World Trade Organization 2.0: Reforming Multilateral Trade Rules for the Digital Age

Abstract

The rules-based framework developed for trade and investment under the technological conditions of the industrial era, as instantiated in the current set of rules established under the World Trade Organization (WTO), is not equipped to address the issues and mediate the tensions that are emerging under the technological conditions generated by the digital transformation – that is, the reshaping of business models and social interaction by the pervasive use of digital technologies.

The emerging knowledge-based and data-driven economy features powerful incentives for strategic trade and investment policy and a confluence of factors contributing to market failure at a global scale; digital social media and platform business models have raised a plethora of social and political concerns, with consequent calls for regulation of cross-border data flows; and newfound security issues raised by the vulnerabilities in the increasingly important tangible and intangible infrastructure of the digitized economy have precipitated a potential decoupling of global production networks along geopolitical fault lines.

To date, the response has been fragmented, incomplete, and in large part conducted outside the WTO. A new WTO Digital Round is required to create a multilateral framework that is fit for purpose for the digital age. This would cover electronic commerce, data flows, tariffs and taxes on digital products, the need for national regulatory space in respect of data (in areas such as privacy and the nexus of “fake news”/disinformation/political interference), national security in the digital age, preferential treatment within data realms, the international competition policy ramifications of the “winner takes most” economic environment, and updated regimes for issue areas where the digital transformation fundamentally changes the policy implications of established rules (especially investment, intellectual property and subsidies).

Keywords: digital transformation, WTO, digital round

JEL Classification: F13