Policy paper

Board of Trade report: digital trade (HTML executive summary)

Published 25 November 2021

This was published under the 2019 to 2022 Johnson Conservative government

This executive summary and foreword duplicates that in the Board of Trade report: digital trade (pdf full version).

Foreword

Digital trade presents huge opportunities for the UK. Just as Great Britain led the world in the first industrial revolution in the 1700s, we now have the chance to play a leading role in the digital revolution.

Digital technologies have already revolutionised the way companies do business - enabling them to reach a wider consumer base, trade more efficiently and cost-effectively, and to connect and grow their workforce across different regions of the world, sharing the benefits of prosperity. They have also been at the heart of how many of us have accessed services, purchased goods, kept in touch with loved ones or entertained ourselves over the last year, as the pandemic has illustrated just how important access to digital trade has become.

Digital trade is rapidly becoming the dominant form of trade. It has allowed British businesses selling goods or providing services to take what were previously local markets to a global scale. British companies providing innovative, high-quality digital services are continuing to expand around the world, from music streaming, video games and our award-winning creative industries to our strong legal and professional services sector. This is fundamental to our prosperity - in 2019, the digital sector alone contributed approximately £151 billion to the British economy, employing almost 5% of the national workforce.

Yet we cannot be complacent and simply wait for these opportunities to come to us. The road to our digital future is littered with potential barriers, whether in the form of poor digital infrastructure, the rising tide of digital protectionism, or the persistence of paper-based systems from the past. The international order has so far struggled to keep up with the pace of change, with the global rulebook on digital trade still largely unwritten. Digital trade needs champions who will make the case for a free, open and competitive international digital economy underpinned by common rules on digital trade that promote growth and the free flow of data, while also protecting businesses and individuals.

My vision is for the UK to be one of those champions and a global leader in digital trade, building a global network of next-generation trade deals that drive productivity, jobs, and growth in all areas of the country, and across all sectors of the economy. We are already the second-largest services exporter in the world, meaning that we are ideally positioned to take advantage of this new way of doing business. We have highly competitive, world-leading digital and services sectors, the third highest rate of technology investment globally, exceptional talent, and a wide range of innovative businesses and start-ups using digital technologies to develop new products and sell them to worldwide markets. Digitalisation of global trade can also help turbocharge our goods exports, worth £372 billion in 2019. Our leadership can help ensure that digital trade enhances prosperity, uplifts communities, and empowers women not only in the UK but globally, including in developing countries.

Embracing the opportunities that digital trade offers will keep us at the forefront of the technological revolution, ensuring we lead the way in digital trade and capitalising on the benefits this can provide for Britain, for our trading partners, and for the world.

The Rt Hon Anne-Marie Trevelyan MP

President of the Board of Trade and Secretary of State for International Trade

Executive summary

This third report by the Board of Trade sets out the importance of digital trade. It shows the potential for Britain to be a leading global voice in helping realise the enormous opportunities digital trade offers for businesses and individuals.^{[footnote 1]}

Digital trade is the new normal

The world has changed. Whether streaming TV and music, sending money to friends, or buying morning coffee with a smartphone, digital technology is now part of our daily lives.

• Individuals and businesses now engage with the world digitally. We use contactless payments, buy train tickets online, order products directly to our door, and catch up with colleagues or friends virtually.

Growing rapidly, digital trade now underpins much of the global trading system, and contributes trillions of pounds in value to the global economy.

• The digital economy is increasingly central to the global economy, representing as much as $11 trillion or 15.5% of global gross domestic product (GDP) in 2019. And even this figure is likely to underestimate the value of digital trade, which generates benefits across the whole economy.

• Trillions of pounds are being invested in digital transformation worldwide. That transformation has been accelerated by the coronavirus (COVID-19) pandemic, when digital tools have played a vital role in keeping the economy and society functioning.

• Digital trade increases the available market for goods and services, enabling ever greater interconnectivity and trade.

The UK, with its strong service sectors, thriving online marketplace and booming tech investment, is ideally placed to take advantage of the new digital economy.

• The UK is already a world leader in services trade, which is becoming increasingly digital. In 2019, the UK exported £207 billion worth of digitally-delivered services, almost two thirds of our total services exports.
• Cross-border e-commerce sales of goods and services in the same year were worth £118.2 billion.
• The UK also attracts more venture capital investment into tech companies than any other country except the US and China.

Drawing on our strengths, the government’s vision is for the UK to be a global leader in digital trade.

The Secretary of State for International Trade has set out a vision for the UK to be a leader in digital trade. A network of international agreements will drive productivity, jobs, and growth across the UK.

Digital trade presents opportunities for growth and jobs across the whole of the UK economy.

• Digital trade offers unprecedented opportunities to revolutionise how goods and services are delivered across almost every sector of the economy. It can deliver growth and jobs in the UK’s world leading finance and professional business services sectors. Retail, health, education, engineering, agriculture, manufacturing, creative industries, and many more can also benefit.

These economy-wide opportunities from digital trade should benefit businesses, workers, and consumers across every part of the United Kingdom.

• Digital trade creates opportunities for businesses across all parts of the UK to benefit from fairer, more open access to new markets. At the same time, cities across the UK including London, Belfast, Edinburgh, Cardiff, Manchester, Cambridge, and Bristol are growing hubs for innovation and digital technology.
• Workers benefit from the digital economy as digital trade grows. Investment in digitisation brings new job opportunities and develops new skills. Workers also benefit from higher wages, with weekly earnings of employees in the digital sector around 50% higher than the UK average in 2020.
• Consumers use digital technology to purchase goods from around the UK and abroad, including from smaller suppliers, and to benefit from new, innovative services. This means access to a wider range of products and services more easily and cheaply than ever before, making it easier to shop, travel, learn and connect with others.

Although digital trade drives jobs and prosperity, a range of barriers threaten the growth of digital trade globally, both now and in the future.

• Restrictions on digital market access to overseas markets can reduce the growth of UK exports.
• Unjustified restrictions on data prevent free and trusted global data flows. That limits opportunities for UK businesses to operate and sell their services in overseas markets, increasing business costs and stifling innovation.
• Insufficient safeguards for individuals and businesses inhibit the confidence they have in digital trade. People should be able to feel safe buying goods and services online, and be assured that their personal data is protected. Businesses need to be able to protect themselves from threats such as cyber attacks and intellectual property theft.
• Lack of digital trading systems and digital documents increase the time and cost of doing business across borders. This includes underdeveloped digital customs and logistics processes and the limited cross-border availability of certain digital services such as e-payments.
• The rapid pace of digital transformation means that global trade rules have simply not kept up. Without modern norms, rules and standards, regulations could become more fragmented, more protectionist and less effective at safeguarding individuals and businesses.
• Imperfect information, particularly for small and medium-sized enterprises (SMEs), can mean that businesses are unable to take full advantage of the opportunities digital trade offers.

To achieve its vision, the UK will need to address the barriers to digital trade by delivering on 5 important goals.

• The UK should secure British businesses’ access to overseas digital markets, so that firms can invest and operate across borders freely, in fair competition.
• The UK should facilitate international data flows that are open and trusted. The UK can lead in developing a balanced approach, maximising the benefits of cross-border data flows while maintaining high standards of personal data protection.
• The UK should champion measures to protect consumer rights when purchasing goods and services online in other countries. Businesses need the confidence that their intellectual property will be protected.
• The UK should prioritise developing digital trading systems based around common standards agreed with trading partners. Those systems can cut red tape and make trade cheaper, faster, and more secure for businesses.
• The UK should collaborate with international partners to shape the rules, norms and standards of digital trade to make it free, fair, and inclusive.

The government should prioritise modern free trade agreements (FTAs) with dynamic, high-growth countries in the Indo-Pacific, and large strategic partners like the US and EU. The UK should also collaborate with less developed countries to ensure that digital trade is inclusive and benefits all.

• The Indo-Pacific is a dynamic, fast-growing region for trade and a centre for digital innovation. The UK should prioritise modern Indo-Pacific trade relationships focused on digital, data and services, building on FTAs with Japan, Australia, and New Zealand.
• The UK should also prioritise modern trade agreements with large, strategically important partners such as the US where established markets are becoming increasingly digital.
• If digital trade is to be the ‘new normal’, digital rules will need to be developed. These must enable all countries, including developed, developing and least developed countries, to benefit from the opportunities digital trade can provide. The UK must play its part in bilateral, plurilateral and multilateral fora in shaping a global digital economy that is inclusive and benefits all.

Delivering on the UK’s goals will need concerted action across all aspects of our trade policy.

This includes negotiating modern, digital FTAs, shaping new World Trade Organization (WTO) agreements, driving thought leadership in fora like the G7, and promoting UK digital exports and investment.

• Given its competitive strength, the UK should make digital trade a focus of its modern FTAs and bilateral trade committees.
• The UK should play a leading role in the WTO to help build international consensus. We should work with other nations towards a framework of global rules for digital trade through the WTO’s E-Commerce Joint Initiative.
• The UK should use its thought leadership in other international fora such as the G7 and OECD to support progress in the WTO. This will create momentum towards digital trade norms and standards that support international trade and wider goals including data policies, labour standards and climate action.
• The UK government should continue to promote UK exporters in the digital economy, particularly SMEs. Similarly, continued investment promotion by the government will highlight the attractiveness of the UK to foreign investors.

The Board of Trade recommends 8 priorities for UK digital trade policy.

1. The UK government should centre its digital trade policy around achieving 5 goals:

   • open digital markets
   • free and trusted data flows
   • consumer and business safeguards
   • digital trading systems
   • partnerships to shape global rules, norms, and standards

2. The UK should conclude accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). We should build a pipeline of other modern digital FTAs with dynamic Indo-Pacific partners, and negotiate new FTAs with large economies like the US.

3. The UK should pursue a ground-breaking Digital Economy Agreement with Singapore which establishes a new gold standard for digital trade.

4. The UK should use its bilateral trade committees to increase digital market access for British businesses around the world.

5. The UK should build on its successful G7 Presidency and the adoption of the G7 Digital Trade Principles to help shape global rules.

6. The UK should continue to play a significant role in the negotiations on the WTO E-Commerce Joint Initiative. We should work together with developed, developing and least developed countries, and push for substantial progress at the 12th WTO Ministerial Conference.

7. The UK should use its thought leadership in digital trade in collaboration with the OECD and like-minded partners. Together we can shape shape an inclusive digital economy that benefits workers, consumers and businesses. We should ensure that developing countries are able to benefit and that women are empowered to fully participate in digital trade.

8. The government should continue to promote UK exports globally and showcase the UK as a strong, competitive place to invest and do digital business.

1. Data sources for all figures provided in the executive summary are included in the main body of the report. ↩