The exchange of data and digital services has become a new frontier for U.S.-China competition. To discuss the scale of digital services trade and the United States’ attempts to regulate it through trade agreements, David Dollar is joined by Joshua P. Meltzer, a senior fellow in the Global Economy and Development program at Brookings.
Meltzer is the author of a new paper for the Global China series: “China’s digital services trade and data governance: How should the United States respond?”
DAVID DOLLAR: Hi, I’m David Dollar, host of the Brookings trade podcast Dollar & Sense. Today, my guest is my colleague Josh Meltzer, a senior fellow in the Global Economy and Development program at Brookings. Brookings has put out a large number of studies this year under the rubric of Global China. Josh has a paper in this series that just came out and is available on the Brookings website. The paper is titled “China’s Digital Services Trade and Data Governance: How should the United States respond?” That will be our topic today. Welcome to the show, Josh.
JOSHUA MELTZER: Pleasure to be here, David.
DOLLAR: Let’s start with the basics. What specifically comprises digital services trade? I should know, but I’m only vaguely aware of what’s actually involved. Can you give us a sense of its growing importance in international trade?
MELTZER: Sure. It can be thought of as more or less anything that can be delivered online and globally. But I also think it is important to point out that there are a couple of elements to this. Certainly, one is direct services provided online. You can think about this in terms of professional services, IT, telecommunications— the types of services that could be provided direct to another business or consumer over the Internet. Another important part of the digital services landscape is those digital services that are increasingly embodied as inputs into manufacturing. In that respect, you get a lot of digital services that are essentially exported as inputs in manufactured products. That’s part of the broader phenomena of the so-called servicification of manufacturing— but focusing on the digital element.
So there’s obviously then a global value chain component to digital services trade as well. In this respect, I think there are two elements. One is the digital services that just enable global value chains. Here you may think of ICT, for instance, and other digital communications services. Then there’s also what is sometimes referred to as digital services which solve problems, which again would be in your professional services range: marketing, sales, and the types of services that could be provided online.
Once we account for both direct and the import side, or the value-added in manufacturing, the data tends to show that, at least when we think of services broadly, for many countries well over 50 percent of exports are in fact services. And we are seeing much faster growth in the services and digital services component when you take into account the value-added element— certainly faster than traditional trade in goods.
Even though [President Xi Jinping] has said that he aspires to [have] globally successful companies operating abroad, I think that there are real challenges for regime security.