Data has become the lifeblood of the global economy. Even before the Covid-19 pandemic, digital technologies were driving trade. The World Trade Organisation estimates that global trade growth in the decade leading to 2030 will be two percentage points per annum higher as a result of the adoption of digital technologies. The pandemic has accelerated the digitalisation trend – the US Commerce Department reports that e-commerce as a percentage of retail sales jumped to 20% in 2021 from just over 13% in 2019. In 2020, the WTO noted that these pandemic-induced changes in behaviour may result in a fundamental and long-term shift in services trade.
As digitalisation accelerates, governments are grappling with how best to manage the digital transformation while safeguarding the broader public interest. From a public policy perspective, encouraging innovation while protecting consumers will be important for ensuring inclusive economic growth and advancing the digital economy. This is easier said than done. Unfortunately, the regulatory environment is becoming more complex and fragmented. This has implications for digital economic growth; studies show that digital barriers could reduce gross domestic product growth by restricting trade output and slowing productivity.
This also has implications for small businesses. Recent research shows that small businesses are increasingly relying on digital tools to survive the pandemic and sustain performance. In the US, which saw a large rise in the number of small start-ups over the past two years, survey results show that small, women-owned firms are ever more dependent on these tools and on digital marketplaces to export. In fact, small, women-owned businesses, particularly those headed by minority women, export to more diverse external markets than other companies.
The latest publication from the Visa Economic Empowerment Institute tackles some of these issues. The paper highlights the growing complexity of digital regulations and calls for greater co-operation on digital issues. According to the VEEI, one solution is to focus on negotiating high-standard digital trade agreements. As an example, the Singapore-Australia digital economy agreement addresses barriers to digital growth by removing market access restrictions and encouraging greater regulatory co-operation between the markets.
But a digital trade agreement is not the only way that governments can work together. The adoption of industry-driven global standards can also help. Such standards can drive a level of harmony that eases adoption, thereby lowering barriers to entry, reducing costs and improving security. For standards to be relevant and effective, governance structures should promote collaboration among participants and include oversight structures that are robust and transparent, with appeals processes for conduct violations.
Additionally, continued engagement and co-operation across international and non-governmental organisations, like the G7, Organisation for Economic Co-operation and Development or the Asia-Pacific Economic Co-operation, can help push the conversation forward. The private sector has a role to play as well, by, for example, working with regulators and within industry bodies to help develop and implement standards that promote interoperability.
Taken together, trade agreements, standards, policy forums and discussions can help unwind some of the regulatory complexity that clouds digital issues. There is no silver bullet, but greater co-operation on these issues can facilitate innovation and help economic growth.
Michael Nunes is Head of Government Advisory, Global Government Engagement at Visa.