within the UK can also be enhanced by use of such technologies that allow for virtual meetings with colleagues and clients, and enable businesses to sell via their websites to customers across the UK. Therefore, making the most of data and the growth of digital technologies are important for our economic growth.

And it is a virtuous circle: our strengths at home enable our strengths abroad. By using digital technologies effectively in our workplaces and marketing on our websites, the UK’s businesses are competitive in selling our services and goods abroad. The UK has a comparative advantage or competitive strength in services. We are the top country in Europe for tech investment and the second largest exporter of services globally after only the United States. As an adviser to the UK Board of Trade, I was pleased to have contributed to its latest Digital Trade report, which analyses how the UK can build upon our strengths in this area. With greater focus on data and related technologies, we can strengthen our trade position in digital, services and goods trade. Indeed, the embedded data in physical goods like a Rolls Royce engine is an increasingly important aspect of how to service and monitor its performance, so manufacturing trade is also enhanced.

But, the global rules around data and digital trade need significant upgrading. The rapid changes in this area have outpaced the 1990s agreements that form the relevant framework for international trade rules. There are initiatives at the World Trade Organisation to liberalise e-commerce and remove requirements that distort data when it moves across borders. But much more is needed to ensure that markets are not just more open but also fair, while also protecting privacy and other aspects that are critically important to our welfare as consumers.

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Digitalisation can also reduce carbon emissions; for instance, through enabling virtual meetings and e-books and other digital goods take the place of some physical goods. That has the potential of making trade free, fair, and also greener.

Unsurprisingly, it is challenging. Data regulations reflect national legislative priorities and standards that differ greatly across countries. Agreeing common rules is a difficult task, not just among advanced economies with different systems, but also because some developing countries are still formulating their domestic approach in a rapidly evolving sector.

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Therefore, this is an area where the UK with its strengths in services and digital trade can play a role in helping to forge global agreements. By including private sector expertise, the UK can encourage the adoption of high quality standards that could eventually become international agreements.

Such digital trade can benefit people and businesses across the UK. When a service is delivered remotely, there is much greater ability to deliver it from anywhere. The spread of jobs related to the digital economy reflects the geographic spread of the sector. Of course, it will require investment across the UK to develop the necessary digital infrastructure as well as upskilling workers and encouraging the adoption of more efficient practices by businesses. By doing so, the UK would be strengthening both its own economy and its international competitiveness.

Therefore, the UK is well positioned to make the most of the opportunities that are emerging in the 21st global economy. That futurist all those years ago was right – the future looks increasingly digitalised.