Will digitalisation render protectionist policies meaningless?

In a political environment that appears to be moving towards greater protectionism by putting in measures to restrict the free movement of goods and services (and people), digitalisation continues to break down borders and facilitate trade. But trade in a digital world looks very different from what has gone on before.

The explosion of global digital platforms such as Facebook, Alibaba, WhatsApp and LinkedIn has fundamentally changed how people connect, communicate, consume, work and study. The numbers are staggering. According to a McKinsey Global Institute (MGI) report, Facebook’s monthly active user base has surpassed the size of China’s population. Some 44 million people around the world find freelance work on Freelancer.com and Upwork, while today there are more than 13 million online students.

Digitalisation has the potential to transform global supply chains by reducing the cost of international transactions. Electronic commerce (e-commerce) platforms such as Alibaba, Amazon and eBay have enabled small and medium-sized enterprises (SMEs) to develop global supply and distribution chains, previously only accessible to large multi-national corporations.

Facebook estimates 50 million SMEs use its platform, almost double the number in 2013. Even the smallest enterprises can be born global: 86% of tech-based start-ups surveyed by MGI report some type of cross-border activity.

Beyond e-commerce, new technologies such as 3D printing are fundamentally altering production. With 3D printers, manufacturing becomes on demand and on location, eliminating intermediary production countries. Intellectual property is really what is moving across borders, raising the question of whether some products are goods or whether in fact they are services.

Digitisation lays the groundwork for a wider definition of how countries trade internationally. Importantly it has revitalised discussion around trade, trade policy and agreements, and how trade, technology and disruptive change affect countries, businesses and people. Despite a retreat by UK and US governments from historical free-trade agreements, newly imagined trade agreements are being crafted.

Countries that are able to leverage digitalisation will increase productivity levels and drive transformational growth and competitive advantage. This in turn will help them achieve the most beneficial trade agreements in future.