Fourth Industrial Revolution

How will trade policy play out in cyberspace?

Internet LAN cables are pictured in this photo illustration. Image: REUTERS/Tim Wimborne

Corrado Sciolla
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Cross-border commerce and communications are changing fast. Opportunities for trade with opposite hemispheres are no longer limited to large manufacturers. And worldwide employees of the same company can collaborate as if sitting in the same room.

International standardisation has played a large part in this progress. Uniform specifications for freight containers and Internet data packets have established ecosystems now covering the planet. They have made the world smaller and the global economy bigger.

Policymakers have recently provided help in the form of the trade facilitation agreement which WTO Members concluded in Bali in 2013. The accord aims to simplify customs checks and it has been estimated that a reduction in border delays for freight containers could add at least $400bn to global GDP.

Is there similar scope to expand the societal benefits of cyberspace standardisation? Close inspection of the Internet ecosystem reveals another great chance to increase world welfare.

Internet Service Providers selling basic “best efforts” connectivity to private consumers only require a physical link between their customers and the geographic point where they exchange packets with other service providers. But providers of the sophisticated managed connectivity bought by multisite businesses need to use data pipes along the full length of a packet’s journey.

This second type of service provider is like a logistics contractor which operates its own fleet of container ships while buying services from road and rail companies across the world. Exercising end-to-end control, it guarantees secure just-in-time delivery for its enterprise customers.

With the assistance of managed connectivity providers, employers in all countries can generate substantial growth in the global economy. Across sectors, cloud computing’s impact on productivity and innovation is likely to be largest in cases where complex transnational network and IT environments have been properly integrated. Proprietary corporate information has to be instantly available everywhere and, at the same time, it has to be available only to authorised individuals.

However, such puzzle-solving work is frequently frustrated by problems with the supply of business-grade data pipes. These essential facilities are too often overpriced or simply unavailable. Standardised internet technology is indeed not enough in itself.

In addition to the cooperation of suppliers of critical intra-corporate communications, enterprises need more help from policymakers. To beat the GDP promises of the Bali agreement, the global use of company-wide IT applications must be supported by better conditions of access to high quality data pipes. That requires the enforcement of competition law.

Countries can improve the efficiency of digital value chains through unilateral regulatory reform. But national benefits can be maximised by the Trade in Services Agreement which some fifty governments are currently negotiating in Geneva - Internet technology’s network effects will be boosted if TISA ensures that all managed connectivity providers can buy point-to-point bandwidth under equivalent terms and conditions.

Such an agreement will allow for full realisation of Big Data’s potential as a new factor of production. It will also unblock further development of “trade in tasks”. Future economic historians might consequently look back on TISA as the true beginning of a fourth Industrial Revolution.

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Fourth Industrial RevolutionTrade and Investment
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