Mind the gap: trade rules and the digital economy

This project is concerned with the gap between current trade rules and digital trade. Multilateral trade rules, originally designed to facilitate trade in physical goods, were last updated over twenty years ago. New digital technologies are changing the nature of trade. Products which until recently could only be traded in a physical format, can now be digitised and traded over the internet. Digitalisation has led to a decline in trade of digitisable goods from 2.7% of total goods trade in 2000 to 0.8% in 2016 and the trend is likely to continue with the advent of 3D printing technology (WTO, 2018). Likewise, services which not long ago could only be transacted if there was physical proximity between supplier and consumer can now be supplied online at the click of a mouse. Exports of ICT services grew by 40% between 2010 and 2015 and amounted to $467bn (UNCTAD, 2017). The nature of traders is also changing. MSMEs, traditionally confined to local trade, can now offer their products and services globally. And, inevitably, trade barriers are changing as well. Until the year 2000, only 19 data localisation measures were imposed globally. The number of measures more than doubled in 2008 and it doubled again until today (ECIPE, 2018). Whether it is to address legitimate public policy concerns, such as the protection of online consumers, protection of privacy, combatting cybercrime, or for purely protectionist purposes, the fact is that new and diverse policy measures have been adopted across jurisdictions that risk fragmenting this emerging global digital market. Against this background, the aim of this CASE studentship, which will be undertaken in collaboration with the Department for International Trade (DIT), is to explore the extent of the gap between current trade rules and digital trade (Are current trade rules effective to combat digital protectionism?; Does the distinction between rules for trade in goods and rules for trade in services remain fit for purpose in a digital context?), identify and assess international rule-based initiatives to bridge such a gap (How are recent Preferential Trade Agreements (PTAs)

responding to these challenges?; What other state-led initiatives for cooperation on digital trade exist outside trade agreements?; What is the role of standard-setters and other non-state actors in the governance of digital trade?) and, where possible, suggest alternatives for improvement (To what extent recent reforms to adjust trade rules to this new landscape are suitable for securing an open and nondiscriminatory, but also safe digital market? What else could be done?). The project will contribute to our theoretical understanding of how trade governance adjusts to a changing environment. The research findings will generate new evidence to help DIT calibrate the formulation and implementation of its trade policy to the particular demands of the digital economy, including the negotiation of trade agreements with third countries.