WITA’s Friday Focus on Trade – November, 3 2023




Digital Trade in Services: Globalization’s Exciting New Frontier

The following is an excerpt from Gary Winslett’s publication titled “Digital Trade in Services: Globalization’s Exciting New Frontier”.
The United States is a powerhouse in services and especially digital‐​friendly services. U.S. services exports grew from $563 billion in 2010 to $897 billion in 2022, a 42 percent increase. A lot of that growth either is or could be connected to digital technology. More than 80 percent of U.S. services exports could, at least in principle, be delivered digitally. In 2020, U.S. exports of information and communication technology–adjacent services totaled $520 billion. Export growth has been especially strong in cloud computing and data services ($397 million in 2010 to $6.9 billion in 2021), computer services ($10.1 billion to $45.2 billion), research and development ($22.2 billion to $47.2 billion), and professional services ($48.7 billion to $132.5 billion).The other things to keep in mind are that the digital economy is large and growing and that services are a much larger portion of the overall economy than goods. In 2019, the digital economy was roughly a 10th of American gross domestic product, and from 2005 to 2019, it grew at more than double the rate of the nondigital economy. Roughly two‐​thirds of the global economy and more than three‐​quarters of the American economy are services, not goods. The growth potential for digital trade in services is enormous. The more that services can be traded internationally, the more customers American service firms have access to…
…Digital trade in services benefits American businesses, American citizens, rural areas struggling with population decline, and many more. It is simply wrong to say that the benefits of globalization and technology only accrue to the few and not the many. They benefit all of us. Consumers get more choices, workers get more options, shareholders get more value, and citizens get more of all the benefits of internationalism. Greater digital trade in services isn’t just about helping with math homework, flexibility for workers, easier telemedicine, increased exports, television shows or movies, 3D printing, and Zoom calls, as great as all those things are. It’s about building a more open, freer, richer world. That’s the promise of American‐​led globalization: material prosperity and ever‐​greater individual liberty.
09/26/2023 | Gary Winslett | CATO Institute

Overshadowed by Foreign Policy Crises, EU-U.S. Summit Fails to Deliver Any Trade Wins

In a first sign of a less-than straightforward summit, the EU’s delegation sprawled in the weeks leading up to include both President von der Leyen and Council President Charles Michel as well as three commissioners. Illustrating the awkward dynamics between the EU’s two leaders, von der Leyen and Michel each held their own separate private meetings with Biden before joining together with Biden for a joint meeting. Von der Leyen is seen by Biden and his advisors as a strong interlocutor, staunch trans-Atlanticist, and partner on confronting China, with Biden keen to see her reappointed next year.
As expected, leaders’ discussions centered mainly around foreign policy issues in Ukraine and the Middle East, leading to limited attention to trade issues at the dismay of working level officials. Notably, the carefully crafted communique covered foreign policy issues first—aiming to minimize U.S.-EU differences on Israel by condemning Hamas, stressing the dire humanitarian crisis in Gaza, and working to prevent regional escalation—symbolizing the summit’s overall tenor of addressing ongoing crisis over long-term problems. In her public speech in Washington, von der Leyen echoed Biden’s comparison between Russia and Hamas and pledged continued strong support to Ukraine and Israel.
Expectations that the summit would deliver some wins on key trade issues fell flat. No new deal or agreements were announced on steel and aluminum or critical minerals. The joint communique simply stated that “we look forward to continuing to make progress on these important objectives in the next two months”, meaning that talks will continue but have yet to reach the goal line.
10/26/2023 | Albright Stonebridge Group

Harm From ‘De-Risking’ Strategies Would Reverberate Beyond China

China’s importance in the global economy has increased dramatically in recent decades, and it has been a particularly crucial driver of trade integration in Asia.
China’s medium-term growth prospects, like that of other countries, will be determined in part by major forces such as convergence to advanced economies’ income levels and demographics. Yet key structural policy drivers, including domestic reform momentum, and external factors, including geoeconomic fragmentation, also significantly affect this path.
What would be the potential implications for Asia and beyond from these different growth paths? In our latest Regional Economic Outlook for Asia and the Pacific, we assess the potential effects of a downside scenario from ‘de-risking’ between China and Organisation for Economic Co-operation and Development economies.
While reshoring would be particularly painful to everyone, it is notable that friend-shoring does not generate net benefits for third countries in the long term. That’s because the benefits from trade diversion are offset by the effects of the contractions in both China and the OECD.
For the region, the results suggest that third countries should not expect to passively benefit from friend-shoring policies, but rather actively pursue reforms that can help them further integrate into global supply chains. For systemic economies around the world, there is an urgent need for constructive dialogue to resolve underlying sources of tensions and resist costly fragmentation outcomes.
In China, the risks that fragmentation poses on medium-term growth underscore the need for comprehensive structural reforms that would help income levels converge more rapidly with those in advanced economies—such as closing productivity gaps between state-owned and private firms and further opening up sectors to competition. Our research shows that achieving this would also have significant positive spillovers for other economies in Asia.
10/17/2023 | Diego Cerdeiro, Siddharth Kothari, Dirk Muir | International Monetary Fund

What is at Stake for Developing Countries in Trade Negotiations on E-Commerce? The Case of the Joint Statement Initiative

The expansion of the digital economy has transformed the way we produce, consume and do business. Electronic commerce (e-commerce) — the sale or purchase of goods or services ordered over computer networks or online platforms — is a significant segment of the digital economy. With the rapid expansion of e-commerce, increasing calls were made for common rules in the framework of the World Trade Organization (WTO) for governing cross-border e-commerce in goods and services. Such calls were based on the perception that the multilateral trade rules that were built upon traditional forms of trade prevalent in the last century could not adequately address opportunities and challenges associated with e-commerce.
The launch of the Joint Statement Initiative (JSI) negotiations on e-commerce among a group of WTO members in 2019 was a significant trade policy development. Participation of a diverse group of WTO members with markedly differing policy preferences, contrasted with the non-participation of a large number of developing countries, in the midst of rapidly evolving digital ecosystems, business models and regulatory requirements, point to the highly complex nature of the negotiations. The negotiations would require finding a delicate balance in reconciling different regulatory practices and priorities across countries with respect to such sensitive public policy areas as privacy, personal data protection, competition, consumer protection and cyber security, as well as industrialization objectives for the digital economy.
One key question that confronts trade negotiators is what negotiated outcome would allow developing countries – both participant and non-participant – to harness potential benefits of e-commerce for sustainable development. The digital divide is still significant within and among countries, and many developing countries are yet to develop their own national policy frameworks to support their ability to harness the evolving digital economy.
02/19/2021 | Division on International Trade and Commodities & Division on Technology and Logistics | UNCTAD

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