2.3 Regional and global economic policy cooperation
2.3 REGIONAL AND GLOBAL ECONOMIC POLICY COOPERATION
Taxation, trade, consumer protection and competition are among the areas of economic policy that require new thinking in the digital age: they are the ‘guard rails’ of the digital economy. Increased cooperation could lead to effective national approaches and experience informing regional and global multilateral cooperation arrangements.
Currently, however, there is a lack of regional and global standards in these areas, and multilateral cooperation is generally not working well. This may inflict far higher costs than is widely recognised. To take one relatively simple example, regional and global standards in areas such as interoperability of mobile money systems and best practices for digital ID would have considerable benefits. To discourage misuse, such standards and practices would also need to include clear accountability.
International trade rules need to be updated for the digital age. Technologies and trade have changed dramatically since 1998, for example, when the World Trade Organisation (WTO) last brokered an agreement on e-commerce.79 In January 2019, 76 WTO member states announced the initiation of plurilateral negotiations on trade-related aspects of e-commerce.80 Any agreement will need to address concerns of a diverse range of countries, including lower-income countries in which the e-commerce sector is less developed.81
Some argue that restrictions on data flows should be treated like any other trade barrier and generally minimised.83 However, views differ sharply, and decisions on national legislation are complicated by concerns about privacy and security – discussed in the next chapter. Countries that require companies to store and process data within their national borders argue that it promotes local innovation and investment in technology infrastructure and makes it easier to tax global corporations.84 Others argue against such approaches on the basis that they are protectionist or represent an effort to obtain access to the data.
There is growing recognition that taxation is an area where digital technology has moved faster than policy frameworks. In particular, technology firms may operate business models – such as multi-sided platforms or “freemium” models – which offer free services to some individual users and earn revenue from other users, merchants or advertisers.85 A company may provide services to millions of people in a country without establishing a legal entity or paying tax there. This has become a source of growing popular resentment.86
International digital cooperation could assist countries to develop appropriate tax policies. The G20 and OECD’s Base Erosion and Profit Shifting project is currently seeking consensus on issues such as how a global company’s tax receipts should be allocated to different jurisdictions based on its business activities.87 An agreement in this area could offer countries a source of revenue that they could, for example, use to invest in human capital or lower the tax burden on small businesses.
Some countries are now taking unilateral action. Countries such as Italy, France and the United Kingdom (UK) have announced the intent to impose taxes on digital sales rather than profits, at least on an interim basis.88 Other countries, such as Thailand, have amended tax rules relating to offshore digital services.89 The lack of cooperation and coordination among different regulators is creating a patchwork of different national rules and regulations which makes trade and e-commerce more difficult. Ensuring that such emerging tax policies do not have unintended consequences on small enterprises or poor populations deserves special attention.
An international perspective is also needed to tackle concerns about competition, which have grown as large firms have established leading positions in many digital services. This is due in part to network effects: the more users a platform already has, the more attractive it becomes for new users and advertisers.
Recent discussions have proposed three main approaches.90 First, a relatively laissez-faire approach that favours self-regulation or minimal regulation. Proponents argue that government regulation is often poorly conceived and counterproductive, harming innovation and economic dynamism. Critics counter that an overly hands-off approach has led to a concentration of market power in large firms and abuses of privacy that have sparked public and government concern.
A second approach calls for more active state intervention to set rules for digital companies. Experience in industrial policy shows that such an approach can either help or hinder depending on many factors, including regulators’ willingness and ability to engage varied stakeholders in a smart discourse to balance competing interests effectively.91
A third approach suggests regulating digital businesses as public utilities, analogous to railroads or electricity companies. The analogy is not an exact one, however, as physical infrastructure is easier to segment and harder to replicate than digital infrastructure and lends itself more easily to hosting competition among service providers. There is also dispute about how contestable are digital markets – that is, how vulnerable are the leading firms to new competitors. Moreover, traditional competition law operates far more slowly than changes in technology.
Finding the right approach in these areas will require not only different countries to work together, but also regulators in different government agencies. Models for how agencies can come together for peer-to-peer information sharing include the International Conference of Data Protection & Privacy Commissioners and the International Competition Network.92
Alongside existing models, new models of governance and cooperation may be needed. They will need to be multi-stakeholder, including the private sector, civil society and users. Their debates should be transparent and open to citizens, as modelled by Mexico’s National Institute for Transparency, Access to Information and Personal Data Protection.93
Where possible, new regulatory approaches should be tested on a small scale before being rolled out widely – through, for example, pilot zones, regulatory sandboxes or trial periods. We stress the overall need for a “systems” approach to cooperation and regulation that is multi-stakeholder, adaptive, agile and inclusive in Recommendation 5B.
However, regulators need to have sufficient resources and expertise to engage in such an approach – and the Panel’s consultations highlighted concern that many regulators and legislators have insufficient understanding of complex digital issues to develop and implement policies, engage with companies developing technologies and explain issues to the public.94 This increases the risk of regulations having unintended consequences.
There are several existing examples of initiatives to develop the capacity and understanding of public officials, from countries such as Israel,95 Singapore96 and the United Arab Emirates (UAE).97 But much more could be done, and the Panel’s Recommendation 2 envisages “digital help desks” which would broaden opportunities for officials and regulators to develop the skills needed for the smart governance that will be required to create inclusive and positive outcomes for all.
Recent Comments on this Site
3rd July 2023 at 2:58 pm
I agree with Michael’s comment.
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3rd July 2023 at 2:56 pm
This first message makes no sense. Please take into consideration the comment made by Torsen.
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3rd July 2023 at 2:37 pm
3 The Ukrainian Internet resilience is impossible without worldwide cooperation, help and support. There are very good examples of such cooperation, and not very good. These lessons also have to be documented and analysed.
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3rd July 2023 at 12:14 am
In responding to the points around the impact encryption, I would ask that the comments I made around the UK’s Online Safety Tech Challenge Fund and academic paper by Ian Levy and Crispin Robinson are added to the key messages.
I referenced a paper by Ian Levy and Crispin Robinson, two internationally respected cryptographers from the UK’s National Cyber Security Centre, which set out possible solutions to detecting child sexual abuse within End-to-End Encrypted Environments that companies could be exploring to balance both the rights to privacy and the rights of children to grow up in a safe and secure environment free from child sexual abuse.
The link to the paper is copied below:
[2207.09506] Thoughts on child safety on commodity platforms (arxiv.org)
And the UK Safety Tech Challenge Fund:
Lessons from Innovation in Safety Tech: The Data Protection Perspective – Safety Tech (safetytechnetwork.org.uk)
It is important that we balance the concerns about the breaking of encryption, with the possibilities that should be being explored to prevent child sexual abuse from entering or leaving these environments.
Andrew Campling also made points about the right to privacy not being an absolute right and the need to balance this right, with other rights- another point I think that is worth reflecting in this final paragraph.
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3rd July 2023 at 12:00 am
I agree with the amendment Torsten has proposed to the initial text.
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2nd July 2023 at 11:58 pm
I would be careful about saying these images have been created consensually. Just because an image is “self-generated” it does not mean it has been created through “sexting”. Children are being “groomed” and “coerced” into creating these images as well.
I agree- however, with the rewritten text above regarding what companies currently do and what they will be required to do if the EU proposal becomes law and is clearer than what was written in the initial text.
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2nd July 2023 at 3:21 pm
The Internet has changed how war is fought, and how it is covered by media. At
the same time, the war has put “One world, one Internet” to a stress test. The foundations of global and interoperable Internet should not be affected by the deepening geopolitical divide, even though it has fragmented the content layer.
No one has the right to disrupt the global network that exists as a result of voluntary cooperation by thousands of networks. The mission of Internet actors is to promote and uphold the network, and to help restore it if destroyed by armed aggression.
The war has been accompanied by heightened weaponization of the content layer of the Internet. New EU legislation is expected to curb at least the role of very large platforms in spreading disinformation and hate speech.
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2nd July 2023 at 2:36 pm
I kindly suggest the following changes:
Please add these two important points that were said by the speakers/audience:
– There is an initiative on the Nordic level to protect children from the harms of the Internet, and this initiative has already been promulgated into legislation in Denmark.
– As the role of parents is crucial in educating children to use the Internet in a savvy way, also parents need education. That’s why we need adult education also from beyond the formal education system, just like the adult education system in Finland already provides training in basic digital skills.
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2nd July 2023 at 2:35 pm
I kindly suggest the following changes:
– governs => governments
– Replace this: ”Therefore, the contemporary political landscape requires three-level trust: political power; knowledge organisations; and individual.”
– By this:
– ”Therefore, the contemporary political landscape requires three levels of trust: trust in basic societal functions and structures of the society, trust in knowledge organizations, and trust between one another as individuals.”
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2nd July 2023 at 2:32 pm
I kindly suggest the following changes:
Replace this: ”Thus, one of the key priorities is to enhance citizens digital literacy and education going beyond only digital competencies and including cultural aspects.”
with this: ”Thus, one of the key priorities is to enhance citizens’ digital literacy and education by going beyond just digital competencies and including also ethical, social and cultural dimensions.”
Add this important point that was said by the speaker: Responsibility for digital information literacy education lies not only with the formal education system, but also cultural institutions, NGOs, youth work play a key role.
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