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

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Huawei | Trade and the Digital Economy ABSTRACT Our White Paper on Trade Rules and the Digital Economy examines trends and needs in the global digital economy, and the emerging set of international trade agreement rules currently under negotiation to govern world trade in the digital economy. It seeks to define the needs of the global economy, the requirements to service those needs by the global ICT industry, and the position of Huawei as a leading ICT company operating in over 170 countries and providing goods and services along almost the entire length of the global digital value chain. It recommends that non‐discrimination, open markets, and fair competition should be the fundamental rules for the global digital economy, whereas any exception to these rules should be adopted subject to the principles of transparency, proportionality, necessity, and multi‐stakeholder consultation. This short summary of the key findings and conclusions is provided for those seeking a more succinct breakdown of our positions on these issues. For a more in‐depth analysis, please see the full White Paper. ACKNOWLEDGEMENTS Huawei’s White Paper on Trade Rules and the Digital Economy is the result of a major project by the Trade Facilitation and Market Access (TFMA) team within Huawei Technologies, inspired by the vision of James K. Lockett, Vice President of Trade Facilitation and Market Access (TFMA) at Huawei Technologies to stake out Huawei’s views on the pivotal issue of the trade rules for the digital economy. With contributions from numerous colleagues, its principal author is Simon Lacey, also at TFMA Huawei Technologies, who researched and prepared an initial and comprehensive draft and has also edited the manuscript through its various stages. Simon’s tireless commitment to this complex and evolving topic is reflected from beginning to end in the White Paper. It has been written under the overall supervision and direction of Madame Chen Lifang, President of PACD at Huawei Technologies and Mr. Zhang Jiangang (Victor) as well as his predecessor Pang Jimin, President of Government Affairs, also at Huawei Technologies. Other members of the TFMA team have also contributed extensive comments and edits, and thanks must go to Alessandro Marongiu, Zhang Shige (Aviva), Hu Zhengguo (Neo) and Professor Sheng Jianming (Jamie) for their input and feedback while preparing the initial manuscript and on many procedural and technical issues in the process of bringing the White Paper to fruition. The TFMA team would also like to thank a number of individuals within Huawei who took time out of their busy schedules to sit and share of their valuable insights and experience, including in particular Paul Scanlan, Colin Giles, Tommi Laine‐Ylijoki, Joe Kelly, Walter Jennings, Han Feung, Ting Ka Lun (Allen), Sameer Malik, Zou Wenyu (Kitty) and Allan Yap. The White Paper has also benefitted enormously from the many valuable insights and inputs received from Hosuk Lee‐Makiyama, Martina Francesca Ferracane, and Erik van der Marel, with whom the TFMA team worked at the end of the process to supplement our research and add some value in terms of economic analysis, case studies as well as with graphical inserts. Hosuk’s far‐reaching and highly insightful expertise on the subject matter proved extremely valuable. James Lockett and Simon Lacey “field tested” some of the preliminary findings at a number of international symposia throughout the months the White Paper was being prepared and in this context we would like to thank Harsha Singh and Michitaka Nakatomi for comments on an earlier paper for the E‐15 initiative which helped our thinking, and we must thank Usman Ahmed from Paypal, Marcos Vaena of the International Trade Center in Geneva and Pierre Sauvé of the World Bank for their valuable contributions as part of our panel session at the 2016 WTO Public Forum which helped our thinking to evolve further on these issues. We would also like to thank the team of Huawei translators who worked on the Chinese version of the White Paper and provided invaluable assistance in also making the English version a much better document. In this regard, it was in particular the skills of Miss Gong Jing that proved invaluable to the whole project. Finally we would like to thank Joy Tan, President of the Corporate Communications Department for her invaluable guidance. As always any shortcomings, errors or omissions in this White Paper are solely those of the lead author. 1
Huawei | Trade and the Digital Economy EXECUTIVE SUMMARY Our White Paper on Trade Rules for the Digital Economy represents a first attempt by Huawei to exercise thought leadership in a relatively new area of international rule‐making. The current set of international trade rules largely predates the internet era of the last two decades. An update of the “analogue rules” to bring them into the digital age is long overdue but has run into some unexpected headwinds as of late. Our White Paper is an attempt to express our views on how we see the current debates surrounding new trade rules, with the hope of making a modest contribution to producing outcomes that would guarantee future decades of the breathtaking growth we have seen in the digital economy and the unleashing of pent‐up innovation, as well as the seizing of manifold opportunities as millions have become empowered in the developing world to set themselves free from poverty. The first Chapter of our White Paper defines the digital economy as the range of goods, products, services and solutions that have emerged and continue to emerge in direct relation to online connectivity. This definition admittedly covers a broad value chain ranging from the hardware and equipment constituting the backbone infrastructure of telecommunications networks, to the devices, particularly smart phones, tablets, wearables, computers and other terminals used in order to get and stay online. This definition also comprises the various services, solutions and applications that have emerged to meet the many needs that users place on the internet and the whole online ecosystem, including digital products and services such as software and e‐ books. In laying out this definition, we will look beyond the narrow confines of focusing simply on e‐commerce, but rather examine how digitalization has transformed international trade across borders: Chapter 1 looks to define and elucidate the emergence of modern day digitalized global value chains that are having a disruptive and transformative effect on both the way businesses operate as well as how consumers acquire and use products, services and information. Chapter 2 of our White Paper examines Huawei’s place in the digital economy. Across all of our three business groups, we occupy a unique place in the digital economy in terms of product coverage, but also in terms of our geographical footprint, since we operate in both very underdeveloped as well as very technologically advanced markets. With regard to our core carrier business, we are responsible for building the underlying network infrastructure (pipe) that allows the digital economy to function in the first place. When it comes to our enterprise business, we provide a range of new services and solutions that leverage the power of cloud computing and remotely serviced platforms, such as in the area of digital customs, or our many Smart City solutions. Finally in our devices business, where we are contesting global smartphone, tablet and wearables markets, we operate as a seller of the terminals with which users interface with the digital economy in order to purchase and/or consume the services, solutions, products and information that the digital economy offers. As such, we are potentially vulnerable to changes in the underlying legal, regulatory and policy regimes that govern the many stages of the digital value chain. Chapter 2 discusses several ways in which new and existing trade and investment rules affect different aspects of our business. Chapter 3 focuses on the underlying legal and regulatory environment in which companies like Huawei operate. As in many other fields of the law, the current rules are struggling to keep pace with technological developments and the quick pace of innovation that characterizes the technology sector in particular. Many countries are enacting rules and setting up regulatory regimes that have a direct impact on the digital economy. Whether it be with the objective of better protecting the data privacy of their citizens, beefing up national law enforcement 2
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White Paper Trade Rules and the Digital Economy Key Points and Findings

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