Shipping Bytes Across Borders

As the world increasingly adopts digital technologies and habits, improving the framework for information flows is essential to preserve the ability of innovators and entrepreneurs everywhere to participate effectively in the global marketplace of the 21st Century.
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Biographer Walter Isaacson told me that Steve Jobs "was seized with the importance of improving the framework governing the flow of information around the world" in conversations he had with the late Apple CEO. While we mostly take for granted our ability to socialize and conduct business online across international borders, some countries are testing policies that could inhibit the ability of individuals and businesses to participate in the global digital marketplace. It is time to start developing a better framework.

Recent concern over the future of the internet and information flows has tended to center on renegotiation of the arcane International Telecommunications Regulations. Russia and other countries appear eager to encourage a new, top-down approach that would make it easier for national authorities to tax, control or unplug altogether from the global internet. Preserving the light touch and multi-stakeholder model that allowed the internet to flourish in the first place is critical, but is not the only challenge to the international flow of information and e-commerce.

A variety of countries are considering other policies that would restrict the ability of individuals and businesses to provide or access information across international borders. Several have proposed or adopted measures that would force providers of financial or internet services to process data locally or locate physical infrastructure such as servers within their borders. China put forward a draft requirement that would have forced companies to innovate and develop technologies locally in order to sell to the government. Others, including Egypt, Guatemala, and Vietnam, have blocked access to U.S.-based information services including Facebook, Wordpress and YouTube over the past several years.

These new online roadblocks are proliferating as companies and countries struggle to adapt to an information-based global economy. One difficulty in addressing them is that they are not as clear-cut or easy to object to as a high tax on a wind turbine. In some cases, countries are attempting to address legitimate interests such as consumer protection, national security, privacy, or public morals, but are doing so in ways that unnecessarily restrict or discriminate against international information and services.

Others are simply invoking these concerns as a pretext for shutting the door to global ideas and businesses and to improve their ability to control information or protect local economic interests. For instance, in May, the Ethiopian Government criminalized the use of services such as Skype that use voice over internet protocol (VOIP) technology to protect the monopoly of its sole state-owned telecom provider Ethio-Telecom.

Regardless of the rationale, measures that shut out global internet-enabled services and ideas jeopardize growth across a country's entire economy. From streamlining payroll services to interacting with customers to developing smart power plants that can be monitored remotely, manufacturers, farmers, retailers and other service providers utilize digital information and technologies to innovate and grow their businesses. Entrepreneurs and small businesses use online advertising, e-commerce platforms such as Etsy and South America's MercadoLibre, along with innovative payment and shipping technologies, to access customers and partners around the world. (eBay estimates that in 2010 approximately $4 billion of gross sales on its platform were the result of cross border trade.) Overall, McKinsey suggests that three quarters of the value of the internet accrues to companies that would exist without it, so shutting down global flows of information and services can be a significant drag on growth in the real economy.

There is some evidence that the economic benefit of the internet is increasingly relevant to national policy decisions involving information and the internet. In Cuba earlier this year, I spoke with government officials, academics and citizens who repeatedly emphasized the importance of the internet to economic growth, including to the success of the small-scale entrepreneurs that President Raul Castro is trying to encourage. While officials clearly struggled to reconcile that potential with the political uncertainty that greater access would bring, telecommunication and internet policies in Cuba are, very slowly, beginning to evolve. Texting prices, set by the state agency, have dropped, and the government permits a Cuban version of Craigslist called to function, implicitly acknowledging and facilitating the grey market that has existed in Cuba for decades.

Other countries are working together to create the kind of global digital framework Jobs recommended by applying familiar disciplines that cover international trade in goods to information and electronic products and services. Mauritius and the United States recently signed a joint set of principles signaling that international internet-enabled services and information flows should not be restricted and that foreign companies should be treated fairly when it comes to providing telecommunications and related infrastructure. In the Asia-Pacific region, countries including Australia, Malaysia, New Zealand, Singapore, the United States and Vietnam are negotiating a trade agreement where for the first time discussions are underway to commit to preserve access to information flows within the group.

Over the past 60 years, global trade policy has established basic rules of transparency, fairness and non-discrimination for international transactions involving physical goods while still permitting governments to regulate in support of national interests such as privacy and security. Applying those same concepts to information and electronic services can help create the kind of open, transparent framework that guarantees the ability to access and transmit ideas and services globally.

Talking through these issues internationally can help encourage the development of fair and transparent laws and regulations that foster the innovation that comes from open access to global information, digital services and technologies. Small businesses and entrepreneurs in particular would benefit from cooperation among governments to ensure fair, non-discriminatory access to global digital markets and to improve their ability to navigate complex issues surrounding privacy, security, jurisdiction and liability.

As the world increasingly adopts digital technologies and habits, and the companies that provide them are more global in scope, improving the framework for information flows is essential to preserve the ability of innovators and entrepreneurs everywhere to participate effectively in the global marketplace of the 21st Century.

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