Technology has been exponentially advancing for decades. But nothing could have prepared us for our dependency on digital reality during the pandemic. Almost overnight our entire lives have become liveable through screens. We work in virtual offices; shop at online supermarkets; socialise at virtual pub quizzes and exercise to an online personal trainer.
There is no fixed definition for digital trade, but according to OECD, it is widely recognised as ‘encompassing digitally enabled transactions of trade in goods and services that can either be digitally or physically delivered, and that involve consumers, firms, and governments.’
The rise of online platforms has made it easier than ever before to start a business. A university student can create an account on a website like Depop and begin selling clothes to consumers all over the world. Promotion of the company won’t be hard given the power of social media. Networking can occur on LinkedIn. Payments can be facilitated through PayPal. Then all they need to do is package the item up, post it, and it arrives within 5 business days. Data flits throughout the whole process.
This is where the government comes in. Digital trade gives significant meaning to the phrase ‘Global Britain’, a recurring ambition since we left the EU. An important aspect of this is the government’s ambition to establish the UK as a global services, digital and data hub. A big part of this strategy is to embrace innovation in science and tech to boost national prosperity and give the UK a wider strategic advantage.
However, while digital trade opens up an increased scope, scale, and speed of cross-border connectivity, the government has to juggle the benefits of these opportunities with the need to ensure data protection. Given how difficult it is to track data, and therefore control it, the importance of strengthening cyber security measures is higher than ever, especially considering cyber crime has quickly become the new weapon of choice in the geopolitical struggle.
Added to this is the issue of localised date protection regulations. The EU, for example, prohibits businesses that collect personal data in the EU from transferring data outside the EU unless the receiving country has an equivalent level of privacy protection. In other cases, countries heavily regulate online content for censorship reasons. For example, Iran blocks anything offensive to Islam, and China blocks many of the major social media platforms because of the threat of anti-Communist Party sentiment.
From data protection comes data protectionism, which certain countries may be tempted to adopt in order to boost local technologies. For instance, the success of China’s Weibo can partly be attributed to the lack of domestic competition from Facebook or Instagram. The absence of a global standard is a challenge when nations want to coordinate and partner in the space of digital trade.
Free Trade Agreements (FTA) can play a significant role in ensuring that we still engage competitively in global digital trade. Recent FTAs have stronger provisions for enabling cross-border flows of data. Our new Digital Economy Agreement with Singapore ‘will champion the role that digital technologies can play in facilitating trade, encourage interoperability in our digital systems, connect the thriving innovation ecosystems in the UK and Singapore, and explore the use of emerging and innovative technologies.’
Furthermore, the Comprehensive Economic Partnership Agreement that we signed with Japan in 2020 promises to avoid unjustified restrictions on the free flow of data between the UK and Japan so businesses can collect, process, and transfer data between the two countries without facing unnecessary red tape. Additional safeguards to use, store, and process financial data on a cross border basis will mean UK businesses supplying financial services in Japan are not obliged to store financial data in Japan, thus avoiding associated costs of maintaining multiple data servers across jurisdictions.
According to ONS data, a new tech business was launched every half an hour in the UK between January and December 2020. That’s a lot of data, a lot of online activity, and a lot of start-ups waiting to take advantage of the new digital era.
As the stream of digital trading continues to gain momentum, greater attention to supporting infrastructures will become ever more necessary. This will range from streamlining digitalisation at borders to facilitate the surge of parcels; developing road and rail networks to support logistics, courier and transportation services; investing in, and raising awareness about cyber security measures, and continuing to leverage FTAs on behalf of the digital economy.
OECD Digital Trade:
Digital trade - OECD
UK Singapore joint statement on the launch of negotiations on a Digital Economy Agreement:
UK Singapore joint statement on the launch of negotiations on a Digital Economy Agreement - GOV.UK (www.gov.uk)
UK-Japan Comprehensive Economic Partnership Agreement: Benefits for the UK:
UK-Japan CEPA: benefits for the UK - GOV.UK (www.gov.uk)