The COVID-19 pandemic has created an “unprecedented disruption to the global economy and world trade,” according to the World Trade Organization (WTO). In fact, according to the WTO, global trade volumes fell 14% in the second quarter of 2020, far exceeding any decline seen during the 2008 financial crisis. Europe and North America experienced the deepest decreases, with volumes down 21% and 20%, respectively.
Not all sectors have fared equally. Even amid this unprecedented economic crisis, the pandemic has rapidly accelerated the transition to a digital economy. Businesses around the world were forced to adopt digital technologies—almost overnight—to allow for remote work and maintain business continuity. Consumers and businesses have increased their reliance on e-commerce, video conferencing and other technologies to keep goods, services and communications flowing.
These trends have reinforced the service industry’s reliance on information and communications technology (ICT)—something that we at AT&T have seen firsthand. In contrast to the drop in global trade volumes, traffic on our US network has increased more than 25% since the beginning of the pandemic. Further, according to Vodafone, overall, mobile data usage increased around 15% across Europe during the pandemic, peaking at 30% in Spain and Italy.
As we look to emerge from this crisis and begin the process of economic recovery, countries will find themselves increasingly dependent on these digital technologies to power economic growth. What’s more, emerging innovations in Internet of Thing, Artificial Intelligence/Machine Learning, and especially 5G will accelerate these trends, and benefit industries from health care and education to financial services and manufacturing.
In order to take full advantage of the benefits offered by these technologies, countries need a robust policy environment—one that fosters and encourages the innovation and investment necessary to build and maintain digital networks, as well as the technologies to leverage them. A rules-based global trade system is a critical component of this environment. The WTO plays an important role in upholding the principles of national treatment, non-discrimination and transparency that underpin free trade, and building and sustaining a global consensus in favor of these principles. Moreover, it plays an important role in guarding against protectionism.
History shows that countries that inhibit data flows fall behind. With the global volume of data predicted to double between 2018 and 2022, and double again between 2022 and 2025, countries that restrict cross-border services and create obstacles to the free flow of data threaten to choke off the recovery before it gains real momentum. Meanwhile, quotas and requirements for localized content, as well as digital service taxes threaten to undermine investment and hurt the very constituents that governments serve.
There are several steps that countries can take that will help them to benefit from digital transformation separate from the at-times lengthy process of negotiating free-trade agreements. They can expand market access, encouraging foreign investment and level playing fields. They can adopt a strong intellectual property regime that incentivizes innovation and ensures the effective enforcement of rights with regard to online piracy. And they can adopt measures that facilitate digital trade. For example, promoting cross-border data flows will allow small and medium companies to participate in this digital revolution and give them access to new markets and customers, while giving customers access to a broader range of products and services.
The countries that are able to harness the great potential of these new digital technologies will enjoy the greatest benefit from the digital economy of the future. This is particularly true in Europe, which has an important role to play in strengthening the policy environment for digital services. In her State of the European Union address, European Commission President Ursula Von der Leyen spoke about Europe’s role in leading the world toward a new vitality. At AT&T, we believe digital services have a critical role to play in the world’s new vitality, and in driving regional and global investment and innovation in the growing digital economy.
Will Rogers, the famous American actor and favorite son of Oklahoma, once said, “even if you’re on the right track, you’ll get run over if you just sit there.” So too with trade. Europe is on the right track, but we should be careful not to become complacent and assume that we will benefit from the great potential of the digital economy. We all must act to promote policies that will foster innovation and investment to continue growing and thriving in a post-COVID world.