Workshop on “the digital economy and other international issues” co-organized by the South Centre and the Foreign Economic Relations Department of the Ministry of Trade of Iraq

In the framework of peer exchange initiatives, the South Centre and the Foreign Economic Relations Department of the Ministry of Trade of the Government of Iraq co-organized a workshop on the digital economy and other issues of international relations on the 24th of November 2022.

In his introductory remarks, Mr. Adel Khudair Abbas, Director General of the Foreign Economic Relations Department, highlighted the importance of understanding better the digital economy for the work of the Ministry of Trade and expressed his appreciation to the South Centre for the workshop.

The topics discussed were:

• “Data and the Digital Economy”, by Dr. Carlos Correa, Executive Director of the South Centre
• “Climate Change and Implications for Developing Countries”, by Mr. Luis Fernando Rosales, Coordinator of the Sustainable Development and Climate Change Programme (SDCC) of the South Centre
• “Digital Technology in Public Health”, by Dr. Viviana Muñoz, Coordinator of the Health, Intellectual Property and Biodiversity Programme (HIPB) of the South Centre
• “International Tax Reform and the Digital Economy”, by Mr. Abdul Muheet Chowdhary, Senior Officer of SDCC and focal point of the South Centre Tax Initiative
• “The WTO Reform and E-commerce”, by Ms. Vahini Naidu, Coordinator of the Trade and Development Programme (TDP) of the South Centre

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Data and the Digital Economy

Carlos Correa noted that the digital economy poses new challenges to developed and developing countries alike. The dominance of a few tech firms that control a large portion of data that are produced, stored and transmitted globally compromises the sovereignty of countries. Thus, Angela Merkel, former German Chancellor, noted that “the EU should claim ‘digital sovereignty’ by developing its own platform to manage data and reduce its reliance on the US-based cloud services run by Amazon, Microsoft and Google”.[1] Data are deemed to be one of the most important assets in the modern economy and, hence, what policies are applied to benefit from its economic value are of critical importance. Notably, as there are no international standards on this matter yet, there is wide policy space to legislate at the national or regional level. To this end, it will be necessary to develop a taxonomy of data (especially to distinguish between personal and non-personal data), clarify the limitations to copyright protection (which may be applied, for instance, to derived data), identify who the right-holders are (a complex matter as data are produced as the result of interactions between different parties), adress the current asymmetries and market dominance of data and define the developmental objectives that the regulation of data would aim to achieve.

As noted in a South Centre’s statement, “there are major asymmetries in the capacity to produce, process, store, use and transmit data. These asymmetries underpin one of the major North-South contemporary divides.”[2] In fact, “new digital markets introduce a range of market failures throughout the process of knowledge creation, knowledge mediation, value creation, value capture and trade in the digital economy. The new technology-mediated economy is imperfect, riddled with information asymmetries, monopolies, algorithmic intransparencies and ‘winner-takes-all’ effects”.[3] The European Union (EU) has advanced not only in relation to the protection of data privacy, but recently approved new regulations, inter alia, in relation to ‘gatekeepers in digital markets’ that have gained ‘the power to act as private rule-makers’ (EU Digital Services Act and Digital Markets Act). Importantly, in the plurilateral negotiations in the World Trade Organization (WTO) on e-commerce, the United States proposes a regime of free flow of data. Governments need to consider, however, data localization as a policy (currently applied in many countries) to domestically extract value from data and pursue other national public interests.

Climate Change and Implications for Developing Countries

During his presentation, Luis Fernando Rosales highlighted three elements: first, the scientific bases of the climate change discussions; second, the international policy framework and the state of play and; third, the interaction between climate change and digitalization.

He stressed that the identification of the climate change crisis is based on solid scientific evidence. The scientific community has shown clearly the magnitude of the climate crisis. Scientific studies began in the19th century, and, with no mistake, from a scientific point of view, we are witnessing an unprecedented climate crisis which is affecting many areas of human activity and the environment. International cooperation to respond to this crisis has been centered mostly on mitigation. However, key issues of interest for developing countries are adaptation, finance, transfer of technology and loss and damage. The main instruments such as the United Nations Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol, the Paris Agreement (PA) and Conference of the Parties (COP) decisions allow the international community to work together to respond to the climate crisis. However, they remain highly insufficient since the magnitude of the problem is increasing. At COP27, a financial facility for loss and damages has been adopted, but it still is a work in progress.

Climate change and the digital economy are cross-cutting issues. The digitalization of the economy could contribute to the efforts of developing countries to deal with climate change. Countries can improve the implementation of climate change-friendly policies and processes by digitalizing them. However, the transfer of cutting-edge technologies is still challenging in the context of the legal climate change architecture. Developing countries can seek support from international financial climate-related institutions to access resources to implement digital solutions that may contribute to deal with climate change related events, such as droughts, heat waves, and water scarcity.

Digital Technology in Public Health

Viviana Muñoz started her presentation by stating that the use of digital technologies in public health should be considered in the context of achieving the objectives of the public health system. An overall objective of public health systems is to better conditions under which people can improve their health and wellbeing, not only the eradication of diseases. Governments’ key role in the public health system is considering health as an investment, not merely expenditure. Prior to assessing the potential of digital technologies to improve the public health system, an assessment can be made of the functioning of the health system, considering components such as the current service delivery, capacity of the health workforce, management of information and networks, access to medical products, diagnostics, vaccines and other health technologies, how the system is financed and the current governance structures. The challenges of the health systems can be identified, as described by Dr. Munoz in respect to Iraq.

Digital health is a term used to refer broadly to the use of new digital technologies in public health, converting analog records to digital data, new ways of working including the integration of digital technologies into public health operations and reorganizing services on the basis of the health needs of the public. The applications are diverse, including mobile health, health information technology, wearable devices, tele-medicine and personalized medicine.

Countries can consider establishing national strategies on digital health. These should clearly define the objectives, target impacts and be tailored to the national context. Some issues to consider in the context of Iraq include the priorities in health system strengthening, the workforce, Internet access, electricity, information and communications technology (ICT) and digital infrastructure, investments required in the public and private sector, need for capacity building, assessment of benefits vs risks of digital technologies for health particularly for those where there is limited evidence for quality, and efficiencies vs cost. Consideration must also be given to the establishment of adequate policies and regulations, including in the areas of safeguarding personal privacy, security for data collection and use, ethical considerations, evaluation and surveillance of new technologies, cost control, and governance and institutions responsible.

International Tax Reform and the Digital Economy

The South Centre workshop for the Government of Iraq also focused on the issue of the taxation of the digitalized economy. The presentation was made by Abdul Muheet Chowdhary, Senior Programme Officer of the South Centre Tax Initiative, part of the Sustainable Development and Climate Change Programme. The presentation began with a focus on the outsized role of tech companies such as GAFAM (Google, Apple, Facebook, Amazon and Microsoft), their growing oligopolistic tendencies and their low effective tax rates, meaning taxes actually paid to countries.

This was followed by an examination of the key limitations in existing international tax rules that make it difficult to tax such highly digitalized companies. These have resulted in two major multilateral solutions for taxation of the digitalized economy – the Organisation for Economic Co-operation and Development (OECD) solution known as Amount A of Pillar One and the United Nation’s solution known as Article 12B of the United Nations (UN) Model Tax Convention. The presentation explained the key features of both solutions, as well as outlined the unilateral or national tax policy measures that countries were taking, outside of the two solutions.

The presentation concluded with an examination of the revenue estimates from the OECD and UN solutions for the 84 combined Member States of the South Centre and the African Union, and for Iraq in particular, so as to inform appropriate decision-making on the right tax policy option.

The WTO Reform and E-commerce

Ms. Vahini Naidu stated that the WTO Twelfth Ministerial Conference delivered on a range of issues including a TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights) Decision, a partial, slimmed down multilateral agreement to discipline fisheries subsidies notifications, WTO Response to the Pandemic and a Declaration on Food Insecurity. One of the major developments was a commitment by WTO Members to work towards the necessary reform of the WTO. While developing countries are not generally the main demandeurs for the new WTO reform per se, their longstanding interests in the Doha Development Round was traditionally considered to be the reforms they were seeking through redressing the asymmetrical rules in the Uruguay Round Agreements. It is a common understanding amongst developing countries that the WTO reform agenda will be guided by the principles of inclusivity, transparency, the continuation of the practice of consensus-based decisions in the WTO, and upholding the rule of law and objectives of the WTO as envisaged in the Marrakesh Agreement Establishing the WTO.

On the treatment of e-commerce in the WTO, the 1998 Work Programme on Electronic Commerce establishes a comprehensive framework to explore the trade-related aspects of e-commerce under the covered agreements including the time-bound moratorium on customs duties on electronic transmissions which is set to expire by the Thirteenth WTO Ministerial Conference or on 31 March 2024, whichever comes first. There is no agreed definition of ‘electronic transmissions’ which has been the subject of much debate in clarifying the scope of the moratorium. For the majority of developing countries, policymakers are seeking to preserve the policy space for the development of the domestic digital industry as imports of online deliveries of digitizable products exponentially increase while seeing a commensurate decline in tariff revenues due to the moratorium in excess of $1 billion for many developing countries like China, India, Mexico, Nigeria, Pakistan, Paraguay and Thailand.

In his concluding remarks, Mr. Tharwat Akram Salman, from the Ministry of Trade, reiterated the appreciation of the Government of Iraq to the South Centre for this activity. Luis Fernando Rosales, SDCC Programme Coordinator, expressed his gratefulness to the Government of Iraq for the activity and that the South Centre is open to further cooperation.

[1] Guy Chazan, “Angela Merkel urges EU to seize control of data from US tech titans”, Financial Times, 12 November 2019.

[2] See https://www.southcentre.int/wp-content/uploads/2022/05/SC-Contribution_UNCTAD-E-commerce-week-2022_DATA-FOR-DEVELOPMENT.pdf.
[3] See https://www.southcentre.int/wp-content/uploads/2019/03/RP93_Regulating-the-Digital-Economy-Dilemmas-Trade-Offs-and-Potential-Options_EN-1.pdf.