The following are the outputs of the real-time captioning taken during the Twelfth Annual Meeting of the Internet Governance Forum (IGF) in Geneva, Switzerland, from 17 to 21 December 2017. Although it is largely accurate, in some cases it may be incomplete or inaccurate due to inaudible passages or transcription errors. It is posted as an aid to understanding the proceedings at the event, but should not be treated as an authoritative record.
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>> MODERATOR: Let me make sure the mic is on. I know we're late in the day today, but that won't curb your enthusiasm here or my enthusiasm to call on you at random times to play into the discussion. Tell you a little bit about what we're going to do today for this panel, and how we'd all like to run it. First of all, make sure you're on the right airplane, this is realizing SDGs through policies enabling digital trade. This is a theme of this workshop, and it's interspersed throughout the entirety of conversations this week. And what we want to do today is touch on a number of discreet components of that large issue. We have a terrific large panel here. And just to give you a sense of how this is going to flow, we're going to try to be fairly quick in interventions. And we have a few different areas, ambitious agenda of what we want to get through. Between each section, I am going to pause and give a chance for any questions, comments, observations that have arisen in your minds for discussion that you want to bring into this. We're going to check remotely, hopefully for the remote participants, that will be something easy enough to do. Let's go down the row with introductions.
>> Hello. I'm Esther Peh, my background lies in free trade negotiations, so I might be speaking a little out of my comfort zone here today, but honored to be here.
>> Good afternoon, everyone, my name is Rachel Bae. I'm with the OECD, the organization for economic development and cooperation. And I work in the directorate. And as you can imagine, digital trade as is the case across all of those in the OECD, anything digital has become a priority area. So digital trade is a narrative included as one of the priority work areas.
>> PANELIST: Hello? I'm Karen McCabe. I'm a senior director of technology policy of international affairs, and hopefully I am bringing perspective from the standards development into the discussion and how we look at standards, trade agreements, and regulation.
>> PANELIST: So, behind the front desk, and my name is Makoto Yokozawa, and I'm from Japan. I'm very happy to be here. Thank you.
>> PANELIST: Hi. I handle internet policy for Disney.
>> PANELIST: I run a think tank. We work in south Asia and southeast Asia. And we worry about economic development, particularly for poor people, so we work on ICT policy and regulatory issues that affect their lives, including some trade.
>> PANELIST: Hello. I'm Eric with AT&T, and pleased to be moderating the panel.
>> PANELIST: I'm Audrey Plunk.
>> PANELIST: My name is Christopher Yoo, I'm professor of law at the university of Pennsylvania where I lead a project called one world connected. We have 120 case studies already conducted. We will begin a data analysis phase. We're trying to connect them to sustainable development goals such as health care, education, financial development, and economic development as well. I'm also on the U.S. federal communication commissions, but anything I say represents my views and not the views of the commission.
>> PANELIST: Good afternoon, I'm Carolyn Nguyen with Microsoft.
>> PANELIST: Good afternoon. My name is Jose, and I have been working in many areas, but certainly, areas related to information technology.
>> PANELIST: Hi, everyone. I'm a post-doctoral researcher at the one world project, and I will appreciate questions from the audience.
>> PANELIST: And Judith? Great. Thank you. And I would like to acknowledge all of the great work of Barbara and what she has done to organize this panel. We have a fairly ambitious agenda. There are six areas we would like to raise and invite your input on. The first is the evidence‑based, what research tells us about the economic developmental benefits. Then we're going to move into a discussion about the digital trade rules. We've got great expertise here. And then we will talk about localization rules and the impact that they can have on realizing SDGs. On to the important topic of fostering users' trust in the digital economy. And then business responsibility and coverage of best practices. We will do our best to get through all of this.
So first on the evidence‑based, which is always an important place to start, and Carolyn, I would like to begin with you for you to provide how digital services are essential and examples where they are realizing many SDGs.
>> PANELIST: So, I wanted to start out with a little bit of background. The goods and services that we consume today contain inputs from various countries around the world. That particular flow of goods and services within the global protection chains are not always reflected. So, if you look at traditional accounting of goods, an overwhelmingly large portion of trade versus services is usually 80/20 or 70/30. However, if you break it down and take the methodology, then more than 50% of the trades is actually digital services. For example, in the EU, it's 58% of total export of services and in the U.S., it's 55%. The ICC has a paper out that talks very clearly about how digital services are essential in traditional sectors such as manufacturing and agriculture. Agriculture impacts SDG2 in terms of zero hunger, and 8. For example, digital services can be used to measure moisture in different parts of the field. Yield data in terms of how much fertilizer, pesticides, global market conditions, etc. These are all capabilities that enable farmers to make better decisions and better yield. For further information in terms of examples of ICT enabling SDG5 in terms of gender and others, I would like to refer you to the ICT paper.
>> MODERATOR: If you can talk about similar elements between the investments and SDGs?
>> PANELIST: Sure. The most often cited number is that 10% growth in internet or broadband connectivity can contribute 1.4% to GDP. Those numbers are done at a broad national level, and it's hard to know what to make with it, and they're not done with what we consider adequate controls. All things being equal, you can attribute it, but all things are never equal. Our project team has actually done literature reviews to see if a proper study has been done. The answer is, there's a lot of anecdotal and suggestive after‑the‑fact information that suggests it's the case. There is literally no hard data at this point that demonstrates it definitively. One of the things we have undertaken is trials, the closest thing you can get to attributing causality to internet connectivity as you can. We're doing trials in education, health care, and in terms of economic development. We're discovering is a key element missing. The hard evidence to mobilize outside education ministers to health ministers, agriculture ministers, finance ministers and Prime Ministers is not to describe the benefits of internet connectivity, but to provide hard evidence that this will advance goals and give them a sense of the magnitude. Prime Ministers have many problems and a limited number of resources. They have to have a keen sense of exactly what they're going to get for the investment. What we find is there is a gap in literature. But there is a lot of anecdotal evidence that it does promote and advance the SDGs.
>> PANELIST: [ Off mic ].
>> PANELIST: Sure. Thanks very much. And hopefully our work can help contribute to existing literature in this area. As we at the OECD went about trying to develop metrics for looking at growth and impact of digital trade, we very quickly realized that we were not sure what we were going to measure. It's not clear what you mean by digital trade. One person can mean one thing when they refer to digital trade and somebody else can mean something else. And the normal comment, statistics and accounting frameworks that exist currently, we can't really turn to without clearly understanding what is meant by digital trade.
So, we went about in the very early stages of our work in this area to try to get everyone to speak the same language. We identified the how of digital trade, which is, is it digitally ordered? Is it platform enabled? Is it digitally delivered? And also the what? Are we talking about goods? Services? Information? And then the who. Who are the actors involved? Is it business? Is it consumer? Is it government? All of this, of course, is underpinned by data across borders. And so, we looked at different examples of businesses out there currently. For instance, we looked at the Uber model where there's a driver and consumer in the same country. There's a platform that operates across borders. So, the question is, is Uber a notching service? Or is it a transport service? And Facebook, another example. It's a free social networking site. So, it's a free service, and so basically there is no monetary footprint there. But, it gets its revenue through advertisement. So, there is a footprint of advertising revenues, which is collected by GDP statistics, but the data underlying the advertising revenue is not captured. And so, where there's no economic activity, where there is no monetary footprint, it's difficult to capture those types of things.
So, what we are in the process of doing is developing this framework for measurement. We're still refining this framework so that we can be in the position to capture statistics and also come to a point where we can get to a point where we can decide or determine which part of international trade is actually digital trade. So basically, our work is in progress.
>> MODERATOR: Thanks, Rachel. I found the work done is very interesting. I would like to take this from some of the broad-based approach and look at a specific area to talk about some of the work that you've done on labor markets and the impact?
>> PANELIST: So, the formal digital trade in the way of IT‑enabled services and software development is reasonably well documented for Asia. Contribution to GDP, anywhere from 7 to 11%, huge employment generated. This is employment generated for skilled workers. There's a whole set of digital labor and digital economic activity that doesn't show up in these statistics. Let me talk a little about that.
This is a classic mode for digital trade. Their work is mediated by a platform. It could be micro work where you're ad clicking for one cent, clicking and tagging images, all the way up to $300 to $700, which is called a project in this language. And everything in between, $5 to $10 for designing logos, writing content for websites and so on.
I'll quickly touch on some of the tangible benefits we've seen in national services through surveys in India, Bangladesh, Myanmar, etc. One is that this kind of work is sometimes the only work for a lot of people in these markets, because there's a concept of part‑time employment. It does not exist with the big companies. So, plenty of people who either do not feel intimidated for various reasons like transgender people or women who need to manage a newborn child or caring for somebody are benefitting because they are able to sit at home and do work. Classic examples are translations in Myanmar. Huge need for translators. 150 to $300 a day of income or by page, translating language to the Myanmar language.
Second, it's a huge benefit in terms of solving underemployment problem. People who already have work who are not earning as much as they can or are not working as many hours as they can. And this is the classic online freelancer, while at their other work they will be doing some online freelancing work. In Sri Lanka, they will earn $150 a month on average, compared to $80 a month through national average income. This is not a highly skilled bachelor's degree in computer science, but those who have taken three to six months in graphic design.
And lastly, a classic solution to sticky or underdeveloped labor markets. The workers don't think they will get paid if they go to the big platforms. So, the local solutions that come up actually create trust. So, there is a platform with the average job value of $3 to $6. They post for jobs from the employers. The employers have to pay the money to an escrow account and when the job is done, the platform takes the responsibility for paying. That's how they mediate trust. So, they solve the friction in the labor market that exists. There's a whole set of challenges that have to do with international harmonization.
>> MODERATOR: Fair warning opportunity for audience intervention coming up soon. I might just call on you. So, Karen, I just want to ‑‑ we've talked about a lot of the very strong bases for being encouraged about this, but if you can highlight some possible reasons to be cautious on the potential link between ICTs to bridge digital divide?
>> MS KAREN MCCABE: Okay. I'll do that. I think it's hard to argue that ICTs would not help advance and help us realize the SDGs, to say the least on that. We've had many discussions around that, especially at the Internet Governance Forum. But I think we need to look at the full eco‑system of ICTs in the sense of the development of the ICTs, the standardization, adoption, and use. If we don't ‑‑ are not inclusive, we may never really realize that. And we also need to look at the issue of inclusion. We're talking about ICTs in the sense of really being inclusive and you know, to your question about how we can bridge the digital divide and drive social inclusion. But if people don't have access to the ICTs, and it's not done in a way that's addressing cultural or contextual challenges, then we do need to be cautious about that. But not cautious in the sense that we won't be able to accomplish it, but making sure that we're working in a broader eco‑system. You know, when we look at standardization, in particular, standards unto themselves are not policy instruments, but they work in that larger eco‑system, because they do help drive innovation, market competitiveness, and things of that nature.
So, when we look at questions of how to bridge this digital divide, I think we also need to look at not only from ICTs as a technology, but as I mentioned, how it's developed, deployed, adopted, and used in an equitable way.
>> MODERATOR: So, on discussion of the evidence‑based, let me check, is there any question from remote participants? Not now? Comment? Question? Next!
All right. We're going to move into a discussion about digital trade rules, so the actual instruments for economic development and inclusion. Esther, you literally just returned; thank you for being awake. Can you talk about the conference in Buenos Ares?
>> ESTHER PEH: I am trying very hard to stay awake. You may be aware of the conference in Buenos Ares last week. The discussion is not entirely new. It's not something that just recently took place. It took place almost 20 years ago. E commerce is being discussed. It was back in the 1990s that e‑commerce will transform international trade landscape. And the international organization dealing with trade rules cannot sit out in this transformation. It needs to play a central role in ensuring that you create this open, transparent, non‑discriminatory environment, and a predictable one to facilitate e‑commerce trade.
Last week in Buenos Ares, there was agreement between all members on continuing the conversations. And also, to maintain the current practice of not imposing customs duties on electronic transmissions until the next conference in 2019.
The second was an initiative involving close to 75% of global trade members. And this lateral initiative is to initiate exploratory work to work future negotiations on trade‑related aspects of e‑commerce. This initiative was an effort by Australia, Japan, and Singapore, and it was significant on two fronts. First of all, it is aimed at quickening the pace of e‑commerce discussions at the WTO amongst a smaller group of members willing to do so with a view towards future e‑commerce negotiations. And secondly and more importantly, I think if you were to look at the participants at the lateral initiative, the participants span across geographies and development status, and the bulk of them are developing countries including Singapore. We see a lot of LDCs participating including Cambodia, Laos, and Myanmar, as well as developed countries. This shows that this really presents opportunities for countries at all stages of development.
>> MODERATOR: Thanks for that review, Esther. The concepts are bilateral, multilateral, and plura‑lateral.
>> PANELIST: Thank you, Eric. I have experience with G‑20, G‑7, and other negotiations. Deep discussions, not negotiations. So, I just feel that the ‑‑ there is a battle between the two major concepts. One, there's a free and open. The other is secure and trustable. So, the things regarding digital trade is just looking for a balancing point between this. In other words, is there a balancing point? Or prioritization issues? So, this is a big difference.
For the people who want to be very free, just requested at the WTO or the negotiation process to be as much as open/free. And the other one is those countries who have a reason to say something about that is they have to secure their people, or they have to secure their local government or SMEs. So, this is the, you know, the fighting issues.
So, it was ordered to say about the free and open first, it's good to think about that. So, the old industry presented the point of why? Because, to be secure and trustable, we need to be open and transparent. So, without any data, and we have talked about the evidence‑based. Unless we don't have the evidence or the good reason or the good status of the industry, we can't be secure or trustable. So that is one thing that I have to talk. And the ‑‑ Eric had mentioned the multi‑stakeholder model. It is, of course, the WTO wants to be multi-stakeholder, and NGF is multi‑stakeholder. The issue here with business and industry is, in a simple word, where is our customers? This idea? Okay?
So, the consumer associations or the business users as our clients, my company is doing some data accumulation, and the big companies in Japan and in other areas is our customers. So where are our customers in IGF? It's very difficult to find the customers. So, the true multi‑stakeholder approach will require to clarify who is representing what. The Civil Societies, for example, what part of the Civil Society is coming as Civil Society representatives? And for the business representative, what part of the business and industry is it coming from?
This is a very difficult question, but we need to think about this to solve the trade negotiation, either multi‑stakeholder approach. Thank you.
>> MODERATOR: So, we're talking about the relationship between the digital trade rules and societal conclusion. If you can add to this discussion, digital scaled development with consumers and the relationship between that and some of the regulatory frameworks?
>> PANELIST: Sure. So frequently, I work for the Walt Disney company, and people often ask why we're interested in internet policy. I think we really like to talk about the role of the entertainment industry in the adoption cycle for broadband. People we know, there's all these great reasons that people can use their broadband around e‑government services, and very important things. We know often what brings people to the internet first is entertainment. Things like Facebook, things like movies, that is what we find people motivating their very first adoption. When they're there, we can transition that into other really useful purposes, but the entertainment is really what often drives the adoption and often drives the investment into the broadband. Part of what we would like to see is an environment where there is local content generation as well, so that the ‑‑ we can leverage that adoption cycle. So, people are interested in more than just block buster movies have the ability to adopt broadband. So, what are the conditions that drive that? That is what, when we talk with governments in the trade context about, that what are the policies that will grow a local content industry of their own. I think what people have come to understand is that rather than having us come make a movie in a location and then leave after the movie is made, what will really benefit the economy is if there's a home‑grown entertainment industry. We talk about those rules of engagement. We talk about an environment that respects free expression and rule of law, consumer protection laws, and the kind of e‑commerce things we have talked about here. I think your examples of payment systems are interesting. For anybody on either side of that transaction to be able to sell or buy entertainment content online, we need to have payment systems that are effective. And also, people to get paid for the work that they've done in the entertainment industry.
So, setting up the policy framework that will let the local economic conditions grow I think is something we would like to keep an eye on as we set up the rules under the trade agreements.
>> MODERATOR: Terrific. So, Audrey, building on that, we've talked about some alternatives beyond major trade agreements for developing digital trade and other ideas?
>> AUDREY PLONK: I want to take a different approach to the issue that I haven't heard yet from the panel, and that is the idea of data has a method of trade and digital trade. It's certainly a very important topic, this idea that we need data flows across borders to be able to realize benefits from computing, from, you know, big data analysis, from potentially AI, and you know, the aggregation of data for things like health care that Chris and others have mentioned.
And so, you know, I observed that we tried for quite a few years now to, you know, to have a digital trade agenda and major trade agreements, and that's been strained in some ways. I don't know that we've had a huge amount of discuss. Are there other ways to get to reasonable policies around data flows? Whether it's also in trade agreements and other ways beyond the big trade agreements and multi‑lateral agreements. We do see governments enacting barriers to the data flows for various reasons. Some of them are local content related, the desire to, you know, sort of ‑‑ in order to develop a local content industry to try to force data to stay in a particular locality. But I feel like it's more complicated, that it's also a lack of clarity about how information is secured when it's outside of a jurisdiction. Lack of clarity as to how information, whether it's personally identifiable or not, may be used and sold and transferred on. And so, you know, these are ‑‑ in the absence of a great understanding about how all this works, I think we see a lot of resistance to the data flows, and at the same time we have the data sector that have technology that will solve all kinds of problems.
Our way to bridge this divide between, you know, the desire to restrict the data for all the reasons I just mentioned and the desire to solve the really fundamental problems.
I think to the degree we can have a discussion about that as we move forward would be very interesting.
>> MODERATOR: That's a great segue, actually. We're just going to jump into a bit of discussion on localization rules. So, you know, I think your perspective, you're a business leader. You've been a leader in government. And so, to talk about the perspective, whether from the specifically or just an emerging market perspective on data localization.
>> PANELIST: Sure. Fortunately, Audrey said a lot of good things that I was going to say. Protecting rights. I would point to what the commission representative said in an earlier session. Sometimes technology moves much faster than the maturity of the society to handle it properly. So, it is not about restricting or opening. It is about finding the way to make sure that things are done the right way. We and many other countries have faced the Uber phenomenon. There is an issue about making sure if something goes wrong, if a car gets in an accident, who is responsible? Is it the person who is the driver of the car, who is the owner of the car? Or is it Uber itself? So, there are legality issues that need to be looked at now.
As Audrey was saying, the process of taking from data from this point to that point, or the big data that is gathered from all of that, where is the line? And are they used for something else? For the purposes of others? And how are those things handled in a regulatory way? Currently, we don't see any clear regulation for handling this on an international level, not to mention a local level. This is a challenge in many countries, certainly in developing countries where we are trying to identify a proper move to encourage the progress of it, but at the same time, making sure there are regulations that manage the information exchange properly.
Or the privacy. Again, part of the digital trade could be consultancy abroad. Remote consultancy. Now I will provide my data about health to the consultant, to the hospital abroad for a fee. And then there will be a consultation, and then other information will be taken. Now that information, what is the privacy regulation that manages it? This is something that we need to identify in order to make better and faster movement into digital trade from developing countries.
That said, the tax regulation currently, while there is a lot of promotion, it helps a lot of SMEs trying their best to open up to the international market. But at the same time, the one who benefits more are the big companies, and then there is still not a fair competition that is taking place on the local markets in many cases, not all. This needs to be somehow regulated. Now from the other perspective, is it good to grow fast digitally? Certainly.
And in Egypt, we have taken many steps for digital society to we have a higher cost for financial inclusion. Financial inclusion is certainly extremely important to move into digital trade. Having, even, because, again, growing in traditional trade, unless we minimize the digital divide, then we are moving into having two types of society. A society that has a lot of opportunities through the digital world, and another society that is totally disconnected. So, what we have tried to do is to ‑‑ we tried to endeavor in several rates where there is less ‑‑ where it is less advantaged than others to make smart areas where we are trying to educate people to be able to be good workers in the digital trade arena, so that they are able to build their own SMEs or participate in SMEs that can cater and benefit from the digital trade phenomenon.
The point is, in many developing countries, while it is of big value making pilots and pilots are successful, there are really a lot of challenges when we want to drive this into a more competitive, robust industry. Maybe I stop there. And of course, there is still also the part of the cyber-crime. And in many developing countries, when we go into digital trade, we have a problem where many, many misuse of information can be done. But money, fraud is happening. It does not fit with what was expected, and nothing can be done. And we don't have any protective regulation for society. And what we suggest is, we need more of the big ‑‑ we need more from the ones that went before us into this spot to help us identify proper regulation that would help moving fast in the track. Thank you.
>> MODERATOR: Thank you. Thank you for the work that you've been doing on the economic costs of fragmentation or localization. I think it would be helpful if you share your findings.
>> PANELIST: I'd be happy to. The study best sided is by the European center for international European economy that estimated the loss of GDP based on proposed data localization law and suggested if there was an economy‑wide data localization law and what the loss would be. In all, there was a significant loss on the proposal, peaking at 1.7% loss in GDP. If you do an economy‑wide localization law, they estimate it would be 1.1% loss to GDP. And we know in the countries where you're struggling to get your GDPs to a certain level, a 1% loss is a significant loss.
The estimated welfare loss in China, 63 billion and in the EU of 193 billion, depending on the methodology. 300 to $800 per worker. These are significant losses from data localization imposed. We mentioned data privacy. Katherine has a nice study looking at the implementation of the EU data protection directive. After implementation of that in 2002, we saw a 65% reduction in revenue. What you see is that, in fact, there are real concerns that have been pointed out that have to be taken out. But they have to be balanced on the part of businesses, and striking that balance is why government people have the jobs that they do and why it's so difficult.
In data flows, business round tables come up with new business models, big data analytics, supply chain automation, digital collaboration and scalable cloud are all requiring the movement of data across data borders in a very different way that have been very poorly studied and misunderstood. And we have to bear in mind that one of the costs as we see these move forward is we lose some of the benefits of those innovations. Many of it, some of it can you manage because latency you can manage. In many cases we're losing the benefit of the industry in the fourth industrial revolution.
>> MODERATOR: Thank you.
>> PANELIST: From a personal standpoint, I'm a huge fan. I put my data into the system and it didn't flow into Geneva, so I had trouble coming into the building. That just set myself up to say thanks very much to Barbara and Jenny to help me get into the building.
On data localization, basically, it's introducing digital border controls. The implications are not well understood. Businesses have said that data is pervasive in doing business, and they are becoming increasingly concerned about some of the data localization measures, while not fully understanding its complete impact. We also know that separating out personal data from non‑personal data is very complicated and can be costly. But in this area, as in my earlier intervention about measurement, there is a great amount of data. And I would like to make a pitch to all who receive our business surveys: Our analysis is only as good as our data that we receive. I was very pleased to learn that a couple of our panelists here are in the process of filling out our surveys. So, our brain chest back in Paris will be very happy with that.
But basically, there are two types of localization measures. There's the cross‑border data restrictions, and those restrictions are applied horizontally across all sectors, and it basically targets personal data. There is also the local storage requirements, which tends to be sector‑specific in areas such as finance and health. At the outset, I should say that precise data on the restrictiveness of measures is not currently available. What we have done is based on the information that we've gathered, we've used economic models to apply a shock to businesses. To see what the shock would be, and for those of you who are economists out there, we applied the 1% shock, because we know that trying to comply with data regulations, there is a cost incurred there. And what we found is that the impact on cross border data flow restrictions, the countries and sectors that are most exposed to global value chains and reliant on exports are the most impacted here, negatively.
In terms of local storage requirements, the negative impact is also across all sectors, except domestic what you would call data sector. Basically, across the board competitiveness, though. In the cross‑border data restrictive measures, there was also a spill‑over effect to the neighboring countries, even if the neighboring regions didn't have any data restrictions, they were impacted by their neighbors' restrictive measures. But in contrast, the local storage requirement measures, we saw a very small, almost negligible impact on the neighbors.
Given that internet is global and the cost of regulations around the world, we feel that it would be to everyone's benefit for the global economy to come together to try and address something that's homogenous moving forward. Thanks.
>> MODERATOR: Great. So, this issue around localization, I know it's an important area. I want to check and see if there's any other comment either in the panel or in the room on this area of our conversation? Yeah? We have a question.
>> AUDIENCE: Thank you. Some of the countries that have data localization requirements do it to help their SDGs. 7.1 is about improving tax collection, so New Zealand requires tax records to be stored in New Zealand so when they want to investigate tax evasion, they are able to get ahold of them. A U.S. former prosecutor says it's almost impossible to get the data out of other countries. If you can't require tax records to be stored locally, how do you improve SDG7.1? 10.5 is about improving financial regulation, and the U.S. government can check the high frequency trading source code to be sure that it doesn't exacerbate a flash crash. Or the U.S. tax authorities, or again, for SDG 17.1. And of course, there are other SDGs that are affected like technology transfer in the name of ecommerce, their proposal to prohibit requirements in, not even for the climate change convention. This is not allowed to be negotiated in the WTO Doha round. They have also proposed stronger intellectual property protections for all members, which makes it harder for them to achieve the SDGs.
There are considerations beyond SDGs as we have heard from Egyptian governments. The supervisor tweeted yesterday that data protection should not be subject to trade negotiations, and he said because the types of exceptions for privacy are not enough and data protection rules could water down the EU's data protection rules and open them up to contest.
The economists agree that it's things like market size. Brazil, China get lots of FDI. It's not about whether or not you have data localization rules. The world bank agrees about what are the real drivers.
>> MODERATOR: Any reactions?
>> PANELIST: Responding first to the point about FDIs, there's no question that the data localization is not the primary driver. The question is given the principle drivers, will data localization have an impact on the margin, and a meaningful impact on the margin? And the data seems to suggest that the answer is yes.
I didn't talk about fragmentation earlier. If you will, regulation is the new trade war. It's not tariffs anymore. It's hashing up the different regimes that we face and making that happen. Is that going to stop trade from happening and direct investment from happening? No. Is it going to make it harder? Are we going to lose margin and benefits from customers? Yes.
The other thing I'd like to say is the question about taxes, to me, and hard data localization to me, is a bit of a false dichotomy. We can create solutions. To say someone cannot post data outside is a different question than saying whether the government has access to the data it needs to do taxes. Many countries are requiring that a single copy be housed in the nation and allow the rest to be housed outside as well to allow the government to need to get access and giving businesses the freedom they need to deliver the high‑quality services they are demanding.
The thing I would say is we should think of this as a trade‑off. It's often to take your favorite issue, whether it's data protection or technology transfer and say this is very important. We need to understand that as the people of the world, making anything too strong can eventually hurt the very consumers we're trying to protect. And the tougher question that we face as policy people is to find courses on both sides and strike a reasonable balance between them rather than saying this is going to hurt this one particular consideration that is in a particular discussion at any one time.
>> MODERATOR: Thank you.
>> PANELIST: Thank you for discussing the issues. Japan is certainly supporting the access to the source code. I would like to highlight what is happening in APEX compared to the GPPO in the EU. We have a certification, which is the cross‑border privacy rules. And this is applicable to the APEC regions, but they are expanding. So, it is comparable, because a code regulation, it's not a hard rule. A soft rule. Not the government, but the industry, the private sector can be involved in this operation of this certification mechanism. So, this is some heat for us. The GDP is staying good, as a good reason to think about the data localization just on the previous speaker has mentioned about the impact on the GDPs. But at the same time, we need to be accountable and responsible from the viewpoint of the private sector.
>> MODERATOR: Thank you very much, Mak, and thank you for the intervention before. Let's shift into the next section, to talk about some of dimensions of fostering user trust. And of course, across many panels this week. And at all times you're going to be discussing issues of privacy and security. Audrey, we haven't talked about artificial intelligence yet. And I want to bring that into the discussion. If you can share how that's going to impact trust? Some of the privacy and security concerns?
>> PANELIST: Sure. Thank you. There's been quite a lot of discussion about AI this week. And I think that it's a big topic. So, I'll try to be succinct about it. The questions around trust and privacy, you know, sort of kind of on both sides of technology. So, the input to building the artificial intelligence, then training, and what is done with the output from it? Sometimes they can get a little bit confused. I think there's a lot of good work. IEEE has a lot of good work going on. I encourage you to look at the latest paper that came out a few weeks ago. The output is only going to be as good as the data going in. We look at things like bias and equal representation and inclusion, issues of inclusion.
But we need data. We're going to need data to realize the potential of AI. So, the question of, you know, where are those data coming from, how do we clean it? How do we ensure that it's, you know, traceable and accountable so that, you know, if we want to go back and look at why something happened, we can trace back the data? These are all really important questions that if anyone told you they had the answer to, they are not being real. Suffice it to say that people are looking into that. The question of we need access to that data to get the best outcomes we're going to be able to get from AI is something that we shouldn't lose in the discussion around how do we also protect that data and protect people's privacy. Sort of two sides of that. On the output side, again, you have this AI. It's turned out a response and you think the response is wrong or you think it's been used unfairly, we will also need to share information and pass data across borders and different industries to be able to solve those problems. That is not to minimize concerns surrounding protecting individuals and information. There's these potentials and some of them go to helping support the sustainable development goals. But there are pretty critical issues around ethics and accountability.
It's not a zero‑sum game. We talked about it before as all or nothing. You have the data, or you don't. It either flows or it doesn't. It's either here or there. But as Chris said, the more creative place to be is can we have it in multiple locations? Is it more risky? Does it provide benefits? Asking the questions to get to better data. I see policy purchase going that way, and it's more helpful for when you're talking about tax information where you have the need to have that stored locally. Nobody's going to let that information be exclusively stored outside their country. But does that need to prohibit flows? Maybe not necessarily.
>> MODERATOR: [ Off mic ].
>> PANELIST: Thanks, Eric, for giving me a really easy question. So just kind of building on some of the topics that's been put out there, I think the title of this session is really, you know, leveraging ‑‑ realizing the SDGs through policies enabling digital trade. So, I think we need to, first of all, make sure that the framing of the conversation is about, you know, realizing the SDGs. And then building on top of that, I think we need to recognize that that is an economic conversation. And many of the speakers today have shared information very specific every with respect to the impact of ‑‑ the economic impact of the data flow, data localization, etc. I just want to put an additional statistic out there to say that research estimates that data flows contribute to 2.8 trillion to global GDP.
To some of the comments that Audrey mentioned to establishing trust with data, we need to look at what is that data? How is it going to be used? What is the context? It's not just a blanket statement that says no personal data can flow. Part of the next set of conversation will have to be in terms of contextual use of data. I want to go back to some of the points and Chris and Audrey have made. It really does require a holistic policy environment that has the focus on realization of the sustainable development goals, but it also needs to balance, you know, sort of multiple dimensions and this is what we have been talking about from ICC as well. Such an environment would consider, first of all, enabling an interoperable, seamless eco‑system, and needs to recognize the interdependence of economic, social/cultural, which has been brought up. And this is where a strong element of trust resides as well as locally relevant content. And then technical. How do we continue, how does such a framework continue to encourage innovation? And governance, because we strongly believe that the different stakeholder communities have different needs and insights that can drive practical policy framework. And then focus on enabling sustainable investments.
ICC has put together this chart that says what is such an enabling economic development? What are the dimensions? What are the different stakeholders, etc.? Trade agreements that optimize the benefits of trade would enable the free flow of data across borders and prohibit local computing environments. The agreement should promote policy coherence. Part of this is that it's beyond the national borders. And I think we heard some of that in terms of the impact on the regional economy in terms of cross border data flows. But it would also have to support the internet's role for small and medium‑sized enterprises to grow and trade globally. That is the foundation of economic growth.
And then lastly, open up trading investment in services. Services is where the opportunity for economic growth would come from. Thanks.
>> MODERATOR: Karen? [ Off mic ].
>> MS KAREN MCCABE: I would be more than happy to share that with you. People know a large chemical organization and standards as well. We are really taking a hard look at a ‑‑ the role that standards bodies and standards can play in this. It sometimes seems like a separate world on to itself. They do work within the larger eco‑system, and they do impact trade and, you know, from the perspective of how standards can be used as barriers to trade. That aside, we have a couple of efforts going on to address these issues of privacy and security. And it's really more grounded from the aspect of trust, you know?
We are starting to explore the possibility of ethics by design. We talked a little about artificial intelligence and autonomous systems. We have to look at it, what is our role there? But also, you know, to educate the technologists that are developing these standards and technologies of the implications of that. And the implications of trust. We can't just be developing technology. It gets put into products and deployed. We know there is concern, and it's a growing concern of people not necessarily trusting technology or trusting the companies and the organizations that are sort of rolling out the products and services.
In order for those products and services to work, there's a standardization element so these things are interoperable. We have a couple of programs or initiatives underway. One is what we call our global initiative on autonomous intelligence systems. It's a pretty robust collection of work. It's rolling in about two years now. Here we are looking at ethically aligned design, so that concept of ethics by design. There are 13 working groups working on this, close to 300 people, addressing many issues from privacy and security and ethics, even to autonomous weapons. It is a guideline and a set of recommendations for primarily the technical community and also for policymakers. When you think about it in context of trade, it can also be applied there as well. A couple of weeks ago, I think it was December 5 or 7 ‑‑ I'm losing track of time as we get towards the end of the year ‑‑ we just issued the second version of that. It's open to public consultation. The deadline for that is March 15, I think, and I will be happy to check that for you. You can just search for it and you'll come across it.
There's another program that we're standing up through digital inclusion through trusted agency. That is focused on technical aspects, but also of the issue of identity as well. Again, as you can see, these things are all kind of evolving and revolving around the trust factor, and how we can contribute to the framework of trust through either ethics work that we're doing as well as the digital inclusion work, and also looking at it from the standardization network and the role that standards bodies can play in that.
>> MODERATOR: Thanks.
>> PANELIST: It's clearly important the harmonization. I run a project that works purely for public research interest. We work with detailed records from telecom operators in multiple countries. We give them historical anonymous records. That's our way of trying to address the privacy concern. We are not using this for monetary purposes. One of the things we are doing is identifying where very poor people live based on algorithms. This is not identifying individuals, but identifying groups of people in areas. We are identifying where diseases like malaria spreads. There are epidemics in certain areas. These are clearly about the SDGs. Yet the cheapest thing for me to do is to take the 7 trillion records that I get each week and put them on Amazon web services. I cannot move it outside of Sri Lanka, because the operators will not allow me because of various rules or lack of clarity of rules. Instead, I'm spending donor‑funded money on buying air‑conditioners and running server space. I should not be doing this. I'm getting the same data from Bangladesh. My data scientists in Col Umbo cannot access the data. This matters to the governments, because they are the direct users. They use our data for transport planning and figuring out where to put highways.
>> MODERATOR: That's a great example. Before I turn to Chris, let me just check and see if either with the ‑‑ we do?
>> AUDIENCE: Trade is a prominent issue in world trade governance.
>> MODERATOR: Thank you. And let me check here. Yes, we have a question or a comment in the room.
>> AUDIENCE: Thank you. I have a question about ethics on the SDG. As an industry operator, when you make a contract between a supplier and a customer, the contract is fair. It's based on technical specification, cost, quality, and delays. We are based on real goods. The WTO is based on the exchange of real goods. But now the economy is immaterial and is based on data and on the capacity and the ability to analyze the data and to data mine. That is to say that everyone on this earth is able to put into the equation. The real deal is that we have little companies in the world who have the data. They are the supplier of the data and they change the report of forces between the buyer and the supplier. We have only a few suppliers. The way this customer buys it. So, we are not in a fair trade. And we will never be in a fair trade. If we have transparency with broad channel ‑‑ I don't know the technology. Between the supplier and the buyer.
>> AUDIENCE: I don't think it would be accurate to say that the smaller players are not getting benefits of being able to trade in the digital world. There are micro firms and SMEs who are able to play in the global trading world that they haven't been able to before.
Just a little while ago, I spoke in a forum where some of the micro companies in the U.S. were talking about how the internet has helped them to find customers in other countries. In some cases, they may be competing, and in some cases, they may not be. Some of them have very niche areas. I don't know if this is addressing what you said, but I wanted to make the point that we are actually at the OECD trying to better understand the impact and the benefits SMEs are getting out of digital trade. So just to make the point that there are a lot of different sized companies that are benefitting.
>> PANELIST: Thank you for your answer. The way we produce things is changing. The supply chain is changing with manufacturing and with a production, next the consumer. So, we cannot resolve the problem that we have with the new solution with the industrial revolution with an old mindset. Sorry. Because the way of production has changed. Thank you.
>> MODERATOR: Christopher, some final thoughts on this segment here. If you can expand on this balance or optimization amongst privacy and free trade and how a regime can be consistent with data norms?
>> PANELIST: You said the perfect word, the word balance. No one wants 100% security. It can't happen. I would have no product, and it would not be 100% secure. It is impossible. What we have to do is look for that balance and understand that even in the balance, there will be security failures and data protection failures. Perfection is not our standard. We need to find a balance that works for consumers. Companies care about trust and they understand it's important to the customers. They understand the clear path forward. Every company knows that it's just a matter of time before they get hacked and before something happens. It's not a failure. We have to create the right incentives to create the best protection and the right way to respond.
>> MODERATOR: Okay. We're going to shift into a new section here in talking about some business and government responsibilities. And Esther, I'm pleased to bring you back to the conversation.
>> PANELIST: The first area I want to address a conscious effort and a movement towards facilitation in areas such as electronic authentication, signatures, as well as paperless trading. A prime example being in the area of customs procedures. Today all customs procedures associated with shipment, these are all being done online through our single window. And this reduces the cost and time to prepare and process paper submissions and documentation. And this also allows clearance to be expedited. So, businesses, particularly the small ones really stand to benefit because it saves time and streamlines processes. Very soon in 2018, trade net will be upgraded to this national trade platform, which will be trade map plus in terms of its features. In the interest of time, I will point everyone to the Singapore customs website to read more.
But, too, I think the other more interesting element is really how we have shifted. I think this is where we have shifted our mindset a little bit in our regulatory approach. So, for new technologies and new business models where our regulators don't yet know enough, we have adopted a regulatory sand box approach. This facilitates the experimentation in a very contained environment. So private sector can experiment can innovative products or service offerings within a well-defined space which we call a sandbox with a limited duration. There are appropriate safeguards to contain the consequences of failure and maintain the safety and soundness of the financial system. Through the sandbox, the monitoring authority provide regulation support by relaxing very specific regulation requirements on a case‑by‑case basis for the duration of a very specific project.
So, one successful sandbox example would be that of policy, which is a very Singapore example, but it utilizes character technology. It analyzes current insurance coverage and make recommendations on how one can further improve on their coverage. We have expanded this approach to other sectors such as the energy sector. So, we are thinking about how we can make use of technology and digital trade to harness new business models and improve the way that we generate and transmit data.
>> MODERATOR: Thank you for that example. Now for a business example, Ellen, if you talk a little about what is happening in the creative industries to help bridge global development gaps?
>> PANELIST: Thank you. I thought I would talk about, when we think about the SDGs as a business, what do they mean for us? I think about it as a couple of buckets. You can, as a business, contribute to the problem‑solving to inventing solutions to some of the problems that have been identified. I think businesses can also invest in ways that we can meet the SDGs and then businesses also have a responsibility to kind of understand the impacts their operations might be having that push against the SDGs and try to mitigate those. I think what we've been talking about here today is in the middle bucket where businesses can be investing in activities that will help us meet the SDGs. I think what we've heard is that the promise of digital trade is a way that we can make that more possible. And I think you raised a really good way of thinking about it. What I think the digital trade is responding to is that the old processes aren't working. We need to transform just as the digital is transforming everything we're doing, it needs to transform the business relationships and the regulatory relationships. And I think that is the way to think about these digital trade agendas is that we're trying to figure out what it means in a world that isn't so product‑heavy. But at the same time, it also translates the ‑‑ it needs to also transform what's happening on the good side, on the hard goods side. At Disney we create movies. We also create a lot of products. And I can tell you that we have 38,000 factories around the world that produce product. The data management is very heavy and expensive. So, all the efficiencies that we see coming out of the digital trade environment, if we can streamline, we think about the examples that Singapore talked about, there's so many goods moving around. If we can just remove the inefficiencies out of the paper customs process in every border that we cross, it would have huge benefits that could then be reinvested in the economic growth that would drive us towards meeting the SDGs.
>> MODERATOR: Yes, a question from the floor?
>> AUDIENCE: [ Off mic ].
>> MODERATOR: Can you move into the microphone?
>> AUDIENCE: Two quotations to help you see into the future. The first is efficiency is another product of lucidity. And the next one is from a man, Albert Einstein. He said we cannot solve our problems with the same thinking we use when we created them. Okay? So, think to that as a similarity to this lecture.
>> MODERATOR: Thank you. Helani, from the studies you're doing, if you can bring in any additional gaps either for government or for business that you'd highlight some places where improvements can be made?
>> PANELIST: So, one is payments that are used by individuals. When people are doing work, when people are paying for goods online, so not just pure digital trade, but sort of the digital sticky trade that involves actual goods using platforms, one of the biggest problems in some of these countries is payment platforms, payments, because there's no use of credit cards. So many people try and use PayPal. There are many countries that don't utilize PayPal.
[ Noise on microphone ‑‑ cannot hear panelist ].
The only region that's doing well is Latin America, where sort of ‑‑ we're talking great numbers.
[ Interference on microphone ].
The platform enabled goods deliveries, service deliveries, platform enabled work. This is low incidence. In Asia, we're talking under 10% of mobile internet users. Forget the percentage of the whole population. This is low incidence with a huge market potential to grow. And connectivity is one of the primary barriers. And mobile phone ownership.
[ Noise on another open microphone ].
It is the big next thing in the developing countries is huge. In Bangladesh, which has one of the most successful payment platforms, only 36% of people have used it.
>> MODERATOR: I would love to come back to you. And with free reign either any additional comments you would like to add to the last couple of statements or on the topic of internet governance and observations you have on relationship between governance improvements and realizing SDGs?
>> PANELIST: This will, among other things, fight corruption. And also encourage ‑‑ otherwise, it would be on the national level. Regulations ‑‑ from the current situation, it is not existing. Each country is trying to identify its balance. It will depend on the maturity and the priorities of each country. And we may go further into more protective regulation. This ‑‑ the head of the private business, I mean, we are on the same run. It is important. It is certainly important for the government to move ahead.
[ Microphone interference ].
[ Laughter ]
So, we need to find a way to balance this. Otherwise, we have to blame ourselves, because then some would be more protective than others on this. We will advance the importance of the shift of type of work that is required of workers. For this, we need to identify ways of having different education systems to protect workers. Some developing countries, we will find certain movement sitting a ceiling, because we don't have this to do. Thank you.
>> MODERATOR: Thank you.
[ Continued microphone interference ].
[ Applause ]