Our new normal calls for new digital trade rulesNovember 05, 2020 | By Sahra English
In this uncertain world, the one constant is our trust in the digital tools and services that can help us succeed. These technologies have enabled small businesses to transform almost overnight from purely brick-and-mortar storefronts to thriving online merchants, and empowered a new generation of entrepreneurs to create innovative businesses for this new normal.
But not everyone is afforded access to the digital economy. Digitization has quickly become the dividing line between which countries and businesses will be able to prosper and which might not recover at all. Faced with these pressing challenges, national governments too often jump to the conclusion that they need national solutions for these global issues.
To build a vibrant, global economy, national markets need to be interoperable — the flow of goods, services, capital and data across borders must connect seamlessly. With growing interconnectedness and greater demand for just-in-time delivery, trade needs to be faster and more reliable than ever. But today’s rules are failing businesses and consumers.
With the spread of COVID-19, we must acknowledge that the accelerated shift to digital tools, services and payments has also accelerated the shift in access to the digital economy from “nice-to-have” to “necessity.” And if too many people — as well as small- and medium-sized enterprises — remain disconnected from the digital economy, it will deepen divides. We can’t have the internet of everything without the inclusion of everyone. We must get trade principles right:
Enable cross-border data flows with privacy in mind
Strong protections for privacy and cybersecurity go hand in hand with the transparent, nondiscriminatory transfers of data across borders. Mastercard’s work to monitor transactions via our global network and, using artificial intelligence, spot patterns of cyberattacks and other criminal activity based on cross-border data flows, has been reaping benefits. That aggregated and anonymized data has allowed us to help governments, financial institutions, merchants, and individuals stop tens of billions in losses due to cybertheft during the past four years. There are existing mechanisms where strong privacy standards are applied consistently across countries to protect privacy while not sacrificing the security of and access to the digital economy. The recently negotiated United States-Singapore Joint Statement on Financial Services Data Connectivity provides a useful model, striking the right balance between facilitating trade and protecting legitimate regulatory interests.
Ensure technology choice and open, international standards
It’s simple, really — the benefits of global trade cannot be fully enjoyed where every country operates as an island. By having a common set of standards, participants in the payments ecosystem can send and receive payments across borders with less need for domestic customization and human intervention. The adoption of international standards also increases competition in local markets by reducing barriers to entry for small businesses or fintechs, and enables domestic firms seeking to expand abroad, which is especially important for developing countries. The recently finalized Digital Economy Partnership Agreement between Chile, New Zealand and Singapore promotes the use of internationally-accepted standards and interoperability of payment infrastructures, encouraging useful innovation and competition.
Strengthen rules in the services sector
The World Trade Organization reports that trade in services accounts for about two-thirds of global value added. In the United States, services represent 78% of GDP, 81% of U.S. employment, and a trade surplus of $259.7 billion. Globally, the services sector is growing faster than the manufacturing sector, provides greater and more widespread economic opportunity, including for developing countries, and promotes cross-border investment and trade. It is an engine of growth when it is allowed to scale, but scaling is difficult when regulatory systems are fragmented. No economic sector could benefit more from uniform rules than the services sector, yet it is the sector where trade rules are weakest. The United States-Mexico-Canada Agreement provides the high standard model for digital trade rules and market access for key services sectors, such as payments, that underpin the digital economy.
The growth of technology has not kept up with the dizzying pace of national regulation. International cooperation and coordination on digital and technology-related public policy issues is badly needed to address the proliferation of overlapping or conflicting measures on issues from artificial intelligence and privacy to digital taxation.
We encourage the creation of a group of like-minded countries to adapt in tech the post-financial crisis regulatory architecture for international cooperation and standard-setting. They must forge consensus around policy principles specific standards and regulatory approaches — all of which will aid international cooperation, data connectivity and security of the entire digital system, and ensure that no one is shut out of the opportunities it affords.