Opening up the digital economy - it is '15 years overdue'

The EU has used protectionist measures to protect struggling electronics manufacturers, rather than pushing for opening up the internet abroad

The digital economy and the internet have virtually transformed everyday life, business and policy-making at all levels, except one - international trade. While the Anti-Counterfeiting Trade Agreement and the European Union's E-commerce directive looked at the potential implications of counterfeiting and consumer rights, the union has made little attempt to open up the emerging digital markets abroad. The IT trade agreement, designed to open up new market opportunities, was signed exactly 15 years ago at the World Trade Organisation. Since then - DVDs, online streaming and Blu-Ray have replaced VHS tapes. Software, previously distributed on 3.5 inch floppy disks, is now delivered online together with media, voice and video communication. And, not least, we have seen the arrival of the internet – which then went mobile and is on its way up to the cloud.

The players in the digital economy are now vastly different to the 1990s. With half a billion Chinese people online, China is easily the largest country – and Mandarin the biggest language - online. China has also emerged as the biggest exporter of IT products, ahead of the United States, and the iPhone alone has added almost $2bn to the American trade deficit. Europe, the world's largest exporter of services - thanks to its banks, phone companies and retailers - has been surpassed by India on technology service exports. Meanwhile, the EU has been driven by protectionist interests to protect the struggling manufacturing of household electronics - rather than pushing for opening up the internet abroad.

It is, perhaps, a gross understatement to say that the lack of progress has rendered the WTO obsolete for the digital economy. In absence of a global trade liberalisation, businesses have turned their attention to regional accords or bilateral trade deals - such as the Trans-Pacific Partnership and the EU's ongoing talks for a free trade association with India. Furthermore, opening up the digital economy for exports needs more than tariff cuts - which is the usual modus operandi for trade liberalisation. Bits and bytes are less affected by duties, while discriminatory over-regulation or censorship effectively stops all trade in matter of seconds. Restricting services - such as apps, maps and emails - can turn a smartphone into a useless and expensive iBrick.

In a policy paper for the European Centre for International Political Economy - we conclude that the digital landscape needs trade agreements that secure access to goods, services, infrastructure and competences. The next generation of trade agreements must include rules on product standards, discriminatory rules on licenses, data privacy, intermediary liability or local infrastructure requirements - just to name a few examples. Furthermore, we need to cut through the bureaucratic red tape that hampers transfer of specialised skills - even within the same firm. They are interface designers from London, system architects from San Francisco or database specialists from Bangalore.

It is a complex trade that treads across a minefield of traditionally sensitive trade issues. Obviously, the Directorate General for Trade at the European Commission will need more tech-savvy trade negotiators that read Chinese - with guts and mandates. Finally, an open internet and trade have significant values beyond exports. Ironically, cheap Chinese exports of mobile phones did much to topple the authoritarian regimes in Tunisia and Egypt, whereas years of EU sanctions and aid have failed. In the end, there is more than European competitiveness and jobs at stake in opening up digital trade.

Hosuk Lee-Makiyama is director of the European Centre of International Political Economy think-tank, in Brussels