Digital trade must overcome barriers to drive global growth
Digital trade is the heartbeat of the global economy. From small startups to large multinationals, businesses thrive on connecting, transacting, and innovating across borders through digital channels. By leading techUK’s international policy and engagement, I work with over 1,100 technology companies, witnessing the transformative power of digital trade and the mounting threats to its growth. While technology breaks geographical barriers, the future of digital trade depends on a complex mix of geopolitical stability, enabling regulation, tech adoption, consumer trust, and digital inclusion.
The Digital Trade Imperative
The transformative power of digital trade cannot be overstated. In 2023, it contributed trillions to the global economy and created millions of jobs. With over 60% of global GDP already depending on digital technology, businesses rely more than ever on the seamless flow of data and digital services. A small craft shop in rural England can now sell handmade goods to customers in Tokyo, and a software developer in Nairobi can collaborate with a team in Silicon Valley. However, this interconnectedness faces mounting challenges.
Rising Barriers to Digital Trade
Geopolitical stability is one of the most pressing issues. In an era marked by trade wars, sanctions, and rising protectionism, the free flow of data and technology has become a critical battleground for global dominance. A notable example is the increasing trend of data localization requirements, where countries mandate companies to store data within their borders or the race to onshore chip manufacturing. These policies, often presented as national security measures or efforts to boost local economies, fragment the global digital economy and increase costs for businesses.
Rising and often confusing regulation is another crucial factor. As technology evolves rapidly, regulatory frameworks must adapt without stifling innovation. The wave of EU digital regulations over recent years illustrates this challenge. Companies are now forced to delay offering products or services in Europe due to overlapping laws and regulatory uncertainty. The solution lies in developing sensible, collaborative legislation in close collaboration among allied democracies. It can help create a regulatory environment that allows businesses to thrive responsibly while safeguarding consumer and national interest.
Technology adoption itself presents a double-edged sword. While developed economies have the infrastructure and resources to leverage digital trade, many developing countries lag behind. The digital divide - both within and between nations - poses a significant threat to inclusive growth. For instance, while mobile money platforms have rapidly gained traction in urban centres across Africa, rural areas often lack the connectivity to engage in the digital economy. An estimated 3 billion people globally are still offline. Closing this gap requires substantial investment in digital infrastructure, education, and skills training. For the Western world, this means aligning trade and development policies with capacity-building efforts in the Global South.
Digital inclusion is essential for the sustainable growth of digital trade. Marginalized communities, whether due to geography, socioeconomic status, or disability, face barriers to accessing digital services. Ensuring that everyone can participate in the digital economy is not just a moral imperative but an economic one. Research shows that greater inclusivity leads to higher innovation and productivity. Initiatives such as providing affordable internet access, fostering digital literacy, and designing inclusive technologies are crucial for making digital trade truly global and accessible to all.
Finally, consumer trust is another cornerstone of digital trade. High-profile cyber-attacks and data breaches have the potential to erode confidence in technology, causing consumers to be wary of sharing personal information or engaging in online transactions. Companies must prioritize transparency, cybersecurity, and ethical practices to build trust. Governments must play a role in holding businesses accountable while educating citizens on how to navigate the digital world safely.
The Opportunity for Growth
Despite these challenges, the opportunities digital trade offers are immense. Businesses that embrace digital channels can reach new markets, reduce costs, and improve efficiency. Governments that prioritize digital trade in their policies can drive economic growth, create jobs, and boost global competitiveness. However, to realize these benefits, collaboration across borders is crucial. Issues must be addressed in multilateral organizations like the World Trade Organization (WTO), and we must fully incorporate the Joint Statement Initiative (JSI) on e-commerce into its legal framework. Strong cooperation among governments, regulators, the private sector, and civil society is vital to addressing these challenges and creating a cohesive framework.
Conclusion
Digital trade is central to the growth of the global economy, but its future is not guaranteed. The challenges it faces - geopolitical tensions, regulatory complexity, unequal technology adoption, eroding consumer trust, and digital exclusion - are significant but not insurmountable. Through global cooperation, forward-thinking policies, and inclusive practices, we can unlock the full potential of digital trade. The stakes are high, but with the right leadership and resolution, we can unleash the rewards of the rules-based international system for businesses, governments, and consumers worldwide.
Sabina Ciofu is Associate Director for International Trade and Policy at techUK.
