Time to modernise trade rules for the global digital economy
Software innovation is threatened by a new wave of protectionism in the digital economy. EU and US negotiators can use the Transatlantic Trade and Investment Partnership (TTIP) to take a stand against this troubling trend, writes Victoria Espinel.
Victoria Espinel is President and CEO of BSA|The Software Alliance, a global trade group representing the software industry, with members such as Microsoft, Intel, Oracle and IBM. She previously served in the White House as the first US Intellectual Property Enforcement Coordinator, and prior to that, in the Office of the US Trade Representative.
The next round of negotiations for the Transatlantic Trade and Investment Partnership (TTIP) opens on 19 May. As the world’s two biggest economies, Europe and the United States have an opportunity right now to put together a trade and investment partnership that will serve as a model for the whole world. It is critically important to seize that opportunity.
BSA | The Software Alliance has a unique perspective because software innovation is driving incredible change in the world today; change which we fear is threatened by a new wave of protectionism in the digital economy. EU and US negotiators can use the TTIP to take a stand against this troubling trend.
Software Innovation Drives Change
Innovation has become a trade issue for the software industry because of the global nature of digital innovation.
Take, for example, Siemens PLM which makes computer-aided design software. A small Italian firm called Biscontini is using it to design high-end sailing yachts for racing. This kind of job used to be done by individual designers working alone, but with Siemens PLM’s technology, teams in different countries are collaborating over high-speed networks. Different people work on sails, masts, fluid dynamics and other aspects of the design. With the elasticity and power of cloud computing, these teams of designers can work together seamlessly on the same data. The result is a faster design process and more extensive virtual testing — so they can make better, faster sailboats, through innovation and global collaboration.
Another example is IBM’s partnership with the Danish energy company Vestas. They are using data analytics to find the best places to put wind turbines and maximise their energy production. That may sound like a simple problem, but any sailor can tell you it is difficult to predict the wind. IBM’s software does it by analysing weather data on an enormous scale. It factors in nearly 180 variables — from temperature, barometric pressure and humidity to precipitation, wind direction and velocity — plus extensive historical data. That allows Vestas to put its turbines in the best locations, and then manage the electricity they send to the grid as efficiently as possible. All thanks to real-time analytics enabled by the free flow of data across borders.
We need global trade rules to facilitate this global digital ecosystem — yet we are already starting to see protectionist impulses emerge which threaten it. Around the world, some governments are considering a slew of non-traditional trade barriers. For example, a number of countries have adopted or proposed rules that either prohibit or significantly restrict companies from transferring data outside their territories. Others are requiring companies to put servers inside their borders if they want to do business there. These kinds of policies are a perversion of the Internet. They undercut the network efficiencies that companies rely on to serve customers globally.
Recent disclosures about international surveillance programs have raised legitimate privacy and security questions. But it is important not to conflate separate issues. National security concerns do not have to undermine technology innovation and economic growth — and we should not allow them to.
Seizing the Moment to Support Innovation
BSA recently released a report that outlines a new trade agenda to drive growth in the digital economy. One of the cornerstones of our agenda is the principle of enabling digital commerce.
There are several ways TTIP can do that. First, by fully covering innovative services such as cloud computing. Second, by ensuring that data can flow across borders without unnecessary restrictions. Third, by preventing government mandates on where servers and other computing infrastructure have to be located.
Trade barriers, whatever their form, slow down job creation and economic growth. And restricting software-enabled innovation affects more than just one sector, since all types of enterprises, large and small, rely on software tools to do business. Protectionism is almost always short-sighted as an economic policy — and ultimately self-defeating. The better path is to facilitate the drivers of future economic growth.
There is precedent for this forward-looking approach. In the late 1980s — during the Uruguay Round of multilateral negotiations —new topics were introduced in the trade negotiations, namely intellectual property, services and foreign direct investment. Negotiators had the foresight to recognise those would be the keys to trade and progress in the decades ahead — and they modernised trade rules accordingly. As we look at the growth that has happened in the past two decades, it is clear they did the right thing.
Today, it is our opportunity to foster digital trade. We hope Europe and the United States will lead the way. If they do, we are confident software innovation will continue changing the world for the better.