Regulating the Digital Economy: Are We Heading for a Win-Win or a Lose Lose?

Abstract

The digital economy has been growing by leaps and bounds in recent years, mostly as a result of new digital technologies that are promoting a global transformation to industry 4.0. The resulting expansion of digital trade has sparked off a political and policy controversy on digital economy and e-commerce, where its boundaries stand and how best to regulate it. Policy discussions on the topic however do not take into account the true expanse of digital trade, which encompasses hardware, software, networks, platforms, applications and data as its core elements, and stretches the boundaries of e-commerce policy to trade in goods, services and intellectual property protection. This Article focuses on the challenges in regulating the digital economy, with a particular focus on development, and offers a discussion of the interdependency between the economic, social, personal and developmental aspects of digital trade for developing countries. Section II opens with a detailed discussion on key digital technologies and their plausible impacts on employment globally and industrial catch-up of particular importance to developing countries, to highlight the divisive nature of digital technologies. Section III then analyses the unfulfilled promise of a pro-development perspective at the WTO looking at how multilateralism has currently failed e-commerce. The incoherence between digital realities and the policy debates at the WTO are presented to show how the institution is losing effectiveness in the war between countries to legitimize national policies on a universal level in this important area of policy making. Norm-setting through FTAs is also analysed at length in section III of the article, which provides a comprehensive review of the plurilateral and bilateral policy developments in e-commerce. The ramifications for developing countries are discussed in the form of a couple of examples. Section IV presents some options for developing countries for the future at the national and international level.

Keywords: digital economy, e-commerce, industry 4.0, digital trade, robotics and process automation, artificial intelligence, 3D printing, manufacturing, development, trade, free trade agreements, digital industrial policy

JEL Classification: L11, L23, L25, L41, L51, L81, L86, O19, O31, O33, O34, O38