Digital Trade in Services

Digital Trade in Services and Data Flows

Digital trade in services refers to services supplied internationally over the Internet. Digitalization has helped boost the tradability of services since providers and consumers do not need to be in the same place. Cross-border services exports, including through electronic means, amounted $ 3.7 trillion in 2017.

With physical distancing measures in place to mitigate the spread of COVID-19, billions of people have been working and learning remotely, often providing and receiving cross-border services – from IT and consulting to distance learning and tele-medicine. Even before the pandemic, experts expected digital trade in services to increase substantially in coming years, particularly as consumers became familiar with the convenience, innovation and options available online.  

Yet, just as digital services trade is increasing so too are the barriers, some new and some created by outdated regulations. These range from  friction on payments across borders and the obligation to establish a local presence to access to communication infrastructure and how to adapt tax systems to digitalization and globalization. A major cross-cutting barrier to cross-border trade in services consists of restrictions on cross-border data flows.

Data flows support new types of services delivery, manufacturing and value creation, while boosting existing international trade. Data flows also enable scientific advances in critical areas like health, environment and conservation of biodiversity, as well as overall societal benefits. Facilitating personal and non-personal data flow across borders is essential. Some governments have sought to limit data transfers in a bid to protect data privacy, security, intellectual property and law enforcement. Insufficient trust between policymakers in these areas has encouraged a rise in restrictions.

Regulatory cooperation and trade deals have begun to address these restrictions and new plurilateral trade talks are underway at the World Trade Organization (WTO). There is a need to support these efforts through multistakeholder dialogue on solutions that will work for good data governance across different types of jurisdictions and facilitate stakeholder compliance – including for small and medium sized enterprises (SMEs).

Data flows and digital services offer a significant opportunity to build a more inclusive economy. SMEs engage in digital services trade much quicker than manufacturing-related trade. Moreover, many business and professional services can be delivered digitally, and are key to determining competitiveness in downstream production of goods and other services. As a result, ensuring access to digital services can improve the competitiveness of local firms that might not have access to local providers in the market, or have less choice available.