Digital lessons for digital policies

Electronic commerce presents a raft of policy challenges for the international community. Agreement on basic principles for regulation and self-regulation is difficult but essential.

Developing countries may feel their problems are so different from those of the industrial world that they have little to learn from OECD members’ experience of the digital revolution. After all, OECD governments seldom have to choose between computers and food, or between providing access to the Internet or safe drinking water.

Nevertheless, there are many lessons to be drawn from the OECD experience which are relevant for developing countries. The “digital divide” between the haves and the have-nots of the Internet world is not only opening up between industrial and developing countries, but also between different income groups within countries. Because of the global nature of this problem, it will certainly be a preoccupation of the OECD in coming years, particularly in its relations with non-OECD countries.

The OECD has worked to ensure non-members are involved in the information and communication technology (ICT) debate by inviting as many people as possible to join in annual ICT fora since 1997.

These meetings have included non-OECD members and representatives of civil society from all over the world, even if they have been held in OECD member countries. This year for the first time the event is moving outside the OECD, to Dubai in the United Arab Emirates. The decision to co-host the 2001 Emerging Market Economies Forum with the Dubai government is a measure of the OECD’s determination to involve non-members in discussions of how we must all evolve to keep pace with the global information society.

The impact of ICT on policymaking has changed significantly over the past two decades. In the beginning, one of the main policy challenges for national governments seemed to be how best to protect national champion hardware manufacturers from competition. But since then ICT has penetrated into all aspects of economies and societies, along with the concept of the knowledge-based economy. The growth of the Internet and electronic commerce has changed the relationship between governments and citizens in so-called “wired” industrial societies, but has also had an effect on government-to-government relations worldwide. Significantly, all of this has made the role of international bodies even more important.

The OECD’s work on the new economy suggests that the “old” economy is going to be with us for the foreseeable future. The first results of the OECD Growth Study published in May 1999 showed that while ICT is bringing about a restructuring of economic activities across a wide range of sectors, extreme claims, such as the death of the business cycle, or of a shift to a path of extremely high growth for the indefinite future as a result of the e-revolution, are unproven. These views are expected to be upheld when the second part of the Growth Study is delivered to OECD members in May 2001.

The US experience nonetheless argues strongly that ICT is a powerful engine of growth for any economy, now accounting for 30% of US economic growth and half or more of productivity growth, although the sector represents just 8% of the economy as a whole.

One thing is clear. While the best of the old economy will stay, there will be no turning the clock back on the digital revolution. The number of Americans online is growing by 40% a year, but Internet access in the rest of the world is growing even more quickly, the latest annual report from the US Department of Commerce shows (see article by Graham Vickery and Vladimir López-Bassols). This year for the first time North Americans account for less than half of the global Internet population of some 304 million.

The rapid spread of electronic commerce and the Internet worldwide has sparked lively debate about the prospects and desirability of global rules, notably in the areas of taxation and security. While international law and global legal institutions exist, getting governments to agree on rules for a digital economy is another matter. For the moment, consensus that global regulation of the Internet in the wide sense is desirable or practicable is not even on the horizon.

Meanwhile, most OECD governments want to ensure that in terms of international regulations, there should at least be a non-discriminatory level playing field between electronic and conventional forms of commerce and that, in general, offline regulation should apply online. This can help ensure that continuing to do business offline does not put less Internet-ready economies and companies at a double disadvantage.

The lack of global consensus goes some way to explaining the appeal of co-operation and “soft law” options such as OECD Recommendations and Guidelines. These set out basic principles on which approaches to regulation and self-regulation can be based and which promote coherence rather than outright harmonisation. Such arrangements can also provide a measure of protection to developing countries that might otherwise find themselves overwhelmed by their more developed neighbours.

Furthermore, the OECD has produced a number of instruments of use to both industrial and developing countries, such as the 1999 Guidelines on consumer protection in e-commerce, and analysis of the economic and social aspects of electronic commerce. It is also developing practical guidance on how to implement the 1980 OECD Privacy guidelines in an online environment, including the use of privacy statements and transborder data flow contracts. Work on taxation issues, such as the treatment of royalties, consumption taxes and ways to use e-commerce technologies to reduce the burden of paying taxes is relevant to both OECD and non-member countries.

The ICT revolution is affecting all of us, whether governments, businesses, or individuals in our roles as workers, consumers, citizens, or just plain individuals. The policy challenges are among the most exciting in any economic field. It gives us a real opportunity to achieve economic and social benefits rarely seen over the past century. If we are really serious about our goals of policy co-ordination, then it could well become a win-win situation for everyone.

©OECD Observer No 224, January 2001 

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