The World Trade Organization in times of digital trade Addressing digital protectionism?

Abstract

Digital transformation is affecting more and more industries, changing existing trade in goods and services, and creating a new, digital trade. Baldwin (2016) calls it the 4th phase of globalization, the second unbundling, driven by the information and computer technology (ICT) revolution. The speed of this transformation is faster than other disruptive changes in the past and digital trade is becoming an important part of international trade. At the same time, the international trade sphere is experiencing a severe crisis, with barriers to classical trade in goods rising and a trade war between China, the United States (US) and the European Union (EU) imminent. The World Trade Organization (WTO) is the multilateral organization that has dealt with rules for international trade for decades, ensuring trade flows to be as free and predictable as possible. Now, the organization seems to be paralyzed, not knowing how to respond to the new, protectionist, realities in international trade. In March 2018, German Chancellor Angela Merkel highlighted in her government declaration that “digitalization and protectionism are two opponent poles that in our understanding do not go well with each other. This is actually why the 21st century is the century of multilateral solutions and multilateral institutions. This is especially the case with regard to trade.”