Science was highlighted by the panel as the main driver of innovation. Brazil's introduction of enabling policies to build science-based agriculture was spotlighted. This transformation has helped Brazil achieve its food security objectives.
Consumers need a fair system where they know what they buy is safe and that they have the right of redress if they have any problems. The level of consumer protection should be equal to the level of trade democratization.
The panel emphasized the important role governments have in nurturing innovation, through investing in research and development. It also emphasized that the current revolution is a consumer-led revolution. Business is adapting the use of technology to what customers need. Manufacturers also face a challenge of sustainability. They have to balance environmental and economic concerns, while providing quality affordable products.
Capacity building and training is an important aspect in moving innovation forward, argued the panel. A need for dialogue between the WTO and consumers was highlighted.
A presentation by TradeLab explained an initiative being implemented by a group of trade experts who provide businesses, governments and NGOs with access to legal services.
Questions from the audience addressed issues such as the privacy of consumers and secured payments, the utilisation of communication tools to help farmers, and the role of science and innovation in risk management.
Mid-day Spotlight: World Economic Forum presents The Global Information Technology Report 2013 — Growth and Jobs in a Hyperconnected World
Finland has toppled Sweden from the top spot in a ranking of economies that are best placed to benefit from new information and communication technologies (ICT). Singapore came in second place and Sweden third in the 2013 Networked Readiness Index, compiled by the World Economic Forum for its Global Information Technology Report.
The Index, calculated by the World Economic Forum and INSEAD, ranks 144 economies based on their capacity to exploit the opportunities offered by the digital age. This capacity is determined by the quality of the regulatory, business and innovation environments, the degree of preparedness, the actual usage of ICT as well as the societal and economic impacts of ICT.
In analysing the productive gaps between the European Union and the United States, it was observed that there was a narrowing of the gap before the 1990s, but after the 1990s the gap started widening again. In light of this, a study was made on the degree of adoption of technology and the different actors who interacted in terms of boosting productivity. ICT was reducing transaction costs between companies.
The ICT presence in developing countries is in the lower end of global value chains (GVCs), and these countries have problems in engaging in higher value-added segments of the GVCs.
The Index’s framework takes into account the following drivers: the readiness of countries to adopt technology, and the extent that these countries use these technologies. In addition to the drivers, the impact at the economic and social level needs to be assessed.
The Index takes into consideration the following sub-indexes: environment, readiness, usage, and the impacts. From these sub-indexes, ten pillars arise to explain the networked readiness index.
One of the questions from the audience was: "What is actually new about this report?" It seems to demonstrate the obvious, that new technological change will not change the balance of power and wealth. There is no francophone or Hispanic country in the top 20. What has changed is that the wider world and its talent has been sucked into those successful areas. To close the gaps, there must be diffusion of technology. The panellists said there is nothing revolutionary new in the results, but even in stating the obvious, you generate dialogue among stakeholders.
Working Session No. 11: Promoting technological capacity-building and enhancing trade competitiveness in Asian economies
Modern technology has created new manufacturing processes which have contributed to industrial success, said the panel. Many Asian nations have achieved remarkable success in recent years by transforming their economies through technological excellence. Products developed through the adoption of innovative technologies are growing faster than technologically inferior products.
The moderator, Mr Vijay Kalantri, Vice Chairman of the World Trade Centre Mumbai and President of All India Association of Industries, started the session with the observation that if you do business, you make money, but if you do innovation, you get a windfall.
Ambassador Jayant Dasgupta traced the Asian growth experience from Japan to the Tiger Economies, and then to Malaysia, Thailand and Indonesia. The reasons behind these high-performing economies are the high level of domestic investment, rapid growth of human capital and state intervention to foster development. He said that to promote competitiveness, governments must emphasize science in schools, increase expenditures in research and development, upgrade physical infrastructure and communications, and implement policies conducive to attracting foreign investment and protecting intellectual property.
International Trade Centre (ITC) Executive Director Arancha Gonzalez said the ITC is committed to helping small and medium sized enterprises (SMEs) in using technology to access global markets and supply value chains, as well as increase their own efficiency. She said technology is a big friend of SMEs in helping them surmount barriers to their exports. She pointed to specific examples of how technology can help trade in developing countries: farmers in Benin using mobile phones to connect to markets, Algerian carpet weavers increasing exports through Facebook, and the Dhaka Chamber of Commerce using information technology to connect directly to businesses all over the country. She invited participants to the ITC stand at the Public Forum that is demonstrating the apps developed to help SMEs in increasing their trade opportunities.
Mr Norhalim Yunus, Chief Executive Officer of the Malaysian Technology Development Corporation (MTDC), emphasized the importance of encouraging entrepreneurship. He said that governments do not create businesses, entrepreneurs do.
Mr Jason Munyan of UNCTAD said that the latest investment report of his organization highlighted the contribution of global value chains (GVCs) to economic growth. He said that transnational corporations drive these GVCs, and technology can help developing countries move up the GVC ladder. He suggested that science and technology parks like the Biotech Centre in San Diego, United States, and the Media 21 in Singapore can help countries attract and develop new technology.
One of the questions from the audience was about inequality in the area of technology transfer. Ambassador Dasgupta said that there is a wide gap between the ideals contained in the WTO TRIPS Agreement for facilitating technology transfer and the reality on the ground.
Working Session 13: The role of governments in trade and the digital economy
Panellists said recent allegations of security breaches of networks and of widespread surveillance programmes have raised the issue of cyber security. They said governments and international rules have not sufficiently addressed the issue.
In terms of WTO rules, Article XXI of the GATT allows governments to take action when necessary in cases of essential national security interest, but the ambiguity of the provision can leave broad space for legal interpretation.
There have been discussions about building national internet systems or a "spy-free zone", but the panel noted that cyber security measures should not translate into trade barriers. The only way to deal with the issue is through trust, and the best way to build trust is through transparency. Government intervention to protect individual data privacy should not stop the development of new technology.
The panel also reviewed the issue of government support in the form of R&D support, green innovation, export finance, etc. The panel agreed that government support in basic research and infrastructure is essential and legal as long as it is offered in a non-discriminatory fashion. The WTO has rules on subsidies. While OECD has a gentlemen's agreement on export finance, a multilateral guideline is needed to cover emerging economies who are major players in global trade.
Working Session 14: Global value chains: opportunities for trade and the environment
The session focused on the extent to which the production of green goods and services is structured around global value chains (GVCs), and the potential benefits of this growing interdependence for trade and the environment. The session also explored the implications of the rise of GVCs in green goods and services for "enabling" policies, obstacles that may hinder the full participation of developing countries in those GVCs, and avenues for international cooperation.
It was pointed out that access to the benefits of technological development remains unequally distributed within and among countries. International trade can serve as a channel for diffusing new knowledge, know-how and expertise, including with respect to environmentally friendly technologies.
Protectionist trade policies risk having a negative impact on the further development of GVCs, said the panel, dampening the environmental and development benefits we may expect from them.
The panel highlighted that sustainable energy technology deployment has been mostly driven by support policies. Looking at the photovoltaic (PV) sector, it is expected that by 2020 the market will shift from Europe to non-OECD countries. The concept of origin as it relates to PV equipment has become difficult to pin down, posing a challenge for trade rules and the WTO.
Innovation supports growing renewable energy technology markets by reducing costs, said the panel, and supports technology adaptation to different contexts and needs. In order to establish an innovation policy framework, it is important to set overall objectives to ensure coherence across policies. Innovation is not only relevant for industrialised countries, but emerging economies can also benefit from and participate in innovation, including the adaptation and commercialisation of best available technologies.
The panel said most of the discussion on GVCs centres on products while other services-related components are neglected, such as operation and maintenance, which are equally important for the development and sustainability of environmentally friendly technologies. In order to leverage technology to advance development and sustainability, the availability of technologies is necessary but not sufficient. Deployment at scale and in the requisite time-frame is also necessary.
Developing capabilities in the areas of technology and the downstream segments of the supply chain are necessary in order for developing countries to participate in GVCs, said the panel. These countries can also engage in international cooperation to build their technical capacity.
During the question and answer session, the audience showed particular interest in the following topics: the role of subsidies in shaping GVCs; the possible distorting effect on deployment of fossil fuels subsidies and other trade measures, including local content requirements, anti-dumping and countervailing duties, and restrictions on consumption; the policy implications in trying to build capacity in environmental services provision; and the importance of predictability and an enabling environment for investors in sustainable energy technology.
Workshop 5: How Can The Digital Economy Contribute To Vibrant Rural Economies How?
Since the hunger crisis in 2008, agriculture and rural development have come into focus and investment has shifted towards previously "unprivileged" rural areas, said the panel.
The panel looked at innovations, such as specific information and communication technology (ICT) for rural usage that has been invented, and which is on the verge of changing traditional lifestyles. E-agriculture technologies have particularly helped farmers and rural communities to overcome information gaps, which formerly prevented entrepreneurial development. Before 2008, the majority of investment by government was focused on urban areas, which encouraged migration to the cities.
Agriculture contributes to three fundamental aspects of development: food security, social stability, and environmental protection. Agriculture can create urban and rural jobs, support scientific research, and improve food security.
There is a clear tendency for young people to not get involved in farming, said the panel. Therefore, a new challenge is how to incorporate young people in the farming process.
The panel said ICow was initially designed as a tool to disseminate valuable information to farmers via SMS messages. One of the first focuses of ICow was on cow calendars (gestation period of the cow), which allows the farmer to receive information regarding certain milestones in the gestation process based on the insemination date of the animal. ICow allows farmers to receive information from veterinaries. It has also helped producers to sell their products to farmers by informing the latter of the availability and location of their products.
Another useful tool is TarimsalPazarlama.com, an agricultural platform developed by TABIT, which provides farmers with reliable information and creates information management systems according to local needs. TABIT has provided computers in the central locations of villages so that farms can have access to the website.
Workshop 6: Can international trade deliver inclusive growth thanks to ICT?
The workshop tackled the delicate issue of international trade, information and communication technology (ICT) and poverty reduction.
Maritime transportation costs have stagnated and one should not expect decreases in trade costs related to transport costs, said the panel. The speed of the maritime fleet has decreased, which in turn has increased costs. It is a similar situation for air transportation. However, internet costs have decreased. The internet has become cheaper, but is everyone on board? Latin America is well connected to broadband, but Central America is lagging behind. ICT availability enhances trade: when a UK supermarket orders green beans from Kenya, it takes 48 hours to have them harvested, processed and in the supermarket thanks to ICT and transportation.
There is a positive correlation between ICT and economic growth, said the panel. However, one must be careful to talk about causality. There are wide economic effects and it represents gains for all sectors; however, as with any technological shock, gains may be biased. ICT is able to reduce fixed costs to trade (access to information, and eliminating the middleman). The reduction of fixed costs will increase the number of people that will be big enough to trade. Trade is about extensive and intensive margins; only the most productive firms can export according to the Melitz model.
The panel highlighted that complementary factors are important: not only is access to the phone necessary but also a place to charge the phone, not only is internet access needed, but also a computer with electricity to run it. A 1 per cent increase in the telecommunications penetration rate increases GDP by 0.03 per cent.
ICT is not the panacea, the workshop concluded, and other technologies that are available should also be used.
Working Session 16: Creating a marketplace for digital content
The panel explored how the creative industries are harnessing new technologies to foster a dynamic and legitimate online marketplace. There are more devices to consume content than ever – from smart phones to tablets, gaming consoles to DVRs. Providing consumers with numerous options to get the content they want is the new "normal".
The panellists pointed out that the rapid expansion of digital content is being driven by the fast evolution of smart telephone devices. Consumers demand highly personalized experiences. Revenues are increasing from the mobile digital services market.
Emerging markets (like BRICS countries) have considerably increased their demand for content. They are progressively becoming providers of online services.
The digital environment offers users new ways of consumption of digital products. This leads to new business models developed to support a broad spectrum of available services. Some of these new business models are à la carte stores (Amazon, Apple, etc.), lockers (iCloud, etc.), ad-supported video and audio streaming (Youtube, Dailymotion, Spotify, Deezer, etc.) and subscription audio streaming (Spotify, Deezer, etc.), among others.
Advances in mobile telephone technology are accelerating the development of cloud-based services. Key aspects for the success of these cloud-based services are the development of devices and networks able to support these services and the increase of consumers' awareness of the growing number of cloud-based services.
The panel also discussed the online environment as a platform for local content to reach a global audience, thereby promoting cultural diversity. Digital platforms are complementary to normal distribution channels.
Piracy remains a problem that continues to threaten the industry. One solution has been to shorten the time that elapses between exploitation windows in order to provide consumers with legitimate options to access content before it is available illegally. Companies fight piracy by using technology to innovate (providing new products, new channels of distribution and new ways to customize digital services consumption).
Working Session 18: Addressing 21st century issues: the importance of cross-border information flows
Small and medium-sized enterprises (SMEs) developing software need to deal with peculiarities of several national laws in the course of their business, said the panel. To sell services easily all over the world, they are calling for a transparent, reliable and non-ambiguous set of rules. Complex rules add costs which are passed on to customers. It is important that government regulations do not "cripple" the software when it is transferred to customers.
Government regulations should be freely available online. Localization barriers inhibit trade and should be removed. Trade agreements need to be updated to account for the cross-border flow of data, said the panel.
WTO rules need to be modified to take into consideration the trade in information. There is a need for classification of information. Multilateral and bilateral trade agreements are seen as a more favourable means of negotiation as they are not restricted by national treatment principles.
The way forward is to establish an informal body within the WTO, said the panellists. There is a need for a database containing the kinds of measures and restrictions being applied to the data flow in different countries. This would serve as the raw material for seeing the various dimensions of the problem and how it has grown over time.
Government regulations on data protection are not standardized and this leads to unequal bargaining power for countries. The regulations are now being seen as data protectionism rather than data protection.
Working Session 19: You can’t stop progress: innovation, the digital economy and risk with trade in international services
Trade can be a powerful force in creating markets and driving innovation, said the panel. But markets are not perfect. The panel sought to answer the following questions: What innovations will the expansion of trade in services deliver and with what effects? Is all innovation good? What role should government play in controlling risk and ensuring quality and access? When services are intermediary goods, how does their trade affect the operation of the broader economy?
The Trade in Services Agreement (TISA) being pursued by a number of members is moving negotiations in the wrong direction, said the panellists.
In the European Union, there has been no liberalization of health services, said the panel. Trade is not the right place to discuss health because to develop good public services, resources must be targeted towards needs, not to shareholders.
The panel said South Africa is currently negotiating services on a regional level, with no negative lists. It seeks to facilitate development and growth by staying away from a strictly mercantilist approach. Countries have their own national objectives, and their won way of dealing with certain issues. South Africa does not have high ambition agreements which have a negative impact on the flexibilities of the General Agreement on Trade in Services (GATS) and it certainly does not want to be in a position in which one day the GATS is modified to be consistent with an agreement negotiated outside the WTO.
Countries have the right to regulate over fracking, said the panel. However, sometimes these prohibitions can result in violations of preferential trade agreements (PTAs), through expropriation, market access commitments, etc.
The movement of natural people is a social issue, and thus binding visa issues in PTAs does not make sense. Mode 4 should not be included in TISA, said the panel. TISA should include labour and human rights, otherwise it would be incomplete.
Workshop 7: Towards a digital economy for all: empowering consumers to drive technology-enabled trade
The session discussed various issues of consumer protection in the digital economy. E-commerce allows small businesses to trade with consumers in many more countries with lower cost. The network of e-commerce involves internet, services, logistics and trade policy, empowering small businesses and giving consumers a voice.
E-commerce presents opportunities for developing countries, while challenges remain in consumer protection, said the panel. The UN guideline for consumer protection first issued in 1985 serves as a general baseline for developing countries, and e-commerce is being considered in the latest update of the guideline.
The panel said difficulties relating to consumer protection in the internet include misleading promises, data privacy and digital identity, the lack of fair price, inscrutable terms and conditions, etc. The new challenge requires regulators to keep up to date with the development of new technology. Developed countries are encouraged to share their regulatory experience with developing countries.
When asked what outcomes they would like to see at the WTO Bali Ministerial Conference, the speakers mentioned the continuation of the WTO agreement to not impose duties on electronic transmissions, a trade facilitation outcome, low customs duties for small e-commerce transactions and closer collaboration between agencies such as the WTO, UNCTAD and ITC.
Workshop 8: Transformational evolution in trade finance: technology meets business proposition in the new Bank Payment Obligation
The panel gave an overview of the Bank Payment Obligation (BPO), a new instrument of trade finance championed jointly by SWIFT and the International Chamber of Commerce (ICC). The BPO preserves proven characteristics of existing instruments, while leveraging technology to accelerate and enhance transaction processing in ways that create measurable financial benefit for importers and exporters.
Mr André Casterman, Head of Corporate & Supply Chain Markets of SWIFT and member of the ICC Banking Commission Executive Committee, said that trade finance is fundamental to the conduct of international trade. Between 80 per cent and 90 per cent of world commerce is supported by trade finance. A survey by the Asian Development Bank concluded that increasing trade finance availability by 10 per cent would result in a 5 per cent increase in business activity and employment. He pointed to the very low rate of default in trade finance: 0.021 per cent.
Mr Markus Wohlgeschaffen, Global Head of Trade Finance & Services of Unicredit Group, said that the open account system is supplanting the traditional letter of credit in trade finance. Banks are now providing more supply chain trade finance. He said that banks need a helping hand from the WTO and other multilateral organizations to prevent over-regulation of their operations.
Mr Alexander Malaket, President of the OPUS Advisory Services International Inc., made a detailed presentation of the BPO, which he said provided win-win benefits to users. He said the BPO represents an opportunity to increase trade through innovation and the application of technology. He said some 50 major banks have adopted BPO, and hoped the WTO can help raise awareness of this new system for trade finance.
Mr Torek Farhadi, Senior Advisor of the International Trade Centre (ITC), said that small and medium-sized enterprises (SMEs) could find the BPO system too complex and expensive. He noted that BPO has not taken hold in Sub-Saharan Africa where banks still had to partner with major Western banks to conclude overseas financial transactions. A major reason for this situation, which has raised trade finance costs for African exporters, is that many African banks have not complied with the new strict regulations, for example those against money laundering.
The panellists agreed that the institutions they represent should work closer together to ensure that SMEs, particularly in developing countries, benefit from technology advances in trade finance.
The workshop was moderated by Mr Jonathan Bell, editor-in-chief of Trade & Export Magazine.
Summaries of other sessions on Day 2 coming soon