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Regulating Across the Digital Divide

Most rules governing global trade were built to regulate the cross-border distribution of goods and services in traditional industries. But the rapid growth of the digital economy has exposed regulatory shortcomings that, unless addressed, could widen the gap between developed and developing economies.

LONDON – The increasing digitization of the global economy is changing how products and services are produced, distributed, and sold across borders. Technologies like cloud computing, artificial intelligence, autonomous systems, and “smart devices” are spawning new industries, and revolutionizing old ones.

But, while these changes could bring important benefits, the speed of digitization has also created daunting governance challenges, both within and across countries. Existing global rules – embedded in multilateral, regional, and bilateral trade and investment agreements – are being challenged by the new processes that digitization is enabling.

This is creating more space for national governments to intervene in the digital economy. China, for example, has established its own digital industries, using policies such as Internet filtering, data localization (requiring Internet firms to store data on domestic servers), and forced technology transfer to drive digital development. This has supported the emergence of major Chinese digital firms such as Tencent and Baidu, though it often has had adverse effects on freedom of expression and access to information.