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Challenges Increase in Rising Digitization of Global Economy

While some countries have managed to take advantage of the current regulatory environment to advance their own digital capabilities, many developing countries risk being left behind
Multinational digital firms, mostly based in the US, have pushed for globally harmonized rules that would provide predictability and limit the space for national governments to intervene in digital flows.
Multinational digital firms, mostly based in the US, have pushed for globally harmonized rules that would provide predictability and limit the space for national governments to intervene in digital flows.

The increasing digitization of the global economy is changing how products and services are produced, distributed and sold across borders. Technologies like cloud computing, artificial intelligence, autonomous systems, and “smart devices” are spawning new industries and revolutionizing old ones.

But, while these changes could bring important benefits, the speed of digitization has also created daunting governance challenges, both within and across countries. Existing global rules—embedded in multilateral, regional and bilateral trade and investment agreements—are being challenged by the new processes that digitization is enabling, news outlets reported.

This is creating more space for national governments to intervene in the digital economy. China, for example, has established its own digital industries, using policies such as Internet filtering, data localization (requiring Internet firms to store data on domestic servers), and forced technology transfer to drive digital development. This has supported the emergence of major Chinese digital firms such as Tencent and Baidu, though it often has had adverse effects on freedom of expression and access to information.

Governments elsewhere increasingly view such digital policies as a way to catch up with advanced digital economies, like the United States. But, while some countries have managed to take advantage of the current regulatory environment to advance their own digital capabilities, many developing countries risk being left behind.

One factor is that the effectiveness of existing global rules is being eroded. The WTO’s General Agreement on Trade in Services, for example, governs trade in services through different “modes of supply.” Many developing countries agreed to liberalize cross-border delivery of services (so-called “mode one” trade), never anticipating just how dramatically the digital economy would revolutionize cross-border economic opportunities and enable more services to be delivered across borders. Today, these earlier commitments are becoming economically meaningful.

 Governing Digital Economy

In recent years, debates about how to govern the digital economy have intensified. Multinational digital firms, mostly based in the US, have pushed for globally harmonized rules that would provide predictability and limit the space for national governments to intervene in digital flows.

Supporting such efforts, the (ex-president Barack) Obama administration made the digital domain a core part of US trade policy. Provisions on the free flow of data, together with prohibition of data localization and forced technology transfer, were included in so-called “twenty-first-century trade agreements,” like the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership. The objective was to bring digital oversight to two major markets—the Asia-Pacific (under the TTP) and the European Union (under the TTIP)—as an important first step toward global rules in these areas.

Negotiations for digital rules under the TPP proved difficult, but ultimately were successful; the Obama administration overcame opposition by offering better market access for manufactured goods to some TPP partners.

TTIP negotiations proved more challenging, with some European states, particularly France and Germany, opposing the rules out of fear that they would enable US firms to dominate the European digital economy.

 Digital Shift Optimize Marketing

As more consumers adapt to an increasingly digitized society, grocers and companies have evolved swiftly to capture shoppers’ attention. Not only is it good business, but it’s essential, considering that digital content influenced 51% of grocery purchases in 2016, and 34% of grocery shoppers used their smartphones while in-store to help choose brands, smartbrief reported.

Retailers can use their digital offerings to catch the attention of consumers even when they aren’t shopping. In addition, the digital landscape creates new competition for brands. The data that’s available to retailers and brands now provide them with a much better understanding of consumer behavior and needs, so offers can be tailored to individual consumers.

The developing digital landscape doesn’t just impact how consumers shop—it also changes other features of the overall retail experience. Digital options can allow grocers and brands to market their products to consumers without having to spend millions on advertising.

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