YJIL Symposium – Trade 2.0: “The New Global Traders on Your iPhone”

Anupam Chander

Today, one of the most important ports of entry for trade can be found on the diminutive screen of the iPhone. Companies from around the world vie to provide a service via that screen — playing a game, offering information, managing finances, or connecting one with friends. With its two billionth download, Apple announced last week: “Today, iPhone and iPod touch customers in 77 countries worldwide can choose from an incredible range of apps in 20 categories, including games, business, news, sports, health, reference and travel.

The process for becoming such a global trader is remarkably easy. One registers as a developer with Apple, agrees not to violate United States laws prohibiting export of certain technology with military uses, declares whether one is U.S. person or a foreign person for purposes of U.S. tax collection, chooses the languages in which the application is to be offered, and indicates a bank account to collect the proceeds.

It has not traditionally been so easy to sell services to the world. The recent development of near-instantaneous communication via global electronic networks makes it possible for people to provide services across the world without boarding a plane or passing a customs checkpoint.

But offering an app through the Apple store is not without possible controversy, especially when the same app is offered across so many jurisdictions. Apple itself polices the proposals, thus far denying applications to sell pornography, for example. Apple retains “the right not to post any material . . . at any time in its sole discretion without notice or liability.” But Apple may permit material that some countries may find objectionable, and it may deny material that some countries may believe cannot be justifiably denied. How will the trade mediated by this device that fits in the palm of one’s hand conform to the laws of all the shores it visits?

Consider the major news in the IT industry from the last two weeks. Dell announced the multi-billion dollar acquisition of Perot Systems, and Xerox followed with its own multi-billion dollar acquisition of Affiliated Computer Services. Perot Systems and Affiliated Computer Services provide outsourcing services to both governments and corporations. With these acquisitions, Dell and Xerox, traditionally in the global hardware business, now plan to move into global services, much as IBM did a few years back. All of these companies rely upon an electronically-enabled global workforce to supply services across the world. Meanwhile, Amazon announced its newest Kindle, now available with an international wireless service that allows you to download books and other reading material in more than one hundred countries. Amazon’s Kindle, like the iPhone, now allows authors to reach consumers across the world. People all over the world can now engage in global trade with just a few movements of their fingers.

My article Trade 2.0 in the latest issue of the Yale Journal of International Law begins to think through how we should think of trade conducted via electronic networks. The abstract for the paper reads:

Where the last century saw the dismantling of barriers to trade in goods, the new century will see the dismantling of barriers to trade in services. Once theorized as nontradable, services now join goods in a global marketplace powered by advances in communications technology. Today, an engineer, accountant, or lawyer can supply her services across the globe without boarding a plane. Less well understood is that cyber-trade encompasses not just the services outsourced to Bangalore, but also the online services supplied by Silicon Valley to the world. Apple, eBay, and Yahoo too are exporters of information services, seeking to become middlemen to the world. Google now earns half of its income overseas. Almost sub rosa, the Internet has become a global trading platform rivaling any history has yet produced. But law developed over millennia for the paradigm of goods is unprepared for trade, version 2.0.

The pressure on law is clear: Antigua challenges U.S. rules barring online gambling; Brazil demands that Google identify hate speakers; an Alien Torts Statute suit charges Yahoo with abetting Chinese torture; and the United States challenges Chinese media restrictions on movie, music, and financial information services. Once we recognize the connections between these disputes, we can begin to form a general theory of cyber-trade. Ricardo’s theory of comparative advantage applies to all trade, whether in goods or in information. Economic theory thus counsels, and international treaties compel, the dismantling of barriers to cyber-trade. Yet, because of its remote nature, it is easy to assert consumer protection to bar online competition. I articulate a principle of technological neutrality to smoke out barriers hiding under this veneer. To flourish, cyber-trade will also require digital analogues to the physical infrastructure for services, from handshakes to courts.

The footloose nature of cyber-trade poses a more fundamental challenge — to law itself. Via the net, service providers can flout local law from afar. This race to the bottom arises from the exploitation of overly liberal regimes, lacking consumer and other protections. A second potential race to the bottom arises from overly repressive regimes, which require service providers to serve as auxiliaries of the authoritarian state. I offer principles to protect local control of global Internet trade without jeopardizing either human rights or the World-Wide nature of the Web.

To summarize further, my article seeks to promote trade liberalization — thereby improving economic opportunities around the world — while not doing away with local law entirely. Liberalization should help those in Bangalore and Manila — and those in Silicon Valley and Seattle — to reach markets around the world. At the same time, we should generally seek to respect local laws, rather than declaring cyber-mediated transactions outside the jurisdiction of local sovereigns. The various laws of the states of the world should not be replaced by the dictates of Steve Jobs or Jeff Bezos, generally benevolent as they may be.