May 15, 2014 - 10:45am

Digital Trade: How to Be “In a Relationship” with Innovation

Former Senior Director, Center for Global Regulatory Cooperation International

Where will the next Silicon Valley emerge? Governments around the world often tout their efforts to build the next great hub of technological innovation.

Silicon Valley was not created by government fiat. Nor did it emerge from the ether to Instagram a #selfie and announce to the world that it is “in a relationship” with innovation.

Rather, strong policy foundations were laid that enabled digitally-minded enterprises to innovate, fail, and succeed — not just in Silicon Valley but throughout the United States. Any government looking to bolster its own slice of the worldwide $8 trillion digital economy should make sure it adheres to the following principles:

Ensure Access to the Best Available Technology and Services: Consumers should be free to buy digital goods and services from a seamless global market. Protectionist barriers that mandate the use of domestically-produced technologies, domestically-developed standards, or domestic servers for the storage of data should be rejected.

Growth and job creation are driven by businesses that leverage a global network of data centers and digital services, using the best available technology to increase efficiency, regardless of geographic location. This enables domestic industries to focus on the quality of their products and services, better positioning them to compete in global markets.

Establish Consumer Protections that Also Promote Trade: The digital economy depends on consumer confidence, especially when purchasers aren’t able to see or touch products until after payment exchanges hands. At the same time, rules providing consumer protections must be flexible enough to cover different uses and activities, and they must be sufficiently forward-looking to accommodate new technologies.

Governments must keep this principle in mind, in particular when addressing vital concerns related to privacy or security. On privacy, officials must realize that privacy is not the enemy of commerce and prosperity, and governments can look to existing accountability-based models, such as the APEC Cross-Border Privacy Rules, to show the path forward.

Similarly, on data security, businesses and consumers benefit when those who maintain data are able to use the best available security measures. Forced localization of data isn’t the answer: Privacy and security requirements apply regardless of the physical location of the data they protect.

Create a Strong Investment Climate: If innovative companies are the engine of growth, investment is the fuel, and clear, predictable rules of the road are also vital. Governments should guarantee non-discriminatory treatment for investments, limiting ownership restrictions and upholding strong protections. Rules that allow the speedy provision of venture capital to start-ups without excessive regulatory hurdles are also important.

If foreign governments put these policies in place, the next attempt to create a domestic Silicon Valley should last longer than a Snap.

About the Author

About the Author

Former Senior Director, Center for Global Regulatory Cooperation International