Data at the Docks: Modernising International Trade Law for the Digital Economy
62 Pages Posted: 3 Nov 2017 Last revised: 11 Jun 2018
Date Written: November 2, 2017
The World Trade Organisation (‘WTO’) has been slow so far in responding to the various challenges arising from the integration of electronic commerce into cross-border trading activities. This slow response in the multilateral system is largely attributable to the complex, multifaceted nature of digital trade or electronic commerce coupled with the conflict amongst countries on issues of internet regulation and digital development. Nonetheless, international trade agreements, particularly at the WTO, play an important role in the creation of a secure, predictable and trustworthy global regulatory framework for digital trade, and therefore, need to be reformed in a timely and meaningful manner to support the growth of the digital economy. In that context, this article focuses on the inadequacy of the General Agreement on Trade in Services (‘GATS’) in liberalising the digital sector, eliminating new types of barriers to digital trade such as data localisation, as well as addressing ‘new’ regulatory issues pertaining to digital trade such as cross-border data flows, data protection, cybersecurity and online consumer protection. Further, the introduction of comprehensive provisions on such issues in Electronic Commerce Chapters of Preferential Trade Agreements (‘PTAs’) in recent years increases the possibility of a potential discord between PTA rules and the GATS. Moreover, since rules on digital trade are heterogeneous and often conflict across different PTAs, it can potentially fragment and disrupt the global framework for digital trade in the long run. Therefore, in our view, WTO law should take a central role in facilitating a secure and stable legal regulatory environment for cross-border electronic commerce while undercutting the current upswing in digital protectionism.
To address the above deficiencies in the GATS, we recommend extensive reforms within the existing multilateral framework rather than simply relying on WTO tribunals to creatively interpret existing rules. In our view, three broad areas of reform are necessary in the multilateral framework to promote the digital economy in a holistic and balanced manner - improving market access, addressing regulatory barriers in digital trade, and supporting developing countries to integrate faster into the digital economy. Several of the member proposals on electronic commerce placed before the WTO Work Programme on Electronic Commerce in recent months provide a useful starting point for constructive dialogue and negotiations at the WTO, particularly in facilitating a sound regulatory framework for cross-border data flows, while enhancing consumer confidence and promoting interests of developing countries and small and medium-sized enterprises (‘SMEs’). These reforms can be supported through incremental changes within the GATS framework (such as adoption of domestic regulations under GATS art VI or development of a Reference Paper or Annex on Electronic Commerce) or through the adoption of a new WTO agreement. In our view, although the second route is politically more challenging, it is better suited to address the cross-cutting nature of issues in digital trade, as well as to overcome the various challenges arising from the antiquated structure of the GATS. Irrespective of which route is taken for initiating these reforms, the WTO needs to creatively engage with the broader network of institutions dealing with digital trade and internet governance, including multistakeholder institutions, to contribute meaningfully to the formation of a coherent framework for digital trade.
Keywords: Digital Trade, Digital Economy, Electronic Commerce, WTO, GATS
JEL Classification: K33
Suggested Citation: Suggested Citation