- The COVID-19 outbreak has accelerated the implementation of digital technologies and services that help facilitate trading despite logistics and travel limitations.
- This phenomenon has highlighted the necessity in modernizing trade rules and reversing the trend of digital protectionism.
- Modernizing trade rules helps connect consumers with creativity more in the post-COVID world
Our globalized world is under threat. Even before the pandemic, the world was already struggling with many challenges, from the economic slowdown and stagnation in trade growth to the US-China trade war. The COVID-19 outbreak was just another blow to the system.
As the physical movement of goods and people is restricted, digital trade has become more crucial in keeping trade flowing – virtually. From cross-border e-commerce and digital payments, to teleconferencing with business partners around the world and digital transactions of goods and services.
Digital services are very important to productivity and economic activity. Digital services not only allow us to work from home, video conference with colleagues and purchase groceries and other household supplies online. This crisis has given us a glimpse of the future: we see doctors to treat patients in another country by video conference call, teachers provide remote instruction to students studying from their homes, and engineers send design files to 3D printers to replace or modify parts, such as those used for ventilators. As the outbreak continues, it is inevitable that we need to shift towards digital more.
However, the expansion of digital trade is facing a turning point. The growing gap in digital development between developing and developed countries could lead to income disparities and digital “monopoly” that rule out smaller players. Concerns about data safety could jeopardize trust that is essential to a digital economy.
To solve this problem, many countries have turned to digital protectionism, which seems to be a good idea, but it tends to increase costs and can hinder the access to other other services that are essential to economic development. Digital protectionism comes in many forms, from restrictions on cross-border data movement and mandates to use local processing facilities, to local equity requirements, foreign licensing requirements that are difficult to fulfil and even tariffs on cross-border electronic transmissions.
And here are five ways we can overcome challenges for digital trade:
1. Advance forward-looking trade agreements. Speculate before making trade agreements. An important first step was the birth of the World Economic Forum Annual Meeting held in Davos last year. The Japanese government showed its potential as a leader in digital trade by proposing the Digital Free Flow with Trust framework, a new digital data protection innovation. This highlights the efforts of the government in keeping the trade regulations up to date and ready to overcome other digital challenges.
2. promote greater cooperation. Set standards for cross-border digital payments, documentations, licenses and create international digital trade rules.
3. Digitize trade documentation. The logistics and travel restrictions during the COVID-19 outbreak has brought the supply chain to a halt. Digital trade can provide more flexibility, reduce costs and obstacles for SMEs businesses. For example, electronic signatures enable smoother transactions.
4. Close the digital divide. Making digital development accessible for all by investing more on the infrastructure, connectivity and education.
5. Build trusted technologies for all. Digital technologies have the potential to reach more people, lower costs and reduce inefficiencies, especially for SMEs businesses. However, to make this work, trust is needed. So, what is necessary is the trusted technologies for every participant and efficient data privacy protection systems.
The covid-19 outbreak has accelerated the adoption of digital technologies, and to support and facilitate cross-border trade, businesses and the economy during these challenging times, digital trade rules have to be modernized. On the bright side, this could be an opportunity in a crisis that helps us to learn and be more resilient in the business world.