On 29 September, 2020 The Jean Monnet Network – Trade & Investment in Services Associates (TIISA) organised Session 9 in the Digital Trade stream. Moderated by Jane Drake-Brockman, IIT, speakers were Hildegunn Kyvik-Nordas NUPI and Orebro University, Pascal Kerneis, European Services Forum, Bryan Mercurio, Chinese University of Hong Kong and Neha Mishra, National University of Singapore.
Clearly neither domestic policy settings nor the rules-based trading system have kept up with the global digital transformation underway. Presentations therefore highlighted critical issues on how policymakers and regulators can encourage both competition and innovation by facilitating trade in digitalised services and free flow of data.
Discussion focussed on exploring the opportunities from getting the regulatory regimes for digital trade right and the dangers in getting them wrong.
Focussing on telecommunications, Hildegunn Nordas observed that digital markets are susceptible to competition problems and may need help from regulators. But regulation sometimes interferes with innovation. Best practice regulation will depend on both technology and on market structure so a one size approach will not fit all. She concluded the WTO will need to work with other organisations such as the ITU and WIPO to establish a governance framework for e-commerce.
Focussing on the need for an outcome in the JSI on E Commerce in the WTO, Pascal Kerneis drew on recent FTA experience on the part of many of the major players in the JSI to suggest that compromises should be able to be found in order to deliver a set of WTO rules on E Commerce, covering the key issues around digital trust, regulatory disciplines on digitally-enabled services, customs duties on electronic transactions, handling of “digital products”, protection of Intellectual property and cross-border data flows.
Bryan Mercurio stressed the need for good regulatory governance to start at home and the implications for regional and international regulatory cooperation. Drawing on examples from Hong Kong, he explored the domestic imperatives of establishing regulatory regimes to facilitate digital transformation, enabling opportunities that come from the cross-border flow of data while minimising negative externalities. Given the reality that numerous WTO members are still developing their regulations and policies, and given the differing approaches already being codified in FTAs on the part of eg United States, European Union and China, doubts arise on the extent to which international efforts can lead in norm setting – or are more likely to be successful in codifying existing practices and common norms.
Neha Mishra covered the interface between trade law and cybersecurity. She argued that trade and cybersecurity can share a symbiotic relationship but when countries impose restrictive unilateral cybersecurity laws, regulations, policies, the economic costs to digital trade are very high. Trade Agreements do have an impact on cybersecurity regulatory frameworks, including to check protectionism. She called for more international regulatory cooperation in trade institutions, eg on interoperability of data regulations and encouraging transparent, open, globally competitive and market-driven cybersecurity standards and best practices.
Some concern was expressed during the discussion about the exceptions clauses being negotiated at bilateral level, for multiple public policy reasons, including national security, simultaneous with new disciplines to facilitate cross-border data flows. The panelists agreed on the urgent need for more intensive efforts in the WTO negotiations.
TIISA Network recently offered PhD and PhD-equivalent Students, Young Professionals and Early Career Researchers the opportunity to submit a policy paper on any topic related to International Trade and Investment in Services. Where possible, the policy paper will have relevance to the process of economic integration in services, and to be relevant to current issues in the European Union.
Prize money was awarded, First Prize 5,000 euro and Runner Up 3,000 euro.
A TIISA Selection Panel was formed, which comprised of TIISA Network partners
Associate Professor International Economics, Utrecht University
Professor of Economics World Trade Institute, University of Bern
Professor, China Institute for WTO Studies, University of International Business & Economics
Professor Emeritus, University of Adelaide
First Prize Awarded “Services Liberalisation and Product Mix Adjustment”
School of International Trade & Economics Central University of Finance and Economics, Beijing China
Supervisor: Pei He, Professor School of International Trade and Economics, CUFE Beijing China
The Impact of AI on White Collar Work Call for Papers
Online Conference November 25, 2020 on Zoom
The AI-Econ Lab at Örebro University will host an online interdisciplinary conference on the use of artificial intelligence in white collar work and implications for the labour market. White collar work is increasingly important in employment. Meanwhile, it performs a number of tasks that is susceptible to AI-induced automation.
Researchers in economics, computer science, informatics and related disciplines will present their most recent research.
At the conference, researchers will present their recent research. We welcome researchers in economics, computer-science, informatics and related disciplines. A limited number of non-presenters are also welcomed to sign up for attending. To benefit the research presented, we aim for an active and close interaction between participants, akin to a workshop.
Key Note Speakers:
Anna Salomons, professor, Utrecht University School of Economics, Netherlands.
Morgan Frank, assistant professor, School of Computing and Information, University of Pittsburg, USA.
Hosted by AI-Econ Lab, Örebro University, Sweden; partner Ratio and the Trade & Investment in Services (TIISA) Network.
On behalf of the Australian Services Roundtable, TIISA Network Director Jane Drake-Brockman moderated the opening session in the Digital Trade stream on Monday 28 September.
Session 3:Digital Trade and Services Trade – Are They Increasingly the Same?
Trade is increasingly going digital, blurring the distinctions between goods and services, commerce and e-commerce. Different regions of the world are adapting in their own way and the policy choices they make impact the speed of this transformation, channel its benefits, and sometimes hold back progress.
The session offered practical policy guidance on how governments can use their toolkits to navigate the complexities of digitization and the increasingly global services trade.
In what ways has digitalisation changed how companies engage in international trade?
What kind of policies will spread the benefits of digital trade more inclusively, especially in Africa?
What are the barriers to digitally-enabled services, and how can they be addressed?
What’s needed for a global baseline agreement on the free flow of data?
Jane Drake-Brockman is Industry Professor with the Institute for International Trade and Founder of the Australian Services Roundtable, which in 2020 celebrates its 20th anniversary
Measurement of trade in services is notoriously difficult. The official statistics on imports and exports contained in the Balance of Payments (BOP) are well known, for example, as measuring poorly at best only three of the four modes of international supply of services.
As defined in the WTO, the four modes of trading services are through cross-border supply such as on-line through the internet, consumption abroad such as tourism, commercial presence of an enterprise such as establishing an affiliate in a foreign country to serve the local market, and individuals such as consultants travelling temporarily to a foreign country to provide services.
There has been no official global source of information breaking down services exports into various modes of supply until the World Trade Organisation (WTO) released an experimental dataset in 2019 known as TISMOS (Trade in Services data by Mode of Supply), providing estimates for the period 2005-2017.
The aggregate results for TISMOS confirm WTO estimates of a decade earlier that commercial presence (i.e. establishing an affiliate to serve a foreign market), accounts for almost 60% of the global supply of services. This is now shown to be the dominant mode for all services except transport, education and tourism. It is therefore important for all countries to have good measures of commercial presence.
Only the United States (US) has produced consistent series of ‘Inwards and Outwards Foreign Affiliates Trade in Services (FATS). For countries like Australia without such statistical collections, inward and outward FDI flows into the services sector have offered useful guidance, but could hardly be considered adequate proxies for services exports.
The Australian Context
Services business advocacy was largely responsible for initiation by the Australian Bureau of Statistics (ABS) in the early 200Os of a first experimental Australian survey of outward foreign affiliates’ trade.
The results showed that in 2002-03, there were 4,000 Australian-controlled affiliates abroad, generating 300,000 jobs and AUD142 billion in sales, of which AUD65 billion (46%) were in services. At the time, those findings on sales of services (a good proxy for services exports via commercial presence) suggested that the official BOP data was measuring less than one third of Australia’s actual exports of services.
Two decades later, as a result of funding provided in the context of Senator Birmingham’s new ‘Services Export Action Plan’, the ABS released a new collection on Australian Outward FATS on 10 September 2020. This data provides a detailed snapshot picture for 2018-19 but no trend analysis.
I offer some insights into the results, and attempt to read the underlying trends in trade, based on two decades of working closely with the Australian Services Roundtable, the peak industry body in Australia representing the services sector.
What the Statistics Tell Us
From an export perspective, the most important result is that local sales of services by Australian foreign affiliates (a proxy measure for Australian exports via commercial presence) can now be seen to sit above AUD92 billion. Insurance and pension services account for 25%; financial services another 23%, other business services 20% and construction 12%.
For 2018-19, the BOP puts Australian exports of services at AUD97 billion. But taking over AUD92 billion of sales of services by foreign affiliates into account, the BOP now appears to be measuring roughly half of Australia’s actual services exports, as shown in Figure 1 (own calculations; rounding up based on WTO TISMOS dataset).
These sales of services account for 42% of foreign affiliates total sales of goods and services (down from 46% in 2002-3) but more than 50% of the sales of goods and services in the largest markets, the United Kingdom (UK) and New Zealand (NZ). The latter stands out in particular as a very much larger market for foreign affiliate sales of services rather than goods.
The new ABS data for 2018 confirms a continued dramatic underestimate of services exports in the BOP. But the underestimate is less than the underestimate by two-thirds in 2002-2003. It is too early to tell, but I hazard a guess that we may be seeing in these results the first measured evidence for Australia of the shift from all other modes of supply including commercial presence, to on-line supply of digitally delivered services; a trend set to accelerate post-COVID 19.
Australian Foreign Affiliates Growth and SMEs
There are now more than 5,000 majority Australian-owned affiliates established in foreign markets, 90% of them SMEs and with 275 Australian parent enterprises.
Their total assets amount to AUD2 trillion, of which financial and insurance services providers alone hold over AUD1.5 trillion or 78%. Mining accounts for 10%. Eighteen percent of the foreign affiliates are located in the US; the next largest destinations are the UK and NZ. But 36% of the total assets are held in NZ, 17% in the US and 15% in the UK.
As shown in Figure 2, services industries account for just over half of the total Australian equity in these affiliates. Financial and insurance services alone account for 32%, mining 26% and manufacturing 23%. Measured in terms of the location of Australian equity, the UK is the top destination, followed by the US and NZ.
In terms of industry value added, services account for more than 70%, with financial and insurance services alone accounting for 50%, by themselves more than double the contribution of mining and seven times more than manufacturing. The contribution to industry value added was highest in NZ, nearly double the figure for the US and nearly three times larger than for the UK.
Similarly, services account for two thirds of the 412,000 jobs created by Australian affiliates in destination markets. By themselves, financial and insurance services generate roughly as many jobs abroad as manufacturing. Professional, scientific and technical services by themselves generate nearly as many as mining.
Total operating profits before tax of all Australian-owned foreign affiliates was AUD42 billion, of which financial and insurance services generated the most.
Clearly commercial presence remains of fundamental importance to international business for Australian financial, insurance and pension services providers. This justifies continued trade negotiating efforts to reduce barriers to commercial presence, such as foreign equity caps and restrictions on the composition and residency of senior boards of management.
Australia needs a sustained services trade statistics collection effort
Undoubtedly the business community, academic researchers and trade negotiators do not want to wait another two decades for the next set of statistics.
Under strong industry pressure at the time, the ABS undertook work in 2011 specifically on outward foreign affiliates trade in financial services. But the time has come for the Australian government to prioritise funding of a consistent collection of Foreign Affiliates Trade in Services (FATS).
Jane Drake-Brockman is Industry Professor with the Institute for International Trade and Founder of the Australian Services Roundtable, which in 2020 celebrates its 20th anniversary.
The views expressed here are the authors, and may not necessarily represent the views of the Institute for International Trade.
THINK20 Policy Brief: Impact Of Digital Technologies And The Fourth Industrial Revolution On Trade In Services
18 September 2020 marked the beginning of the T20 Summit Season, celebrated the work of T20 Task Force 1: Trade, Investment and Growth.
Jane Drake-Brockman Institute for International Trade, The University of Adelaide coordinated and presented TIISA Policy Brief 4: Impact of Digital Technologies and The Fourth Industrial Revolution on Trade in Services
We all know we are in the early stages of a major technological transformation. We call it the 4th Industrial Revolution.
It is driven by digital technologies: 3D printing, artificial intelligence, cloud computing, 5G, and the Internet-of-Things.
These technologies are dramatically cutting trade costs for digital delivery – and putting trade in services on a stronger growth path than trade in goods. Throughout economic history, such periods of deep technological change, and resulting structural shifts, have ultimately delivered the biggest most prolonged global growth stories. With the right policy choices, designed to connect our digital economies and enable businesses to inter-operate, this new wave of deep innovation is offering us all our single best shared and immediate chance for productivity gain, economic growth and rising living standards.
*Jane Drake-Brockmans presentation begins from 1:54:26