White Paper Trade Rules and the Digital Economy Key Points and Findings

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Chapter Four| International Trade Rule‐Making for the Digital Economy Key Points Explained 01 For the first few years as the internet was just starting to gain widespread adoption and uptake among users in both developed and developing countries, governments were often slow or hesitant to intervene for fear of overplaying their hands in trying to regulate something about which they still lacked a detailed understanding of both its workings and its vulnerabilities. Those days are almost certainly behind us as governments all over the world have become cognizant of the very real benefits but also of some of the latent risks the digital economy entails. We find governments of all ideological bents actively opting to intervene in the digital economy in order to achieve a whole range of policy and regulatory outcomes. Because of the complementarity effects and the general interconnectedness of both the online and offline economies, these interventions can have unforeseen consequences far beyond the narrow scope in which they were enacted. Governments need to beware of and refrain from regulatory overreach but they must likewise be careful not to allow a policy or legal vacuum to arise which engenders real risks to the future growth of the digital economy. 02 In order to avoid any potentially harmful repercussions that may constitute the unforeseen consequences of such policy and regulatory interventions, governments should take into consideration any internationally agreed principles or pre‐existing best practices before they act. They should also consult widely with a broad array of stakeholders comprising businesses, consumer groups, and public interest groups, and make sure any measures they enact are the least invasive, least trade restrictive, but also an effective way to meet the intended policy objective. We also advocate in favor of non‐discriminatory and transparent legislative and regulatory processes that result in equal and fair market access terms for both foreign and domestic economic actors. 03 We recognize the important role the digital economy has to play in helping governments foster economic development and achieve industrial policy goals, as well as in empowering users to pursue productive and satisfying economic livelihoods. When designing policies that seek to achieve such outcomes, we advocate strongly in favor of flexible regimes that afford companies as much freedom of action as possible in deciding how they wish to meet any targets or objectives set. We also favor governments enacting such targets only following a transparent and multistakeholder consultation that allows all affected parties to have their views heard. 04 We at Huawei have for many years emphasized the importance of investment in the essential network infrastructure that enables the digital economy and unleashes all of its productivity gains and welfare‐enhancing effects. This is a prerequisite to tackling the digital divide which continues to plague many, particularly the poor in developing countries. Although connectivity infrastructure is only one of several important elements that need to be tackled to resolve this problem, we contend that it is both the starting point and the conditio sine qua non for effectively and finally bringing the billions of unconnected online and allowing them to participate in this modern day economic miracle. 11
Huawei | Trade and the Digital Economy | White Paper Key Points and Findings Emerging Policy and Regulatory Trends As the internet economy emerged in the second half of the 1990s, it was a place largely free of government intervention, with some commentators pointing to this as one of the reasons why it has grown so quickly and was able to become such a powerful economic force. For better or for worse those days are now well and truly behind us, with many governments having long recognized both the massive potential but also the risks that the digital economy brings with it. Today governments intervene in the digital economy in a number of ways, both directly and indirectly, in order to achieve a very wide range of – for the most part – perfectly legitimate and commendable policy objectives. The graphic below (Figure 3.1) is an attempt to map some of the different regulatory objectives governments have for intervening in the digital economy as well as some of the different regulatory approaches they take. To find out more, see chapter three of the full White Paper. Figure 3.1: Different regulatory objectives and approaches Stimulate competition Protect existing jobs Promote economic development Increase the size of the formal economy Bridge the digital divide Objectives Foster Innovation Stimulate economic growth Diversify the economy Promote market contestability Create new jobs Promote digital Inclusiveness Enable inclusive trade Kick-start domestic ICT industry Prevent base erosion and profit shifting Attract investment Approaches Light touch approaches Generally favored by advanced industrial countries where the digital economy is already very ubiquitous. Interventionist approaches Generally chosen by developing countries with prominent national security concerns or development agendas. Industrial Policy Generally chosen by middle-income developing countries with their own ambitious plans for the digital economy. Executive agency activism This can be in the form of lawsuits to reign in tax privileges, competition investigations or other actions. Tax breaks/ incentives These can be used to either attract investment or encourage local content, but often also lead to market distortions. Source: Huawei 12
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White Paper Trade Rules and the Digital Economy Key Points and Findings

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