June 19, 2018


Sections Introduction Scale and Scope What's Trending Digital Drivers: Recommendations to Drive Growth Conclusion IntroductionThe digital economy is everywhere. From listening to music or a podcast on your internet-enabled phone to watching the news on one of the many digital platforms available, technology already sits squarely at the center of our daily routines. With more than 90% of the Korean population online, technology is driving changes in the way business is conducted, in consumption patterns, and in social interactions. And it will continue to do so for years to come.As technology impacts lives on a micro-level, it is also having major effects on the global economy, trade, and development. Over the past two decades, the digital economy has increasingly become the backbone of national economies as well as the global one. Powered by the billions of online connections of people, businesses, data, and devices around the world, it has been transformational across industries, companies, and economies of all sizes.The fundamental point is this: The digital economy is the real economy. Where analysts and policymakers once referred to the information and communications technology (ICT) goods and services trade distinctly a few years ago, today, any distinctions are increasingly irrelevant. The production and use of digital products and services—from computers, tablets, and smartphones to cloud-based software, online games, and content and social media platforms—has moved beyond being identified with traditional technology companies.Yet the speed and scale of the digital economy’s evolution have exposed a substantial disconnect between policymakers, developers, and end users of these new digital products and services. Looking around the globe, countries that have been most successful at harnessing technology to impact their economy have followed a light-touch regulatory approach that promotes technological innovation, and, in turn, the economy. Economies that take this approach will likely be the ones that flourish in the years ahead.The Korean government understands this and has prioritized the digital economy as a driver of future growth. President Moon has established a Presidential Committee on the Fourth Industrial Revolution, as well as the “I-Korea 4.0” digital innovation strategy. Similarly, through a joint effort with 21 government departments and agencies, the Committee has established the people-centered Plan for the Fourth Industrial Revolution.These are important steps in the right direction, and the U.S. Chamber of Commerce and the U.S.-Korea Business Council applaud these efforts and plan to be constructive partners in making these goals a reality. This report highlights the best practices and policies that Korea can implement to maximize the benefits of technology across sectors and help the Korean government sustainably develop its vision for the Fourth Industrial Revolution. They include the movement of data across borders, neutral approaches by government to technology, and rules that promote security and individual privacy along with continued innovation. These light-touch approaches have enabled innovation in today’s most digitally competitive economies and are generating tremendous benefits by encouraging increased digital advancement and innovation.Scale and ScopeIt has long been established that the digitization of the economy has been an incredible driver of economic growth since commercial internet service providers began to emerge in the late 1980s—but it is just the tip of the iceberg. For starters, the digital economy is growing at almost two and a half times faster than the global economy. In 2015, all things digital in the economy were valued at $19,159 billion, making up 22.5% of global gross domestic product (GDP). By 2020, those numbers are estimated to increase to $24,615 billion and 25.0%, respectively. Moreover, trade in digital goods and services is growing more rapidly than trade in traditional manufactured and agricultural goods. In 2015, the digital economy accounted for roughly 10.4% of Korea’s GDP. Korea is benefiting greatly from this growth. In 2015, the digital economy accounted for roughly 10.4% of Korea’s GDP. This figure already greatly exceeds all other members of the Organisation for Economic Co-operation and Development (OECD). And it is worth noting that while the estimated value from mobile digital advancement will reach an estimated $1 trillion in 2020 in the U.S., this would represent just 4.7% of GDP. Proportionally, Korea’s pace of digitization is blistering.As the digital economy is powering the traditional one in Korea, it is also undergoing radical transformation within the market. In the past, Korean participation in the global digital market was oriented around hardware manufacturing. But since 2008, the value added by the IT services and software subsectors has grown by 16% and 12%, respectively, as the market continues to develop. This tidal wave of digitization is delivering benefits across the country in all areas of the economy.Korea has a leg-up on many economies as they try to maximize these trends. For starters, Korea boasts more than 110 mobile internet subscriptions per 100 inhabitants. Over 90% of the population and 99.9% of youth have access to and use the internet. Reports suggest that internet-enabled businesses already contribute $146 billion to the Korean economy each year, a figure that will continue to grow.Sustained growth, however, is not guaranteed. The ability of both governments and businesses to continue to reap benefits from these new technologies depends largely on the policy framework adopted moving forward. Developing a positive, light-touch regulatory environment will enable Korea, like other digital adopters, to benefit from accelerated GDP growth, an increase in government revenues, more jobs, and new businesses.What’s Trending#InternetUsersInternet usage has accelerated on a global scale in recent years. As of January 2017, 3.8 billion people were using the internet, an increase of 10% in just one year. Half of the world’s population is now online compared with just 5% in 2005. Between 2007 and 2015, global internet traffic rose from 2,000 to 26,600 gigabytes per second, roughly 33% per year on average.Almost half of the global population has a mobile broadband subscription, and the adoption rate of mobile broadband has outpaced fixed broadband in the last five years. But billions of people still remain offline. The spread of 3G, 4G, and 5G networks worldwide will continue to bring the Internet to more and more people as mobile devices become more versatile and viable tools for consumers and industry.If the past two decades are any indication, once connected, those offline are full of potential. They will have transformative impacts as entrepreneurs, consumers, and a source of untapped ideas.Unlike many jurisdictions around the world, connectivity is a major strength of the Korean economy. As noted, 90% of Korea’s population uses the internet and Korea already leads the globe in high speed internet infrastructure, with the highest average internet speed in the world. Despite being connected, Korea’s internet usage could be more sophisticated in a number of areas. Korea falls below the OECD average when it comes to using email, cloud services, online sales, and online job searches and travel agencies. #DataToday, virtually no company would be able to do business, let alone export their goods or services, without the ability to move data.Ninety percent of the data that exists today did not exist two years ago. At this pace, it is expected that data will grow at a rate of more than 200% per year. Cross-border data flows are 45 times higher than they were in 2015, now topping global flows of trade and finance. The dramatic increase in cross-border data flows has ushered in a more digital form of globalization, enabling goods, services, financial capital, and people to be moved around the world more rapidly, easily, and inexpensively. This is encouraging, as global flows of information and data of all types support economic growth. By some estimates, over the course of a decade, global data flows have raised global GDP by 10.1%, with the value amounting to some $7.8 trillion in 2014 alone. Digital flows—which existed 15 years ago—accounted for $2.8 trillion of that impact, and digital flows now have a larger impact on GDP growth than the global trade in goods. #JobsContrary to the narrative that technology and automation are destroying jobs, the internet and the associated digital trade of goods and services have been drivers of job creation. A detailed analysis of the French economy, for example, showed that over the past 15 years the internet has created 2.4 jobs for every job that it has destroyed.For every job displaced by digital technologies, 2.6 jobs are created. Similar research by McKinsey has supported this conclusion, finding that on a global scale, 2.6 jobs have been created for every one that has been displaced by these technologies. Far from eroding employment, the incorporation of digital advancements and the requisite training of workers make a populace more competitive in a global market that is seeing technology-related job needs soar. In Korea, for instance, employment in the ICT sector has grown faster than total employment at a rate of 6% between 2008 and 2015, and the Korean ICT sector accounts for the largest share of employment across all OECD countries.#InnovationIt is no secret that the world’s leading companies thrive off their ability to utilize and develop new technologies to grow and stay competitive. The large scale deployment of the internet is a perfect example, and as more and more people have come online, increases in innovation, productivity, and economic growth have followed. The good news is that Korea is connected and investment in new technologies is particularly robust. For instance, Korean firms invest heavily in research and development, which makes up 3.3 percent of Korea’s GDP. From 2012 to 2015, over 50% of the patents filed by Korean companies were ICT related. This focus on innovation has led to Korea becoming one of the world’s top 10 exporters of technology goods. To ensure this progress continues, it is essential for Korea to establish and sustain the right mix of regulatory policies and practices—the right “innovation ecosystem”—that allows companies of all shapes and sizes to thrive in an increasingly connected world. #ValueChainsAs technology increasingly touches all companies across all sectors, it is changing traditional interactions between business and consumers, as well as the traditional infrastructures and value chains where these interactions take place. While there is wide variation in interconnectivity by sector, new interdependencies and cross-sector partnerships between companies are quickly emerging. Further, the supply chains are becoming much more digitized relying on big data, cloud computing, and additive manufacturing. Asia has become the center of electronics global value chains over the last 15 years, increasing its world exports in electronics intermediaries by 27%.It is estimated that in five years, 80% of the S

500 will be engaged in cross-sectoral relationships with digital partners and gradually rely on digitally integrated ecosystems for future revenue growth. Critical business functions, such as customer service and machine maintenance, are increasingly composed of complex networks of digital partners that go beyond the traditional silo of a single organization.#DigitalContentGlobal digital content revenue, which includes video games, video, music, and e-publishing, reached almost $90 billion in 2016. Video games, in particular, made up nearly 50% of the total. The majority of growth in video on demand has been due to streaming services that allow access to content directly over the internet without downloading. Streaming generates $9.7 billion of video on demand totaling $16 billion revenue in 2016.Real-time entertainment accounted for roughly 49% of downstream internet traffic in Korea in 2015, up from 45% the previous year. The ecosystem is seeing an emergence in business-to-consumer content platforms—these include entertainment, commerce, and sharing apps. Many notable examples are present in the Korean market. One such example is the startup Spika. Founded in 2009, Spika produces content sharing platforms. One of its most popular services, ShareOn, has become one of the largest content sharing platforms in the Korean market. It enables users to have interoperability between device lines that would otherwise not be compatible. In particular, despite other advances in the digital economy, Korea lags behind other OECD members in all measured categories except News Reading and Content Creation, including email services, E-banking, and software downloads.Mobile gaming also continues to build momentum across the country as cloud infrastructure and broadband speed growth allow wider segment participation. In Korea, video game revenues are expected to reach nearly $10.5 billion in 2018, a figure that grows by nearly $250 million each year. This growth has accelerated thanks to advancements in cloud infrastructure and broadband speeds that allow digital content to reach a wider audience. Cloud storage and usage statistics enable richer analytical efforts to better customize their content for users. Many rely on algorithms that help estimate a user’s preferences. Many content creators also use these algorithms to analyze user preferences to determine future content investments.#e-commerceOver 12% of global goods trade is conducted via e-commerce platforms. Global e-commerce grew to over $ 27.7 trillion in 2016, and B2B e-commerce makes up more than 85% of the total. In 2016, Korean e-commerce accounted for 18% of retail and is expected to hit 31% by 2021. Meanwhile, China ($767 billion) and the United States ($595 billion) are the top B2C e-commerce markets. Rapidly evolving online marketplaces are facilitating exports and enabling even the smallest firms to become what some analysts have termed “micro-multinationals.” To support this growth, international rules and norms are becoming increasingly necessary and are an important tool to help goods and services providers reach customers beyond their borders.Policies that promote e-commerce are incredibly useful for businesses of all sizes, but especially benefit small and medium-sized enterprises (SMEs), which often lack the resources of large multinationals to meet compliance requirements and reap the benefits of complex trade agreements. The internet opens up new markets and export opportunities for small businesses for fractions of the costs of traditional operations. Small businesses that utilize the internet are 50% more likely to sell their products and services outside their region and gain higher revenue from their exports. For instance, a study on eBay users found that 190,000 of those exporting businesses on eBay are exporting to at least four continents.E-retailing growth is certainly promising. McKinsey predicts that Koreans’ online shopping will grow from $40.7 billion in 2015 to $59.8 billion in 2022. But logistics and customs procedures are a major chokepoint for e-commerce in Korea. According to the World Bank, sellers in the region face higher than expected costs and long waiting periods for documentation to process during import and export activities in Korea. Korea, despite ranking fourth in overall ease of doing business, ranks just 33rd in the “trading across borders” indicator and has seen no substantial progress in the last several years.#ServicesAs governments look for growth opportunities, the service sector is a good place to start. International service exports accounted for 21% of total global exports in 2014 ($5+ trillion). Over the past decade, digitally deliverable services comprised 50 percent of total services exports. The growth in services exports is not limited to developed or developing countries, as each grouping experienced services export growth of 5.3% and 4.8%, respectively.Services providers leverage digital technologies and free movement of data across borders to serve businesses and consumers, providing everything from basic connectivity and communication access to online education, solutions for home health, entertainment, logistics, and utility metering. Behind globally competitive economies are strong connectivity and collaborative industries—where technology and integration converge in a transformative way.Technology is already responsible for broad service availability to the world’s population in ways inconceivable just a decade ago. Mobile internet has made an indelible impact on economic and social development, notably in areas around financial inclusion, health services, and farmer productivity.E-government services are expanding and building efficiency with the adoption of digital technology too. Korea has made particularly robust progress in digital government, and the country is one of the few to have created a one-stop government website in multiple languages. This service streamlines the process of accessing and utilizing government information. Korea also has an online tax declaration, value-added tax, and customs declarations, one of the only OECD countries to have an extensive online presence.Public and private services providers are increasingly dependent on digital technologies and the free movement of data across borders. When supportive public policies are in place, they are able to manage operations in more efficient ways and pass on real benefits to the consumers that they serve. Conversely, localization laws and data onshoring requirements that are viewed as prohibitive tend to divert foreign direct investment and the associated jobs to locations with more welcoming data regimes.#ManufacturingThe internet is transforming the manufacturing sector by digitizing everything from how companies design their products to how they manage their supply chains. Manufacturers already utilizing digital technology have reported benefits such as increased efficiency management, enhanced security, reduced development costs, and faster time to market. Korea has the highest density of industrial robots in the world, with just over 53 robots per 10,000 employees. Manufacturers are also leading the next industrial revolution via the Internet of Things (IoT) and the Industrial Internet, merging the physical with the digital by embedding sensors and actuators in traditional products. In Korea, industrial robotics have been a particular boon for the private sector. Despite having a relatively small share of the global population, Korea has the third largest number of operational industrial robots and the highest density in the world with just over 53 robots per 10,000 employees.Integrating these industrial robots with IoT technology has greatly benefited Hanwha Systems, a Korean aerospace and defense firm, for example. Hanwha has been able to automate its aircraft engine factories and has plans to deploy this technology in other manufacturing subsidiaries. With this strategy, productivity is enhanced and manpower can be reallocated to other sectors of the economy. In these ways, the nascence of the technology-infused manufacturing sector is full of potential, especially as Korea tries to manage economic pressures created by an aging population.While the future of traditional industrial sectors remains a big question globally with technology’s rise, the direct benefits of improved manufacturing are important for Korea in particular. The key, as the World Economic Forum advises, is to increase innovation, the application of the latest technologies, and a focus on more value-added products. Furthermore, smart introduction of mechanization will be needed, combined with a significant effort in training and skills development.The manufacturing and service sectors can no longer be separated along traditional lines. Today, the manufacturing sector relies heavily on service inputs. For instance, every dollar of manufacturing output in the U.S. requires 19 cents of services. In addition, over half of the employees in a manufacturing industry work in service roles, ranging from research and development to office support.#Small BusinessThe digital revolution is transforming the players, patterns, and possibilities of world trade. It is opening opportunities for millions of micro-entrepreneurs and small businesses to engage in cross-border trade, grow into multinational sellers, and craft their own global supply chains. It is also enabling companies of all sizes to make, move, and market products and services faster and at a lower cost than ever before.Perhaps more so than any market participant, small businesses are poised to reap the benefits of data, service, efficiency, and scale provided by emerging digital technology. Operational improvement, new market access, and service affordability, plus reliability, mean a promising new future for SMEs to leverage emerging technology.But policy and regulatory friction still stand in the way of unlocking the full potential. Data localization has been a particular hindrance to full harnessing of the Korean digital economy’s benefits. In a recent study, ICTSD found that monthly salaries are depressed by almost 20% in Korea as a direct result of localization rules.Digital Drivers: Recommendations to Drive Growth Digital connectivity drives every aspect of the global economy, fueling job growth, productivity, and efficiency. Companies of all sizes and across sectors rely on the internet to manage their relationships with customers and supply chains, and digitization has spread widely and is even creating completely new industries. Government plays an important role in managing the risks that arise from emergent technology and through adopting smart public policies that encourage the growth of the industry.It is imperative to note that the digital economy is not constrained by traditional geographic borders. Thus, an increasing amount of international cooperation is necessary to enable these technologies to deliver. Every economy’s success depends largely on scalability, interoperability, and the ability for data to move freely across borders. Countries that turn to international standards and norms benefit the most from digitization. Therefore, finding pathways to implement global best practices in domestic economies while spreading them through international cooperation and trade agreements should be prioritized by governments across the globe. Economies that isolate themselves from the global economy by building regulatory roadblocks to technology will undermine the ability of digitization to fully drive economic growth and create jobs. To maximize the potential for increased revenue growth, productivity, and innovation, the following “digital drivers” are recommended:Regulatory InteroperabilityDigital innovation is transforming every sector of the economy, from services to agriculture. Such innovation brings with it the potential to confer a range of benefits on businesses and consumers alike. Given that regulation typically lags behind technological innovation, however, it poses a potential challenge for regulators—how to provide oversight, while enabling digital innovation to flourish. Countries that strike the appropriate balance will be best-positioned to benefit from this trend.Where regulation is deemed necessary, governments should carefully deliberate new policies through engagement, transparency, and cooperation with industry to incorporate private sector expertise. Further, policymakers should prioritize international and domestic cooperation, align on shared measures for progress, and institute principles of regulation that deliver general, industry-agnostic and broad societal benefit. The internet and digital economy have no geographic borders, and governments must work together to ensure that the policies they create do not erect arbitrary barriers that shut their economies out from the benefits of technology.Data FlowsThe ability to move data across borders and access information is as important to an economy today as the movement of capital. Virtually no company, regardless of sector, can do business, or export goods and services, without the ability to move data and access information across borders.Policymakers recognize that investment flows are vital to economic vibrancy, and economic activity in the digital age is just as dependent on data flows. The benefits of technology will be limited by data localization policies that force foreign companies to produce or establish part or all of their operations within a nation’s border.The number of data localization measures has doubled in the past six years. More than 18 major economies currently have data localization policies in place, specifically targeting accounting, tax, and financial information. Requiring data to be stored within national borders, whether targeting certain sectors or more broadly, leads to higher expenditures, lowers data security, and disincentives foreign investment. It puts companies at a competitive disadvantage by requiring them to maintain data locally while trying to use it globally.Policies that force companies to manage, store, or otherwise process data locally, link market access or commercial benefits to investment in or use of local infrastructure, or require technology transfer are discriminatory in nature and draconian. They deter investment, delay innovation, and cut off consumers from the best digital products and services. Moreover, by protecting domestic champions, they ill-prepare them for competition outside of their home markets. Such efforts are often justified using economic development rationales that are shortsighted, unproductive, and ultimately serve to reinforce a path to dependency.Nontariff measures like forced content and data localization are nearly twice as trade restrictive as tariffs. Recent WTO research suggests that nontariff measures like forced content and data localization are nearly twice as trade restrictive as tariffs, causing a loss of almost $100 billion in world commerce and affecting 3.8 million jobs. According to the report, forced localization does the following: Increases firm cost structure and complexity of doing business in the country. Raises costs of key capital goods, especially ICT, but also important raw materials and equipment. Reduces choices for businesses and consumers. Discourages innovation by reducing intellectual property protection. Affects the implementing country’s reputation and investment attractiveness. To realize the full benefits of the movement of data, government officials should eliminate data localization policies that interrupt the transfer of data or require local process or retention of data, and work to dispel the myths that localized data increases its security. This will become increasingly important for Korean firms as they expand their global operations.Real World View: How data localization stunts growthIn 2005, South Korea’s restrictions on cross-border data flows and outsourcing of financial data were among the most stringent in the world. As a global financial institution we were unable to transfer or process off-shore any data collected in Korea and were forced to implement data processing systems that were unable to communicate with our other offices. The result was higher operating costs, decreased efficiency, and operations that were out of sync with global best practices. Yet today, South Korea boasts one of the most open regimes in the world relating to cross-border data transfer, processing, and related IT facilities for financial services. Under the revised rules we have been able to launch three additional global platforms and are now able to process Korean customer and policy information using our global human resources and IT security software platforms. Using these platforms, rather than separate systems, allows us to operate more efficiently and competitively. The change in the digital rules resulted from provisions in the U.S.-Korea Free Trade Agreement that enabled cross-border data flows, and extensions of those rules to include financial service providers. Having similar rules across the Asia-Pacific is a key to growth for us, and the absence of them really hinders our ability to compete in such a dynamic, growing market place.” — Testimony from a U.S. financial service provider operating in Korea Data ProtectionMore than 120 countries have passed some form of data protection legislation. While privacy safeguards are necessary to ensure consumer protection, consumers also demand the mobility of data to bring them the best products and services. However, overly restrictive data protection regimes too frequently create difficulties for companies conducting business in-country and worldwide.Privacy regimes must protect data and respect privacy while cultivating digital-based innovation to solve society’s most difficult challenges. Instead of forcing rules that endeavor to protect privacy through limiting data transfers, narrowly tailored and proportionate laws will provide better oversight and protect individual privacy. Prioritizing protection of personal data at the expense of legitimate uses that benefit citizens is a prescription for outcomes that forestall innovation.As Korea looks to amend its data protection regulation, the government should continue to base its privacy regime on international norms. Turning to existing best practices like those found in the OECD and the Asia-Pacific Economic Cooperation will continue to ensure that Korea’s law is globally interoperable. The government should also recognize differences among industries in their use of data, enable legitimate business uses of personal data, empower consumers to make informed choices, and enable cross-border data flows. At the same time, data protection regulation needs to ensure a coherent, streamlined set of rules and establish clear authorities that minimize complexity. Importantly, as countries implement these frameworks, they must refrain from duplicative or secondary requirements that undermine their efficiency.It is also crucial that the ability to move data across borders and innovation coexists with strong and interoperable data protection rules. A data protection framework that facilities cross-border data flows will enable business of all sectors and sizes to reach new customers in foreign markets inexpensively and manage relationships with foreign clients securely.Cloud and Emerging TechnologiesCloud technology is revolutionary in its capacity to bring services, goods, and efficiencies to emerging economies. According to the International Data Corporation, by 2020 “… [the cloud] will simply be the way business is done and IT is provisioned.” It is a critical driver of economic health with particular application on cost reduction, computing power access, internet availability, and generally democratizing access to technology. Breakthroughs in local entrepreneurship initiatives, government service availability, job growth, and competitiveness are directly linked to public cloud development.Public cloud spending is expected to reach $160 billion in 2018, achieving a five-year Compound Annual Growth Rate (CAGR) of 21.9%. Companies need access to commercially viable IT solutions and services. While the public sector likes bespoke technologies, cutting-edge innovators are building on top of commercially viable solutions such as hyperscale cloud services. Instead of investing in data centers, governments should turn to the private sector, which has proven it can offer cloud services that are less expensive, more reliable, and more secure.The Korean government should adopt cloud-first and open data policies to promote innovative commercial solutions built on top of proven tech. Governments must remove trade and data residency requirements to reap the full benefits of cloud technology.IoT is advancing within Korea, especially in the industrial sector. Korea ranked first in the IDC’s IoT readiness index based on its deployment of IoT-connected industrial robots. The report found that South Korea spends the highest percentage of GDP on IoT-connected devices and infrastructure and is therefore expected to maintain its top ranking. The number of cellular IoT connections in the region is expected to grow at a CAGR of around 38% between today and 2022, as IoT solutions are being explored to solve region-specific challenges. Regarding IoT potential, and energy specific revolutions, GSMA explained:“That system is KT-MEG, the Internet of Things (IoT) demand response platform that uses micro grids, cloud-based analytics and variety of mobile networks and communication mediums to manage the supply and consumption of energy throughout Korea. Powering more than 18,000 sites, each with disparate energy requirements, the Korean mobile network operator has enabled more efficient energy use for power plants, vehicle charging points and a variety of other businesses.” Innovative capacity is not the problem. Ultimately, the benefits of emerging technology will be limited only by government decisions to allow data residency and policy barriers to persist. Technology’s unbridled success is helped by a minimal regulatory framework which has been the foundation for U.S. global internet leadership for decades.Premature or reflexive regulation can lead to quicker obsolescence and, worse, may create security vulnerabilities. Governments and policymakers are best served by applying a light touch. Regulators should pursue a streamlined approach that promotes the development and adoption of cutting-edge technologies and analytics tools associated with emerging technologies, such as IoT and artificial intelligence.With that said, there is recognition that the economic benefits of such technologies may not necessarily be distributed evenly across society, and that certain technologies may affect the labor market in unintended ways. Governments and their respective citizens will need to have substantial dialogue on these challenges, but they should not use these risks as an excuse to halt innovation. CybersecurityAs internet use increases, securing our connected economies is increasingly important. It is likely that by 2020, 60% of digital businesses will have suffered some sort of major services failure due to the inability to manage cyber risk. The best way to address cybersecurity is through voluntary risk management, investment in safeguards, and information sharing. Security must remain flexible and innovative—enabling solutions to evolve with the market. Collaboration between government and industry is critical. Cybersecurity risks are constantly evolving, so predefined solutions quickly become obsolete. Worse, they could provide bad actors with a roadmap for attack.By 2020, 60% of digital businesses will have suffered some sort of major services failure due to the inability to manage cyber risk. Vulnerabilities are inevitable as technology develops. Cybersecurity policies need to focus on protection rather than on mandatory incident reporting. Governments that view the private sector as a valued partner and engage in deep collaboration across borders are best positioned to safeguard their citizens and their economies.The U.S. National Institute of Standards and Technology (NIST) Framework for Improving Critical Infrastructure Cybersecurity (Framework) is an example of an effective model to manage cybersecurity risks to information networks and systems in a cost-effective manner for private organizations. The Framework identifies a flexible suite of standards, guidance, and best practices, but it avoids presuming to tell companies how to use them. These nonregulatory, cooperative, and efficient qualities have drawn industries to the Framework, which is applicable regardless of where a business’ operations are situated internationally and can enhance cybersecurity.InteroperabilityInteroperability between regimes may be the most important concept to enable the digital economy to deliver on its potential. On a technical level, having interoperable systems is integral for everything from cloud computing and IoT to autonomous vehicles. But that’s just the beginning. Technology is integrating economies and countries more closely. Country-specific approaches run the risk of fragmenting the global internet, which exists beyond traditional borders.As companies and countries try to compete in the 21st century global economy, the winners will certainly be supported by forward-looking digital policies that are applicable beyond national markets. Therefore, strong, consistent global trade rules that adhere to the principles mentioned here are necessary, and for their greatest impact they must be widely adopted. One of the most effective and efficient ways to do this is to codify such rules in trade agreements. A failure to do so will create serious disadvantages for economies, divert foreign investment, limit job growth, and stunt innovation.StandardsAs technology continues to evolve, standards must evolve as well. Standards are at the heart of digital products and play a growing role in digital services. Still, governments often complicate standards development and create corresponding problems that exacerbate compliance. Governments have made binding commitments to avoid creating technical barriers to trade. Yet far too often, their policies fail to recognize the trade facilitating, self-regulatory attributes of a private-sector market approach to standards development in recognized international standards bodies and consortia.Voluntary, industry-led, globally recognized standards will drive secure, flexible, and interoperable solutions that scale across a global ecosystem. Internationally recognized standards enable interoperability, helping to expand the access that businesses, governments, and consumers have to global markets. Utilizing open standards and commercially available solutions will accelerate innovation and the adoption of new technologies. Tying industry at this early stage to burdensome, conflicting, or one-size-fits-all standards would be harmful. Standards need to be voluntary and carefully designed so that they do not constrain innovation. Historically, the most effective process for developing standards has been driven by the private sector through a variety of open participation, globally recognized, voluntary, and consensus-based standards groups, industry consortia, and companies.Government AccessToday’s legal processes and treaties enabling law enforcement and government agencies access to data are outdated and inefficient. Law enforcement agencies often wait months for responsive data, making it difficult to prosecute crimes conducted over the internet. Meanwhile, cybercriminals are only becoming more sophisticated. The process by which governments around the world obtain data stored outside their borders needs to be modernized.Localization of data, however, is not the answer. Law enforcement and government agencies do not necessarily gain easier or timelier access to data and, ultimately, jeopardize cybersecurity. New solutions are needed that allow access to information necessary to protect citizens without disadvantaging companies competing in the global marketplace. Governments need to work together to modernize the legal processes through bilateral and multilateral agreements by which they are able to gain access to data outside of their borders. This engagement should include bilateral and multilateral discussions with an aim to minimize adverse global impacts in connection with the collection of private sector data.Competition PolicyThe innovative nature of data-driven companies make markets more competitive, not less. The potential benefits that data-driven companies can deliver to consumer welfare are enormous. Therefore, it is difficult to see big data presenting competition concerns. However, in some jurisdictions, competition enforcers have floated novel theories of harm attached to big data, market dominance, the outcome of algorithms, or the need for competitors to be granted access to data pools. These claims should be met with skepticism by enforcers, and vigorous sound economic analysis should be applied in any investigation to ascertain certainty that the anti-competitive effects significantly outweigh the pro-competitive benefits. Further, competition enforcement should not be a backdoor to respond to other policy debates, such as privacy. Other policy issues should be appropriately debated and regulated by different regulators and competition enforcers should be narrowly focused on economic harm and situations where competition needs to be restored in order for markets to once again self-regulate.InfrastructureWidespread adoption of technology in homes, cities, and industries will place demands on communication infrastructures and services. Infrastructure will be critical, and the government should look for ways to promote investment, deployment and upgrades of communications networks, including next-generation cellular (5G) and Wi-Fi. Lack of infrastructure will hinder technological growth.Infrastructure investment will not only be critical to realizing technology’s full potential, but it is capable of rapidly creating jobs and new technologies that will maintain a country’s technological, political, and economic position.Customs ModernizationSmall business and e-commerce are huge drivers of economic growth and job creation. The emergence of new e-commerce platforms has enabled for small and medium size companies to reach new customers across the globe. It has also created a surge of low-value, cross-border shipments.Antiquated, burdensome, complex, and costly customs procedures make it difficult for business to compete by slowing delivery times and raising transaction costs. Further, in response to the increased volume, governments have sought to introduce new border measures such as X-ray screening, additional paperwork requirements, and new e-commerce channels>