Book Symposium The Electronic Silk Road: Opportunity and Complexity Along the Electronic Silk Road

[Jake Colvin is Vice President of Global Trade Issues at the National Foreign Trade Council.]

How is global trade different in the digital age? As Anupam Chander makes clear in his new book The Electronic Silk Road, the internet is changing who trades, what is traded, and how we trade, all of which have implications and complications for businesses, consumers and policymakers.

Upfront, his book outlines the great promise of the internet to democratize global trade.  Businesses and entrepreneurs around the world can hang a digital shingle to offer goods and services online to a global audience, and consumers and intermediary businesses have new options for tapping into information, goods and services from far away.  While Chander focuses much of his attention on what he labels net-work – functions like medical services from India and customer service operations from the Philippines that can be done anywhere with increasing ease – to illustrate the effect that the internet is having on who trades and what is traded, it is worth putting a finer point on the role that the internet is having on trade in goods.

Thanks to cloud, logistics, financial and related services that reduce the red tape associated with international transactions, small businesses and entrepreneurs can participate in global markets from an early stage on a broad scale for the first time in history.  Many of them are using the internet to sell physical things.

Take Maryland-based Kavita Shukla, who founded a company called Fenugreen that manufactures a low-cost solution to keeping produce fresh for up to four times longer.  She can connect, market and sell her product around the world thanks to services provided by companies including BigCommerce.com, Google, Intuit and UPS. The online craft marketplace Etsy reports that over 25 percent of its transactions are international.  eBay has produced several studies that quantify extraordinarily high participation of the commercial sellers that operate on its platform in the global marketplace.  The electronic silk road is a critical conduit for physical goods as well as services.

Amid this opportunity, Chander deftly highlights and makes sense of a number of issues that businesses and governments are confronting as they dig into the complexities of engaging in global trade in the digital age, such as appropriately protecting privacy, national security, intellectual property rights, and free expression.  Companies are wary of getting wrong-footed as they extend virtually into new countries and worry about being caught between overlapping and conflicting legal jurisdictions, addressing privacy concerns across the countries in which they operate, and responding appropriately to law enforcement and national security requests for information.  Businesses, particularly small companies and entrepreneurs, could use greater certainty from international rules.

Unfortunately, in a world where countries approach issues of expression, privacy and security in sometimes dramatically different fashion, these issues are often resistant to one-size-fits-all policy prescriptions.  Chander’s maxim, to harmonize regulations globally where possible and “glocalize” – tailor service offerings to local regulations and sensibilities – where necessary, is unavoidably subjective and reflects the tension that companies face when confronted by divergent (and at times conflicting) laws, different privacy policies, and a variety demands to turn over or take down information or alter corporate behavior or practices. As a company, do you provide a one-size-fits-all product or service or set of policies to the world? Do you tailor your offerings and approach to different countries or regions based on local law or custom or international norms? Does that calculus change depending on whether you are doing business in Germany versus China?

One important approach offered in the book is to use the global trading system to apply the kind of principles like transparency and non-discrimination that have underpinned trade in goods for the last half-century in an attempt to impose disciplines on efforts to discourage information flows and internet-enabled services.

There is support in the business community for developing new international trade rules – and enforcing those that are already on the books – to commit countries to avoid discriminating against global flows of information, to permit companies to transact business through e-commerce platforms without establishing a commercial presence in each country, and to prohibit requirements to use local computing infrastructure, such as servers, as a condition for doing business or investing.  Negotiators in the Transpacific Partnership trade talks are weighing such commitments as they work towards a final agreement, and the World Trade Organization recently devoted its annual public forum to discussing these kinds of digital trade issues.

There are other significant barriers that can impede the ability to do business across borders in the digital age.  Chander highlights one that can stymie services trade – licensing and accreditation requirements that favor domestic providers. Other policy levers can enable or discourage digital trade in services and global e-commerce, from export controls and immigration and visa policies to de minimis thresholds, customs regulations, and rules governing financial transactions and logistics services. Updating those rules through trade agreements or unilaterally can further pave the electronic silk road.

Trade policy alone will not address fundamentally different approaches to law and regulation. Chander alludes to the different approaches to regulate privacy taken by Canada, Germany and the United States, and hints that certain countries’ rules could conceivably raise the level of privacy protection throughout global platforms like Facebook by encouraging companies to implement more robust protections across the board.  Even if there is incremental movement on a case-by-case basis, at a macro level, fundamental differences will persist between the United States and European Union; yet, those differences cannot be used as an excuse to block global flows of information or trade in services.

Addressing differences in approach where harmonization is not an option requires building bridges.  With respect to privacy, the EU-U.S. safe harbor agreement has provided “a streamlined means for U.S. organizations to comply with the [EU Privacy] Directive”. It and other efforts like the Asia Pacific Economic Cooperation privacy framework offer models to overcome differences in approaches that ought to permit information and services to flow.

Chander does not deal with the implications of U.S. national security policies, which became more prominent thanks to the revelations by Edward Snowden about National Security Agency activities in the digital realm that were coming to light as this book was going to press. These revelations are having an impact on policy discussions and attitudes about the treatment and storage of information in Brazil, China and the European Union in particular.

Officials are in some cases using the controversy to advance longstanding agendas or to conflate programs like PRISM with concerns that the United States has raised on state-sponsored commercial espionage, while non-U.S. cloud service providers are happily using the controversy to differentiate themselves in the marketplace.  Having an adult conversation about the extent of authorities and the checks and balances on them in the United States and in countries around the world – and separating concerns about national security activities from those about commercial privacy protections – could help calm tensions and avoid policy reactions in other countries that could put up roadblocks on the electronic silk road.

The issues raised in the Electronic Silk Road are not easily settled, but Chander provides an excellent roadmap that outlines the enormous opportunities and complex challenges.