The future is digital, and this is especially true of commerce. If the exchange of traditional goods and services across borders has declined in the past decade, the exchange of data, digital services, intellectual property and even students (despite the setback caused by the epidemic) is expanding. Between 2010 and 2019, knowledge-related trade flows increased twice as fast as traditional goods flows. And some regions grew faster during the pandemic, thanks to the digital boom, according to an analysis of supply chains by consultants at the McKinsey Global Institute (MGI).
This is good news: it is important that ideas and data cross borders. But it presents itself with old and new challenges. First, we need to figure out how to ensure that digital commerce does not become a global race to the bottom, with multinational corporations moving jobs and data to regions with cheap labor and few privacy protections. Hence, politicians, executives, and corporations must realize that this non-material exchange is different from the exchange of traditional goods and services, and they must know what it means for economics and politics on a global and local level. Perhaps the most important dimension in which trading in intangible assets differs from traditional trading is that data is not like a piece of coal or steel: it can be used by many people at the same time.
Information tends to monopolize. The network effect has created giants in data-intensive industries, such as technology and pharmaceutical companies
In theory, this should create a win-win scenario, not only for the parties to a single transaction, but also for the countries through which the data travels. However, in practice, information tends to monopolize. The network effect has created behemoths in data-intensive industries, such as big tech and pharmaceutical companies. They prefer to create highly linear supply chains because it is more efficient and cheaper. According to MGI, the concentration of trade is most pronounced in sectors related to knowledge and intangible assets. The six production series with the highest concentration belong to this group. Think technology companies, electronic components, pharmaceuticals, and so on.
Regulators are already addressing some of these issues with stronger efforts by antitrust agencies. In other sectors, such as semiconductors, attempts are being made to increase regional production, which will allow more companies and countries to become an active part of supply. In contrast, little progress has been made in the pharmaceutical market to diversify flows. Multinational corporations control much of digital commerce and, as in traditional commerce, have an incentive to move work and data to the most appropriate place. While trade in intangible assets is still mostly concentrated in OECD countries, there is a trend to outsource more digital business to places like the Philippines or India, where labor protections are weaker.
These concerns are exacerbated by the fact that while working from home has been a boon for many employees in rich countries, it has shown how white-collar jobs can be done from anywhere and then outsourced. As one CEO told me a year ago, “If you can operate from Lake Tahoe in the Sierra Nevada, you can also do it from Bangalore.”
Will digital trade flows reverse some of the problematic aspects of traditional trade? Or will they create new dynamics? It depends in part on how tenuous the US-China technology links are. It will also depend on how connected the digital streams are with the physical world.
The Internet of Things (the Internet’s extension to the world of things) is increasing data flows within and between companies, an increase that reflects consumer data after the launch of the iPhone in 2007. “Digital commerce is not a separate The cause-and-effect relationship between the two.
We need better tools to measure knowledge flows, which are more opaque than those of traditional commodities. It is difficult to limit, tax and regulate them; It’s hard to understand. Knowledge is something we humans create, but it is also something we exchange. This fact is the core of the digital economy. Information should be free to circulate. However, it must not become another sector in which capital gains exceed labor gains. If that happens, we can expect a white-collar revolution against digital commerce. ◆ and what comes next