Policy paper

Digital trade objectives

Published 20 September 2021

Digital trade - our approach

Digital trade helps British businesses grow

International digital trade is now a significant driver of productivity and business growth in the UK. The digital sector contributed £150.6 billion to the UK economy in 2019,^{[footnote 1]} employing 4.6% of the national workforce,^{[footnote 2]} and firms selling goods or providing services digitally have taken local markets to a global scale. In 2019, the UK’s remotely delivered trade with the world was £326 billion – around one quarter of Britain’s total trade in that year.^{[footnote 3]} Globally, some estimates suggest that digital transformation investments could total $6.8 trillion between 2020 and 2023.^{[footnote 4]}

Digital trade allows British businesses to share the benefits of prosperity by:

• reaching a wider consumer base by selling online
• trading more efficiently and cost-effectively by streamlining shipping, logistics and other trading processes
• connecting and growing their workforce across different regions of the world

The ability to connect digitally alongside more traditional methods also makes the supply of services more resilient to disruption. A recent study suggests the ability to connect remotely has mitigated the impact of the coronavirus (COVID-19) pandemic on the cost of supplying services.

Digital has been integral to this, with digitally-intensive services such as accounting, legal and engineering seeing some of the greatest benefits.^{[footnote 5]}

Our vision for digital trade

Our vision is for the UK to be a global leader in digital trade, with a network of international agreements that drive productivity, jobs, and growth across the UK.

The existing and emerging barriers to achieving our vision are considerable. While some countries are more open to digital trade, others are taking a more protectionist approach. We aim to deliver our vision by addressing a range of barriers in 5 areas:

1. open digital markets

2. data flows

3. consumer and business safeguards

4. digital trading systems

5. international cooperation and global governance

These 5 pillars - and our broader digital trade strategy - will complement:

• our wider international trade programme
• the plan for growth
• the levelling up agenda
• our trade and investment campaigns

Building a global network of digital trade agreements

We are already making great strides in building a network of international agreements on digital trade. A priority is to expand the UK’s digital trade in the Asia Pacific region where technological innovation and the digital economy are growing rapidly. Our goal is to be the European partner with the broadest and most integrated presence in the region – committed for the long term, with closer and deeper partnerships, bilaterally and multilaterally.

Our free trade agreement with Japan was the first for the UK in the Asia Pacific region to set a new standard for digital trade, reflecting the status of the UK and Japan as digital leaders. We have built on this, agreeing a trade deal with Australia that sets out ambitious digital trade proposals, increasing opportunities for both countries across all sectors of the economy.

In June, we launched negotiations on a cutting-edge digital economy agreement with Singapore, with the aim of pushing the frontiers of digital trade further. At the same time, negotiations with the United States and the members of the Comprehensive and Progressive Trans-Pacific Partnership will build the UK’s digital trade connections even further across the Indo-Pacific region.

These efforts complement initiatives such as the digital trade network (DTN) – a joint Department for Business and Trade (DBT) and Department for Science, Innovation and Technology (DSIT) initiative to increase the UK’s digital and technology capacities in the region. Our DTN enables new collaborations, supports businesses to increase trade and investment and fosters digital innovation to improve people’s lives and make businesses more productive.

We are also growing our network of digital trade agreements in other regions. Negotiations with India on a new free trade agreement will provide potential opportunities in another rapidly growing market in Asia. Our trade deals with Norway, Iceland and Liechtenstein include provisions that make them the most advanced deals for digital trade signed by the 3 countries to date.

While we continue to build the UK’s network of bilateral and regional agreements, we are also helping to shape the global rules of digital trade in international fora. The UK is actively participating in the World Trade Organization’s (WTO) E-commerce Joint Statement Initiative where over 80 countries are negotiating new rules for the global digital economy. At the same time, under the UK’s G7 Presidency, trade ministers have committed to adopt the G7’s Digital Trade Principles when they meet in October.

Open digital markets

Objectives

DBT aims to secure access for British businesses to overseas digital markets, so that firms can invest and operate across borders freely and in fair competition.

We will:

• seek to establish predictable and open regulatory principles with our trading partners, ensuring that British businesses are able to compete fairly with domestic suppliers in overseas markets
• seek to secure market access for the UK’s world-leading services, such as our financial, professional business, legal, technology and creative industries sectors
• champion Britain’s highly successful telecommunications sector by negotiating fair, competitive and transparent access to international markets and by minimising trade distortions
• use our free trade agreements (FTAs) to support the mobility of digitally-skilled UK professionals and workers in international markets
• promote investment in digitally-delivered services
• be a strong advocate for the WTO moratorium on customs duties on electronic transmissions, opposing such customs duties permanently
• continue to advocate for a free, open, and secure internet as the bedrock of a thriving and innovative global digital economy
• work with partners to remove barriers which result in discriminatory conditions for e-commerce activities, as well as removing measures that inhibit the use of electronic authentication

Access to a wide variety of products and services from overseas has become a vital part of our day-to-day lives. More open digital markets allow consumers to benefit from being able to access and purchase new and better-suited products and services – for example, through buying items online.

Businesses also benefit. More open digital markets provide businesses with easier, cheaper, and more straightforward access to the international marketplace, and to a wider and cheaper variety of inputs and services.

This enables UK firms (including small and medium enterprises (SMEs)) to reduce their costs and increase their productivity. This increases their competitiveness, making it more likely they can benefit from new export opportunities, or that they can diversify their existing exports.

We are committed to helping businesses and consumers make even more of these opportunities in the future, so that the UK becomes an even greater hub for digital and services trade. This involves working to address existing barriers to open digital markets, preventing new barriers emerging, promoting greater openness, and reducing or removing unfair restrictions or conditions on British businesses.

Data flows

Objectives

DBT will champion data flows internationally, preventing unjustified barriers to data crossing borders, while maintaining the UK’s high standards for personal data protection.

We will:

• advocate free, open, and trusted cross-border data flows
• seek to minimise data localisation, which is harmful to fair and open competition
• explore how data can facilitate the smooth journey of goods through international supply chains
• seek to ensure that the free flow of data can drive innovation and improve trade opportunities, allowing businesses to provide new services to customers, and enabling new ways of trading using new technologies
• support businesses that trade goods which depend on embedded data and services
• require trade partners to commit to establishing or maintaining domestic legal frameworks that protect personal data, while ensuring that personal data from the UK will continue to be protected by our own domestic data protection legislation
• work with our partners to publish transparent, anonymised, and open government datasets, providing opportunities for businesses to offer innovative services

From music and TV streaming to travel apps and online shopping, data is becoming ever-more important to our lives. It is a significant driver of productivity and business growth in the UK, underpinning modern global value chains and creating new, high growth opportunities for businesses to trade internationally without facing traditional market access barriers.^{[footnote 6]}

Ensuring that consumers have confidence in the ongoing protection of their personal data is an important aspect of our trade approach. Consumers’ trust in how their personal data is used, whether in the UK or across borders, is imperative to give people the confidence to shop online and benefit from digital services.

We intend to make the UK a world leader in developing a balanced approach to the trade in data. This involves maximising the benefits of cross-border data flows to consumers and businesses, while maintaining and promoting high standards of protection for personal data.

We are working with trading partners to address data localisation restrictions. Restrictions on where data can be stored and processed are harmful to fair and open competition, increasing costs, and often preventing SMEs and start-ups from doing business in other countries.

We are also an advocate of transparency, working with our trading partners to publish appropriate government datasets in an accessible format. This allows businesses to access new markets and opportunities for innovation, while providing consumers with better apps, services, and experiences, such as real-time public transport information.

Consumer and business safeguards

Objectives

DBT will champion consumer benefits and necessary business safeguards in digital trade.

We will:

• advance digital consumer rights, such as seeking access to redress and reducing spam (unsolicited commercial electronic messages)
• ensure effective and balanced intellectual property frameworks, ensuring that businesses are able to receive the benefits of their innovation
• seek net neutrality commitments to open internet access as a means of developing an open, secure, and trustworthy online environment - retaining scope for legitimate public policy interventions
• require trade partners to avoid unreasonable or unjustified data requests – for example requiring the disclosure of source code as a condition of operating in certain markets

The internet has revolutionised our ability to connect with others, whether that be for professional or personal reasons. It has also created unprecedented levels of transformation in industries and production processes, providing new and varied opportunities for British businesses.

Given such rapid and revolutionary change, it is important that consumers and businesses are assured that their rights and interests will be protected in the digital marketplace.

We believe that it is imperative that effective measures are in place to protect consumer rights when purchasing goods and services online. This involves developing high-quality shared rules for online consumer protection and seeking to address unsolicited commercial electronic messaging.

Businesses must have confidence that engaging in digital trade will not be detrimental to their business interests. This could be through requirements to disclose commercially-sensitive information like source code as a condition of market access, or through insufficient protections against intellectual property theft.

Digital trading systems

Objectives

DBT will develop and agree digital trading systems with partners which cut red tape and make trade cheaper, faster, and more secure for businesses.

We will:

• promote customs and border processes that are ‘digital by default’, making trade easier for businesses
• work multilaterally to facilitate the flows of data necessary to support digitisation of customs and border processes
• seek to facilitate easier, cheaper, and more efficient international trade through using digital technologies. This includes paperless trading, electronic contracts, electronic authentication, and electronic trust services
• champion digital trade facilitation globally in the WTO and in our FTAs to cut red tape, speed up administrative processes, promote interoperability, and enable British businesses to better diversify their supply chains

Making digital trading systems faster, easier to use, and more accessible is vital to ensuring that the greatest number of businesses and consumers can benefit from the opportunities that digital trade provides. However, many trading systems across the world remain insufficiently digitally enabled, increasing the time and cost of doing business across borders.

This includes underdeveloped digital customs and logistics processes, barriers to interoperability between different systems, and the limited availability of certain digital services. We are working closely with international partners to address these barriers.

We are committed to helping minimise barriers which inhibit growth, including addressing the limited availability or recognition of digital services, such as online tax registration or internet banking.

International cooperation and global governance

Objectives

DBT will collaborate with international partners to ensure that the rules and structures that govern digital trade are free, fair, and inclusive.

We will:

• work with WTO partners to advance new rulemaking on digital trade to ensure that global governance keeps pace with developing technologies and fosters a fair, predictable, transparent, competitive, and non-discriminatory business environment
• collaborate with like-minded partners to promote transparency, sound regulatory principles, and robust and evidence-based approaches
• continue to be a leading voice in the negotiation of the WTO Joint Statement Initiative on E-Commerce
• work with forward-leaning partners to establish cutting-edge digital trade agreements that include cooperation in areas such as innovation and emerging technologies, fintech, and cybersecurity

The rapid pace of digitally enabled change, and the revolutionary new opportunities that it provides, means that the global system of digital trade governance is arguably underdeveloped.

This will require working with international partners to continue to develop the framework of international digital trade rules.

This includes through existing dialogues within the WTO such as the Joint Statement Initiative on E-Commerce, our network of free trade agreements, and international cooperation between regulators to develop mutually acceptable standards.

We believe that the rules governing digital trade should be responsive to digital innovation and emerging technologies to allow businesses and consumers to harness their full potential.

As part of this, we should encourage the interoperability of digital standards and frameworks globally to maximise the opportunities and benefits of digital trade.

We aim to be a leading voice on digital trade in multilateral fora such as the WTO. We believe that the rules governing digital trade should be responsive to digital innovation and emerging technologies to allow businesses and consumers to harness their full potential, and that we should encourage the interoperability of digital standards and frameworks globally to maximise the opportunities and benefits of digital trade.

1. Department for Digital Culture Media and Sport Economic Estimates (2019) Gross Value Added. ↩

2. Department for Digital Culture Media and Sport Sectors Economic Estimates (2019) Employment. ↩

3. Office for National Statistics (2020), Trade in services by modes of supply. ↩

4. International Development Committee (2020), Digital Transformation Investments to Top $6.8 Trillion Globally as Businesses and Governments Prepare for the Next Normal. ↩

5. G Benz and Mourougane (2020), The Impact of COVID-19 international travel restrictions on services-trade costs. ↩

6. Meltzer (2019) ‘Governing Digital Trade’ ↩