In 2020, the Covid-19 pandemic has brought to the fore an urgent need that first emerged in 2018, at the beginning of the trade war between the United States and China: the need to reform the organisation of the WTO. Unfortunately, it has also complicated the choice of possible alternatives. The G20, which has incorporated a Trade and Investment Working Group since 2016, is now urgently examining the implications of the pandemic for international trade and investment. The coronavirus has unleashed not only an unprecedented global health crisis, but a worldwide economic, trade and investment crisis too. Trade has been hit by simultaneous shocks to supply, demand and cost, and is currently languishing in the most serious crisis of the last 50 years.
One of the themes raised in recent months and presented at the G20 is that the measures taken to halt the pandemic must not themselves obstruct recovery. While the crisis will inevitably create unavoidable costs, it is being emphasised that governments must at least limit avoidable ones. Among such costs, obstacles to trade and restrictions on exports must give way to trade facilitations and the elimination of duties, and to the rationalisation of non-tariff measures on medical goods and foods.
The pandemic has further accelerated digital transformation since it has naturally favoured digital over physical trade. It has therefore made even more pressing the need to tackle the problems involved. While it was once thought that services would be the hardest hit, results have proven the contrary. Though certain service sectors will be damaged by restrictions on transport and travel, others will benefit from the adoption of digital alternatives to replace face-to-face transactions. At the same time, modern services based on digital offerings will probably prove more resilient and could even enjoy a rise in demand. Services like telecommunications, IT and digital entertainment, along with professional services, can be delivered across borders without face-to-face contact and will therefore be less penalised and even likely to expand in the short term as a result of social distancing. Online retail services, at least for certain types of goods, have already grown in many markets, though international success depend on the ease of transporting goods across borders.
Since the pandemic has accelerated the existing trend towards digital trade, domestically and internationally, companies that have already completed their digital transition have left others behind, especially small and medium enterprises (SMEs) who have not yet put in place digital sales processes. Today, efforts to accelerate the digitisation of commerce can create opportunities for SMEs by further reducing sales costs and overcoming breaks in the supply chain, providing access to a wider range of international customers and suppliers. It is believed that the adoption of advanced digital solutions will also help SMEs become more resistant to future economic downturns.
At the same time, efforts are being made to build unconditional faith in the benefits of global digital connectivity, especially as a way to achieve inclusivity and convergence in access to resources and information, in line with the objective of the UN High Level Panel on Digital Cooperation of 11 June 2020. Yet we now read in G20 documents that one of the principal post-pandemic challenges will be to develop a framework of inclusive economic rules to ensure that developing countries will be able to participate effectively in the digital economy and share in its benefits. This means that rapid progress must be made in constructing a more effective architecture for digital cooperation, and that proper digital governance must be put in place immediately. The growth in international digital commerce has been a real shock for the international trade system in the absence of a legislative framework to regulate it.
Unfortunately, the WTO’s regulatory framework is proving unsuited to tackling international rivalries exacerbated by an economy based on knowledge, advanced digital technologies and intellectual property, to say nothing of dealing with even more complex questions raised by an economy based on international data circulation. WTO rules were formulated to suit the industrial economy and global competition of the last decades of the 20th century, and to gradually integrate developing nations into the global division of labour and provide them with access to modern technologies.
Today’s data-based economy is generating extremely positive conditions associated with the benefits of technological change and is driving investment in the public sector. At the same time, it is amplifying the risk of powerful negative effects due to the abuse of dominant positions. This demands clear legislative responses from the public sector, covering areas ranging from privacy and consumer data protection to competition.
The pandemic is aggravating the need for systemic governance to make the international trade system more resistant to global challenges like natural or environmental disasters, and also to reflect levels of access to online retail that could reach 30% in Asia by 2025. We therefore need a global WTO negotiation to construct national and international governance systems for services, including data governance obligations. At the G20 level, an understanding of the need for modern digital infrastructure, capable of improving the resilience of companies and entire sectors, needs to be complemented by a greater awareness of the serious risks involved in pursuing global digital connectivity before an adequate legislative framework is in place.