The Digital Trade Agenda and Africa

14 March 2018
Digital Economy

Digital technologies and data flows are increasingly the subject of provisions in trade negotiations. How do African states position themselves in these discussions in order to expand their digital economies and support digital industrialisation?

 

In this article, we discuss recent trends towards regulating broader aspects of digital technologies and data flows through international trade rules. Given the growing importance of digital technologies and data, these changes are likely to shape the future directions of digital economies, industrialisation and structural change in Africa. Yet, at present there has been little consideration of the specific challenges that African countries face.

From e-commerce to digital trade

In recent years, trade policymaking in the areas of digital and data has rapidly evolved. Trade chapters concerning “e-commerce” are now being discussed in terms of “digital trade”. This change in terminology signals an expansion in focus towards regulating a broader set of cross-border digital issues.

It is worth considering the drivers behind the move towards “digital trade”. The most important factor is the rapid expansion of digital technologies, tools, and services globally. As connectivity is expanding across the globe, digital services and data are becoming an integral aspect of economies in areas such as e-commerce and e-government. We are also at the cusp of a whole new set of innovations in areas such as artificial intelligence (AI), cloud computing, digitally-integrated machines, and big data that promise to shape global economies over the coming decades.

There has also been the expansion of firms with global business models that exploit digital tools and data flows. This includes well-known digital firms as well as global firms that are incorporating the digital delivery of goods, services, and data into their core models. These firms, typically originating from the US or the EU, have often encountered barriers when seeking to enter foreign markets. In some regions, rules preventing data flows or limiting trading in foreign markets have limited firm expansion. Moreover, uneven regulatory frameworks across countries increase the cost of the global business models of these firms. Given the growing political mobilisation by such firms, their agendas for free digital trade have consequently become part of national trade goals, particularly in the US.[1]

These drivers have led to the introduction of binding rules in various trade negotiations, with the goal of preventing so-called digital trade barriers. Examples of rules that have been proposed include rules which would force nations to allow free flows of data across borders, rules which would prevent foreign firms from being forced to store data locally, and rules which would prevent market conditionalities or tariffs being applied to foreign digital firms. Instituting such rules in trade deals make them subject to dispute settlement mechanisms, meaning that even for states without significant national digital assets, diverging from these rules could be damaging through retaliation in other sectors of their economies.

Within bilateral and regional trade agreements, the most notable success around digital trade has come in the agreed e-commerce chapter of the Trans-Pacific Partnership (TPP) – which is likely to remain in place in the modified Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) agreement following US departure from this trade bloc. Digital trade and data flows are also part of the for-now-stalled Trade in Services Agreement (TISA) and Transatlantic Trade and Investment Partnership (TTIP) negotiations. Renegotiations of the NAFTA agreement are addressing some of the digital issues as well. Some bilateral free trade agreements (FTA) already include digital trade rules, such as the EU-Japan and US-Korea FTAs. While such rules will only directly affect states that are party to these agreements, they will indirectly affect other countries through increasing the pressure to adopt such rules multilaterally. Indeed, we are already seeing similar proposals at the WTO to expand the existing work programme on e-commerce to more broadly include digital trade (see next section).

In Africa, many policymakers are still grappling with the challenges of basic provision of digital connectivity. Only a few have begun considering the broader implications of the digital economy and digitisation. However, these issues have major implications for the African continent. In terms of trade rules, there are questions of how digital trade rules will interact with existing trade agreements. In services, for instance, a number of African countries have maintained protections under the General Agreement on Trade in Services (GATS) agreement of the WTO. Rapid growth in digitally-delivered services is weakening these protections and many countries suspect that digital trade rules are a way to push for complete free market access for services. There is also a growing focus by African states on industrialisation and structural transformation. In an era where the digital is increasingly becoming central to industrialisation and technological catch-up, understanding the impact of digital trade rules is vital for industrial strategies.

Our analysis suggests that, at present, only Nigeria is coherently pushing national digital policy, through legislation supporting local digital content and forcing foreign firms to localise their data. In these actions, Nigeria is clearly attempting to leverage digital access to its large market to promote local digital capacity. Outside Nigeria, there is a scattering of legislation that might be highlighted as falling within the scope of digital trade.[2] For example, Algeria and South Africa have local rules on e-commerce considered challenging for foreign firms. In the bigger picture of digital trade, however, these rules in Africa are likely to be having only marginally effects on digital sectors or data flows today.

African negotiating positions

There are good reasons why African countries might sign up to digital trade clauses in trade agreements. In the short term, it could support the development of the digital economy nationally, particularly on the consumer side of the economy. Consistent rules could help attract foreign digital firms who are developing global business models. For instance, growth in digital payment ecosystems and logistics can be an enabler of e-commerce at a national scale. In the medium term, rules also provide a basis for digital or digitised businesses to expand beyond their borders without risk of barriers. This might be particularly valuable in smaller African countries where regional reach is central to firm growth.

However, there are also risks in agreeing to overly-broad rules on open digital trade. Whilst multilateral trade negotiators and experts might argue otherwise, digital trade is still a very loosely defined term and the implications of digital trade rules are still not well understood. The lack of knowledge of digital policy also comes from the fact that digital technologies are still rapidly evolving, with significant developments in areas such as AI, drones, and digitisation emerging in the past one or two years.

Committing to binding rules at this early stage appears problematic and could impact the ability of nations to build coherent “digital industrial policy”. It may be that to develop more rapidly in the digital area in the future, African states will look for more strategic policy options aimed at fostering structural change, rather than simply committing to liberalising agendas. Such an approach might lead to a push for more interventionist measures, or more likely intermediate positions around digital trade where sectoral or dynamic rules are implemented with respect to digital trade.

Manoeuvring at the WTO

Discussions on e-commerce were an important part of the 2018 WTO ministerial conference in Argentina and in line with our discussion above, there were attempts to broaden the WTO e-commerce agenda to include digital trade. The history of the e-commerce work programme goes back to its initial establishment in 1998. Discussions waned somewhat during the mid-2000s due to a lack of interest, but recently debates have been revived alongside growing demands for digital trade rules.

Exploring the negotiating positions that were formulated by WTO members ahead of the ministerial, we see a number of attempts to broaden and reposition the e-commerce agenda towards digital trade. In early discussions, the US looked to outline a list of digital issues in an attempt to open up the negotiations, reaching well beyond e-commerce.[3] However, with the change of administration, the US drastically reduced their activity in later discussions. With the US fairly muted, negotiations were pushed forward within an “e-commerce for development” agenda driven by Costa Rica, with support from an alliance of other developing countries such as Pakistan and Colombia.[4] This alliance was argued to be more focused on e-commerce, with particular emphasis on the potential for SMEs to become involved in exports through e-commerce. This proposal also had the implicit support of China, who with ambitions of global e-commerce expansion supports similar agendas.

During negotiations, strong opposition to these proposals came from a number of fronts. Notably, opposition came from a well-organised African Group who repeatedly questioned the proposals put forward.[5] Concerns were that African economies, still to be industrialised, would potentially lose from expanded rules. In their most combative submission, the group argued that “the multilateral rules as they are, are constraining our domestic policy space and ability to industrialize”.[6] Even the more modest positions from Costa Rica were questioned and considered as disguising other agendas, with the document stating that “the African Group views the so-called 'E-commerce for Development Agenda' as a 'Trade Liberalization Agenda'.” The African Group’s position was to ensure that they retained their “policy space”, with emphasis on the need to iron out technical challenges but without installing new directions on e-commerce – be it under the current work programme or within a new framework.

Prior to the ministerial, there were statements that this would be the “e-commerce summit”, with revived impetus and agendas showing the potential of the WTO to modernise. In the end, however, no substantial multilateral outcome was reached, with WTO members adopting a relatively neutral ministerial decision that only preserved the status quo. A group of 70 members also signed a joint statement, indicating that they “will initiate exploratory work together toward future WTO negotiations on trade-related aspects of electronic commerce,” though notably this did not include any African country except Nigeria. Whilst this lack of multilateral result was perceived as a failure in some quarters, it might be seen as a success for African negotiators in terms of agenda setting.

Towards African alliances in digital trade

Principally, our argument is that the appropriate directions for digital trade policymaking are not well established. At this early stage, stalled debates and conflicts should not be seen as a failure but an important part of the process of finding equitable policy directions, particularly for regions such as Africa. In our view, it is too early for African states to commit to the types of digital trade policy typically being set out in negotiations. It makes sense that Africa looks to undertake rules at the margins to smooth the availability of foreign platforms and e-commerce, but with attention to avoiding overly committing to rules that will have long-term impacts.

Given that the future directions of digital trade are already starting to be institutionalised, it is essential that African leaders are able to articulate their position in order to shape agendas going forward. The outcomes of negotiations in agreements such as the CPTPP and TISA are likely to be taken as norms for future multilateral rules. This then poses the more difficult question of how African states can best engage to avoid problematic rules being imposed on them in the future.

The WTO discussions highlight useful directions going forward for Africa. African negotiators were able to come together, understand the issues more deeply, and clearly articulate their position. In the WTO process, various positions, alliances, and potential directions emerged through critical discussions involving a broad set of stakeholders beyond just technology firms, and this should continue. It would also be recommended that debates on digital trade be expanded outside the pressured, non-transparent environment of trade negotiations. Expanding the use of multi-stakeholder fora such as the UN World Summit for Information Society (WSIS) process or the Internet Governance Forum (IGF) with a view towards building alliances and suitable policy approaches would be prudent. There is also a responsibility on leading digital nations in Africa, notably Nigeria and Rwanda, who can drive African alliances forward in the future.

To summarise, we have discussed the move from rules around “e-commerce” towards “digital trade” within the international trade regime. As should be evident, digital trade is a rather loosely defined area, often driven by those who set the agenda. In a world of digital disruption and evolving data flows, there is a strong need for a better understanding of best policy practices, and even more so in the context of African economies.

Moving forward, African leaders need to be careful not to undertake policy commitments that would bind their hands too much for the future. They should be building an understanding of the way forward and nurturing alliances as a means for making their agendas more coherent. Now is the time to begin to form these agendas which are likely to remain at the forefront of trade debates in the coming decades.


Authors: 
Christopher Foster, Lecturer in ICT and Innovation, University of Sheffield. Shamel Azmeh, Assistant Professor of International Development and International Political Economy, University of Bath.


[1] Azmeh, Shamel, and Christopher Foster. “The TPP and the Digital Trade Agenda: Digital Industrial Policy and Silicon Valley’s Influence on New Trade Agreements.” Working Paper. International Development, Working Paper Series (16-175). Department of International Development, London School of Economics and Political Science.

[2] ECIPE. “Digital Trade Estimates Database.” Brussels, Belgium: European Centre for International Political Economy, 2017.

[3] WTO. “Work Programme on Electronic Commerce: Non-Paper from the United States.” JOB/GC/94.

[4] WTO. “Work Programme on Electronic Commerce: Communication from Costa Rica.” JOB/GC/139.

[5] Not all the region was united, for example Nigeria with its growing push for e-commerce took a different position

[6] WTO, “The Work Programme on Electronic Commerce: Statement by the African Group.” WT/MIN(17)/21.

This article is published under
14 March 2018
Beyond its effect on incomes, trade can also have significant developmental impacts through its influence on the price, quantity, and quality of goods available within markets. How can African...
Share: 
14 March 2018
The growth of the Internet can generate significant economic opportunities in Africa, in particular when it comes to e-commerce. What are the challenges hindering the development of African e-...
Share: