The 2020 edition of the World Trade Organization’s (WTO) World Trade Report analyzes the adoption of government policies to foster digital innovation and technological progress for economies, and explains the WTO’s role in this changing context. The WTO launched the publication in an online event on 23 November.

The publication titled, ‘World Trade Report 2020: Government Policies to Promote Innovation in the Digital Age,’ finds that 115 countries have instituted new industrial policies and other digital and industrial development strategies that aim to foster a transition to the digital economy. The report highlights a number of new policy instruments that are being used to support this transition. These include policies to address access to data, research and development support, such as tax breaks to facilitate digital innovation, and technological hubs to maximize knowledge spillovers and knowledge diffusion. Governments are also continuing to employ several conventional policy instruments, including investment and tax incentives to develop local technologies, incentives to foster patent and other intellectual property creation, tariffs on infrastructural equipment, and innovation-oriented procurement to shift markets towards innovative products and incentives.

The rising importance of data as an input in production is resulting in a demand for new international rules on data transfer, data localization, and privacy protection.

According to a WTO press release, developing countries are “showing a clear interest in the transition to the digital economy.” The report highlights opportunities related to inclusion in the new digital services supply chain, lower costs of reaching international markets through the internet, and the digitization of manufacturing production. Challenges include developing the necessary infrastructure to facilitate this transition.

On COVID-19, the report observes that the pandemic has accelerated the uptake of digital innovation and e-commerce and led countries to strengthen policies aimed at boosting growth through innovation and technological upgrading. Correspondingly, governments have introduced support measures for capacity building and upgrading in information and communication technology (ICT). The report highlights significant growth in online platforms since the start of the pandemic. Latin America’s leading e-commerce technology company, MercadoLibre, for example, reported a 70.5% year-over-year increase in net revenue in the first quarter of 2020. Chinese e-commerce company Alibaba reported a 22% increase in sales in the first three months of 2020. The report also showcases digital innovation in developing countries in response to the pandemic: Senegal’s Ministry of Trade partnered with the private sector to facilitate delivery of essential goods and services through e-commerce, among other examples.

The report also showcases ways in which the WTO has supported innovation, including through eliminating tariffs on internet and telecommunications infrastructure products through the Information Technology Agreement (ITA). The press release notes that the WTO has stimulated e-commerce through a moratorium on duties on cross-border digital flows, liberalizing internet services through the telecommunications agreement – and providing a stable framework for the development of global and open standards, intellectual property protection, and other critical rules based on principles of non-discrimination, transparency, and reciprocity.

The report concludes that international cooperation can play a key role in countries’ efforts to accelerate a digital transition while minimizing the negative impacts from national policies, including distorting trade, diverting investment, and promoting unfair competition. In the future, the press release notes, the WTO will continue to play a role in reducing uncertainty in markets for digital goods and services – and WTO members will need to consider measures needed to facilitate investment and how to encourage the sharing of benefits from innovation policies. The report observes that the rising importance of data as an input in production and the potential use of such data is resulting in a demand for new international rules on data transfer, data localization, and privacy protection.

The World Trade Report is an annual publication that aims to deepen understanding about trends in trade, trade policy issues, and the multilateral trading system (MTS). [Publication: WTO World Trade Report] [Executive Summary] [WTO Press Release]