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APEC: Liberalizing Trade in the Digital World

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By Jennifer Mulveny

As the 2015 Asia-Pacific Economic Cooperation (APEC) eyes another November finish line when CEOs and the 21-member economy leaders gather in the Philippines, Intel is again engaged in APEC’s ambitious efforts to plot a strong and steady course on growing the digital economy. This is significant given that APEC economies are home to 2.8 billion people, comprise almost 60 percent of world GDP, and represent the world’s largest producers and consumers of technology.

Considering the great diversity of political and economic systems within APEC, discussions and final consensus on a framework for the digital economy, while not binding, can help ensure that citizens reap the many benefits of the data-driven world. APEC can also raise the bar for other global organizations and frameworks to build on, just as it has done for privacy regimes.

To be clear, the digital economy is already alive and well in the Asia-Pacific region. Nonetheless, the rules of the game-- or rather the enabling policies such as those that allow data to flow freely but responsibly across borders, thereby supporting citizens rich and poor as well as businesses large and small—should continue to be a cornerstone of APEC member initiatives just as it has been for more traditional trade in goods and services.

For several years now, APEC, and indeed many international and domestic organizations as well as governments, has been mired in discussions on “local mandates,” which by a simple definition is a government-led policy that requires some degree of domestic presence, whether it be domestic storage of data or a percentage of manufacturing that must occur within a country. Objectives of these policies vary, but generally they are designed with the intent of boosting domestic economies, particularly in the IT sector.

The panel on which I spoke during the third Senior Officials Meeting in Cebu, Philippines last month focused on the negative impact that local mandates have on APEC economies. But the discussion went further to reveal the merits of alternatives to these policies. In other words, governments tempted to implement a “make it here” policy should consider taking a different (and more effective) pill to treat the economic symptom.

As I mentioned during the trade dialogue in Cebu, Intel looks at factors such as broadband infrastructure, IT skills, education systems, access to our customers, R&D spending and a strong IP regime to protect innovation when we invest our resources. These are the incentives that attract and sustain a local IT presence, whether it’s foreign or domestic. These are the incentives that help local companies stay agile and compete globally. These are the incentives that create a connected and thriving digital world rather than a patchwork of data islands of often wasted potential.

Along these lines, in 2013 the APEC Ministerial Statement included an Annex on Best Practices to Create Jobs and Increase Competiveness. In that document, the leaders recognized the vital role that the Internet plays in citizen’s lives and economic development, and points to ways that APEC economies can “promote an internationally attractive business environment” through infrastructure support, investing in digital literacy and promoting the fair treatment of investors.

More specifically on small and medium-sized enterprise (SME) support—the APEC statement rightly pinpoints the fact that SMEs should be leveraged for their “innovative and forward thinking” that can spur economic growth. Intel’s business leaders could not agree more. Helping SMEs gain access to capital and better integrate them into global supply chains is essential for making them more competitive. Leveraging their fresh and innovative approach to markets is just as valuable.

Access to technology and its efficient application is what helps grow a local economy, not mandating the origin of that technology. It is precisely the ICT use that drives all sectors of a domestic economy and harnesses its maximum potential. Applying effective technology and IT processes to everything from manufacturing to retail and services delivery to mining and agriculture, is the truly magic multiplier the lifts all boats. It’s what can catapult a small business onto the global playing field, whereas an artificial requirement that a small business store all of its email and inventory data within the borders of a country would have the exact opposite effect.

APEC should continue its strong push, in tandem with the Trans-Pacific Partnership (TPP) trade talks, to ensure that countries move toward a system in which governments not only are prohibited from mandating local content, as the TPP would do, but also that governments would naturally choose not to impose such rules because of the inherent damage it would bring to its citizens and businesses alike in the long term.

Intel will continue to be at the forefront of these discussions by advancing alternative approaches to restricting manufacturing and data movement within a country, while also promoting that this be done responsibly by protecting citizens’ data. Our evolving Internet of Things (IOT) platform, for example, offers enormous opportunities for small businesses to layer valuable software on top of our sensor and gateway framework, thereby bringing about countless insights through extracting valuable data from physical “things.” These companies can then customize targeted services for the local market based on that data. This is an example of a local ecosystem that Intel fosters and wants to continue to grow with governments and the private sector worldwide.

For business, “make it here” or “store it here” policies should not be the primary reason to build a manufacturing facility or store data in a particular locale. While homegrown products and services may often have a natural appeal to local constituencies, including in the United States, a local mandate simply is not a silver-bullet policy that successfully builds and sustains IT ecosystems as it often aspires to do. Nor does it enhance access to technology for citizens and small businesses in the long-term. Rather, these policies silo economies in a way that is quite contrary to regional integration and to the economic well-being of that country.

APEC leaders should continue to apply their collective leadership on strengthening the integration of traditional trade and services as well as digital products and services. Specifically highlighting the benefits of allowing data to flow freely and focusing on long-term investment incentives is a cornerstone of this leadership, and will no doubt be a measurement of APECs success in the future.
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