Essential elements for digital trade governance

The world has entered an era of new globalisation, defined not just by the movement of goods, people and money but also by data flows around the world. With the adoption of advanced technologies—from AI-based systems for predictive supply-chain analytics to digital platforms connecting international buyers and sellers—there has probably never been a better time to establish new rules of engagement.

A global survey, conducted by Economist Impact of over 3,000 executives, finds that nearly two-thirds of companies (63%) are actively using digital platforms to sell their goods or purchase raw materials. This requires the flow of data across borders, starting from the identities of key players to information about the goods and services being transported.

According to Anna Joubin-Bret, the secretary of the United Nations Commission on International Trade Law (UNCITRAL), who spoke at Economist Impact’s Trade in Transition event in March, there are two key considerations. The first is governing digital identity. “In some situations identity is given by the platform—for example, Facebook will say who you are as the buyer and seller, so there is a new player in the trust relationship,” she says. “This intermediary comes with its services but [also] additional liabilities and issues.” To establish standards in identity management, UNCITRAL has developed a draft model law, which aims to increase transparency and protect businesses and end-users. The second is governing digital dispute-resolution mechanisms on online platforms. Ensuring that they adhere to the same principles as traditional physical arbitration systems of fairness, equality and transparency is imperative, says Ms Joubin-Bret.

UNCITRAL is working on a framework for crossborder data transactions, drawing inspiration from the existing UN Convention on Contracts for the International Sale of Goods that provides harmonised default rules to contracting parties from over 90 jurisdictions.¹ This framework should provide guidelines to define who owns the data, the rights and obligations of buyers and sellers, and rules for addressing a breach of contract. It is also expected to feature additional rules specific to data, such as transparency, traceability or technology neutrality. The aim is for data transactions to take place in a predictable way.

Importantly, these international laws are being designed to complement rules already enshrined in regional free-trade agreements. This is critical, because divergent guidelines in different countries would create a fragmented environment for companies to operate in, akin to the alphabet soup of ESG regulators and their frameworks through which companies have to wade, imposing a significant administrative burden on them.

Ultimately, for digital platforms and crossborder data transactions, the North Star is inclusivity to bridge the digital divide. Our survey reveals that companies in North America have the highest rates of advanced technology adoption, while the rates are lowest in Africa (see Figure 1). Creating international guidelines will enable governments around the world to establish national standards and laws that apply to all rather than having the few—corporate giants such as Google and Alibaba—define them, says Ms Joubin-Bret.

In addition, Ms Joubin-Bret explains, facilitating crossborder data transactions could accelerate data imports into developing countries, which could spur growth in their digital economies. In our survey, the highest shares of executives who expect to increase their adoption of advanced technologies in 2022 are located in Africa and the Middle East, with 40% in Africa and 34% in the Middle East planning to use AI and big data analytics to gain real-time insights and predict possible disruptions (see Figure 1). Clear and standardised guidelines for international data contracts will be fundamental to an equitable expansion.