published on T20 Argentina 2018
Major Challenges Faced by G20 Members
Multilateral progress on the governance of the digital economy and trade remains sluggish, with possible serious consequences for the global economy and development. Processes currently in course, such as those at WTO, need strengthening. Such attention also needs to effectively address the risks of a widening digital divide. Plurilateral and regional approaches raise the potential for innovation in this domain, but such approaches must be understood systemically in relation to their sustainable development impacts. New gaps in trade governance have been exposed as the digital economy continues to grow and new technologies emerge and are rapidly deployed. Policymaking in this area requires more and effective international interagency coordination and greater involvement of country capitals. Misallocation of taxable profits is exacerbated by lack of adequate frameworks that address the digitalization of economy and trade, and there is lack of consensus about political and technical solutions.
Specific Recommendations for the G20 in 2018
The G20 presidency should convene trade ministers with a priority focus on providing direction for global governance actions that address the multifaceted relationship between digital technologies and trade, the digital divide, and the incorporation in rule-making and implementation of distributive ledger technologies and artificial intelligence, among other strategic trade-related issues. G20 trade ministers or the Trade and Investment Working Group should sign a Buenos Aires Memorandum for Cooperation on Digitally Enabled Trade with the following elements: Incorporating senior trade officials in G20 digital ministers’ meetings and discussions related to digitally-enabled trade, and vice versa, with a view to keeping the digital trade agenda well coordinated in the capitals of G20 economies. Set up a G20 Trade and Investment Package to Enhance Digital Connectivity. This package would contribute to infrastructure for digital development, one of three G20 priorities in 2018. The package may also call for liberalisation and facilitation of trade in goods and services that are pertinent to digital access and connectivity, public and private partnerships to address digital divide challenges, and strengthening aid for trade and other forms of technical assistance to low income countries. Prepare a succinct document of non-binding Guiding Principles for Global Digital Economy Policymaking, similar to the G20 Guiding Principles for Investment Policymaking at the 2016 Hangzhou Summit. The principles can be based on A Roadmap for Digitalisation (G20 2017) and G20 Digital Economy Development and Cooperation Initiative (G20 2016). The G20 should reaffirm the facilitating role of the World Trade Organization (WTO) in global governance on digitally-enabled trade, and suggest a WTO Facility on Digitally-Enabled Trade as a focal point to initiate information-sharing, cooperation, and coordination among international agencies related to digitally-enabled trade. In line with the July 2018 report of the G20-mandated OECD Action Plan on Base Erosion and Profit Shifting (BEPS) work, a priority of the international community is how to maintain coherence of the international tax system in light of the persistent disagreement on how to best address the tax challenges of digitalization. Towards this end, the G20 should set up an ad-hoc Intergovernmental Panel on Taxation in the Digital Economy, similar to the Intergovernmental Panel on Climate Change (IPCC), to provide technical and scientific reports that allow G20 political leaders to make holistic solutions to the cross-cutting issue of digital economy and tax policies by 2020.