The Seoul Consensus
Tradeup Capital Fund and Nextrade Group
This blog post was originally published in Ideas Lab and reflects parts of the discussion on the Internet economy in the T20 Workshop on June 13-15 in Izmir/Bodrum
The world needs a new policy agenda to unleash the power of the digital economy.
The world economy is flailing, with growth expected to slow to the weakest pace since the 2008-09 crisis. Growth of cross-border trade remains well below 2007 levels. And global middle classes have not expanded as assumed — to just 13 percent — compared to 56 percent who are still low income.
Luckily, a powerful cure to these ills exists: disruptive digital technologies. 3D printing, virtual currencies, Big Data, and the Internet of Everything are creating a new wave of growth opportunities. They empower companies to dramatically cut costs and enable even the smallest of businesses and solo entrepreneurs to get in business and engage in trade.
And yet, creeping digital protectionism and persistent digital divides limit the potential for hundreds of millions to benefit fully from these breakthrough technologies.
Over 100 governments are limiting the cross-border transfer of data, today’s critical input for manufacturing, consumer product, mining, agricultural, services, and hosts of other businesses around the world. Several emerging and advanced are forcing foreign companies to invest in unnecessary duplicate servers in-country as a condition for market access. Protectionist barriers are being raised on 3D-printable designs. Outdated procurement rules complicate governments’ purchases of software and other IT products and services from foreign bidders. Many governments still limit market access for digital products and services. The emerging patchwork of national rules on virtual currencies risk territorializing what could become a single global currency.
While it seems the Internet is ubiquitous, digital divides are deepening. Less than a half of the world’s population uses the Internet. In sub-Saharan Africa, only 13 people out of 100 people were netizens in 2013; in Asia-Pacific, only 33 percent and in Latin America only 47 percent were. Barely over 10 people in developing regions have fixed broadband
In the early 1990s, the Washington Consensus set off deep trade and investment liberalization across the developing and post-communist world — creating, with the IT revolution, a tidal wave of globalization. Aimed to curb the role of the state in the economy, the Consensus laid out 10 major policy prescriptions — such as deregulation, privatization and trade liberalization — for emerging economies to follow in exchange for aid from the World Bank, the IMF and Western donors.
It’s now time for Washington Consensus II to guide how nations should behave in the digital economy and pave the way to the next era of globalization. Given the persistent stigma around “Washington Consensus” — a term often associated with unforgiving austerity — the new framework could be called the Seoul Consensus, to celebrate Korea’s rapid ascent to a leading digital economy. Instead of a top-down process led by Washington-based organizations, the new Consensus should be forged by a broad group of thought leaders from around the world — G20 governments, international organizations and multilateral development banks, and think tanks.
Tenets of the Seoul Consensus should include:
1. Free market access to digital goods and services, as well as goods and services that support the digital economy
A Seoul Consensus would focus policymakers’ minds, empower think tanks and watchdog groups to keep governments’ feet to the fire, and guide the spend of donor dollars. It could be backstopped by a Digital Trade Organization, a nimble forum for dialogue, inter-governmental codes of conduct, independent data gathering and analysis, and bottom-up data from market participants on the barriers that companies and consumers face in the digital economy.
Broad guidelines, policy dialogue, and increased transparency won’t necessarily prevent bad policy — but they are a critical start. Every country that wants to see its companies and citizens prosper in the 21st century world sees the value proposition. The G20 meetings in Turkey this year could be a great place to start.
Kati Suominen is the Founder and CEO of TradeUp Capital Fund and of Nextrade Group, LLC.