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Driving Digitization at Regional Levels
The Internet has succeeded thanks to multilateral, multi-stakeholder dialogues that have created the basis for market forces to spread the web. However, today, governments face two-fold challenges in translating digitization into trade, economic development and inclusive growth:
How to provide access to the billions of still-disconnected; and
How to best ensure companies, consumers, and the government itself use and fully leverage the new technologies when they do become available to streamline operations, develop new solutions, and transact more efficiently.
Numerous obstacles stand it the way. Some include national policy and regulatory barriers to the flow data and ecommerce, trade in digital products and services, and government procurement of IT services. Others are disparate national standards in the digital economy that create frictions resulting in welfare losses to consumers. Still others involve gaps in policies and public investments to advance the digital economy. All these issues touch on ongoing debates on trade policy, trade facilitation, and trade and development alike.
The purpose of this paper, produced for the Inter-American Development Bank and American University's project on regional public goods, is to take stock of gaps in digitization in different world regions and in intra-regional digital flows, and put forth an agenda for different regions to foster their digital economies.
The paper highlights two areas where regionalism can substantially complement multilateral and unilateral measures:
Regional scale economies. Regions with barriers to the movement of digital goods and services and without common internet interconnection points, interoperable payment networks, harmonized mobile spectra or interoperable internet laws are not in a position to create the type of scale economies that have allowed the existing common digital markets such as the United States and China to create such global companies as Facebook, Google, and Alibaba. Common digital markets are critical for lowering costs to every economy and incentivizing investment and startup formation in any one national market, particularly when national markets are small. Common digital markets can also better weed out inefficiencies, such as excessive numbers of national operators that can be consolidated.
Regional digital trade and ecommerce. Digitization is not only about flows on the web – not until all goods and services digitize. Ecommerce is online marketplaces whereby most products are still shipped physically. Given the high importance of fluid door-to-door logistics, limited capabilities of smaller firms to comply with complex trade rules, and the high sensitivity of small parcels, the hallmark of ecommerce, to time and cost of transit, regional trade policies; common, simplified customs procedures; common ecommerce laws; and shared logistics services and networks matter a great deal.
Many regions have already engaged in such efforts, such as ASEAN through cooperation in ecommerce and EU in forming a single digital economy. This paper puts forth ideas and solutions for further regional action.
Access Powerpoint here