Trade agreements cement close economic ties, lay down the rules for development and growth going forward, and create more stable partners, which often underpin a more stable security environment.

THE THINGS YOU NEED TO KNOW:

Author

Joshua P. Meltzer

Senior Fellow - Global Economy and Development

@JoshuaPMeltzer

• As one of his first official acts, President Trump signed an executive order removing the United States from the Trans-Pacific Partnership (TPP).
• This action—along with repeated promises to renegotiate the North American Free Trade Agreement (NAFTA)—are in line with the protectionist trade policies he advocated on the campaign trail, and continues to promote as president.
• The United States enters into trade agreements with other countries both for economic and security reasons. While trade deals with Canada or Mexico may generate relatively small gains for America’s large economy, these agreements are important for regional security and economic growth.
• U.S.-Mexico trade under NAFTA has helped build a prosperous and increasingly democratic Mexico, which has a positive economic and national security outcome for the United States.
• Trade opponents may highlight the trade deficit—which calculates the difference between exports and imports.
• Imports are not necessarily good or bad for economic growth– it depends how imports are used.
• The use of imports can be a positive driver of growth: If imports are used productively—as imports to business processes—then imports make businesses more competitive, employ more people, and generate more wealth.
• It’s common to renegotiate trade agreements, and NAFTA, which President Trump hopes to re-negotiate, is more than 20 years old.
• Former President Barack Obama talked about renegotiating NAFTA in 2008, which was achieved in the context of the TPP.
• In those negotiations, the U.S. gained improved market access into Mexico and Canada, without having to make any significant concessions.
• Rather than accepting the TPP outcome as an update of NAFTA, President Trump wants to start negotiations over.

THE SOURCES:

The high costs of protectionism 

NAFTA under Trump—the myths and the possibilities

      

 

 

From Ross Perot’s 1992 claim that the North American Free Trade Agreement would generate a “great sucking sound” as jobs moved from the U.S. to Mexico to President Donald Trump’s claim that the agreement is a job killer, it has been good politics to blame trade with Mexico (and more recently with China) on job losses, particularly in the manufacturing sector.

This might look like a fulfilled prophecy given that the increasing trade deficit of the U.S. between 2000-2010 coincided with the loss of close to 6 million manufacturing jobs (yet, since 2010 the manufacturing sector has added over 800,000 new jobs). But the truth is that all advanced economies have been steadily reducing the share of employment in manufacturing, regardless of trade deficits or surpluses.

Rather than trade, increases in productivity and technology have been a much larger driver of manufacturing job losses. Compared to the early 1990s, it takes about half the number of workers today in the U.S. to produce the same output. In fact, from 2000 to 2010, while jobs were being lost, total manufacturing output increased by over $800 billion.

So how much of the job losses from trade can be attributed to NAFTA, and in particular to Mexico? While it is difficult to assess, it is estimated that U.S. trade with Mexico led to little over 100,000 manufacturing net job losses—equivalent to about 0.1 percent of the U.S. labor force.

In fact, good trade agreements should produce job losses in some sectors due to increased competition and the restructuring that follows.

Yet, as Harvard’s Dani Rodrik points out, even if NAFTA increased overall welfare for Americans, it has caused labor market challenges such as relatively slow growth of wages of blue-collar workers in areas more exposed to imports from Canada and Mexico.

Instead of bemoaning such job losses, the administration should instead focus on better assisting people who lose their jobs—whether due to trade, technology, or productivity gains – to find new work. This could include improved education and training, wage insurance to encourage workers to renter the workforce early, and allowances to encourage people to move to where the jobs are.

What about the U.S. Trade Deficit?

President Trump also sees the U.S. trade deficit, particularly with Mexico and China, as evidence that the U.S. has been losing from trade.

Trade among countries is not a zero-sum game, where some countries win and others lose. A country’s international trade position is the sum of the millions of decisions by consumers and firms to purchase and sell goods and services. To assume a loss from trade it is necessary to assume that overall everyone has been made worse off by their decisions all of the time.

In the case of NAFTA, American consumers are better off from having a greater variety of goods at lower prices. Imports also give businesses access to lower cost inputs, which in turn increases their competitiveness in domestic and overseas markets. The ability for the U.S. to export opens new markets for its businesses and generate more jobs.

The U.S. trade deficit does not reflect the U.S. “losing out” in international trade. In fact, steady economic and employment growth since the 2009 Great Recession have coincided with a 30 percent increase in the U.S. trade deficit. From an accounting perspective, the trade deficit (plus other international cash flows) reflects a lack of domestic savings to finance investment. This gap is covered capital inflows from foreign countries investing in the U.S.  Thus, raising tariffs on imports will not eliminate the deficit, as long as the investment and savings gap remains.

The U.S.-Mexico trade deficit

The U.S. trade deficit with Mexico is not the right measure to assess the benefits of NAFTA. It instead reflects the underlying structure of the U.S. and Mexican economies. Mexico has become part of North American supply chains, which gives U.S. businesses access to lower-cost inputs. In fact, over half of U.S. imports from Mexico are intermediate goods, as shown in Figure 1 (intermediate goods are categorized as “capital goods” and “industrial supplies”).

Figure 1: U.S. imports from Mexico, by end-use category

The integration of North American supply chains also suggests that the U.S.-Mexico trade deficit is overstated. Imports from Mexico often include U.S. value added as U.S. exports to Mexico are in effect embodied in subsequent Mexican exports to the U.S. According to the Organization for Economic Cooperation and Development, over 45 percent of Mexican exports comprise foreign value added.

Renegotiating NAFTA 

It is not clear how Trump would renegotiate NAFTA. His view that protection makes the U.S. stronger, combined with a political imperative to bring back manufacturing jobs, may lead the administration toward reducing flows of goods and services among the U.S., Canada, and Mexico. Such an approach would reduce the competitiveness of U.S. manufacturing and impoverish North America.

The Trans Pacific-Partnership (TPP), which Trump withdrew the U.S. from in his first day in office and included Mexico and Canada, was also a modernization and improvement of NAFTA.

New rules on digital trade and commitments to address unfair competitive practices would create opportunities for a growing U.S. export sector.

The best way forward for Trump would be to build on what Canada, Mexico, and the U.S. agreed upon in the TPP. The U.S. could also seek to tighten automobile rules of origin as a means of forcing greater manufacturing within the NAFTA countries. But such a move also risks reducing competitiveness as companies could be forced to source from more costly suppliers.

Updating labor and environmental rules in NAFTA could prevent countries from lowering standards to induce trade and investment. Making such commitments subject to dispute settlement would also strengthen compliance.

New rules on digital trade and commitments to address unfair competitive practices would create opportunities for a growing U.S. export sector.

Trump could also tie NAFTA renegotiation into his infrastructure plans, improving road, rail, and internet connection between Mexico and Canada, further building a more integrated and economically significant economic area.

What’s certain, reducing opportunities for international trade will make the U.S. poorer. And renegotiating NAFTA with the aim of reducing the trade deficit or bringing back manufacturing jobs to the U.S. will achieve neither. The key challenge for this administration should instead be how to better assist workers adjust in a dynamic economy.

      

 

 

Leaving the TPP also undercuts U.S. leverage with China. While China was not a party to the agreement, the TPP had led to a fierce debate in China about prospects for joining it, as well as the type of economic reform it needs. That reform incentive, which could have led China to become a fairer player in the global market, has vanished.

The TPP also includes rules that seemed to matter to Trump, such as disciplining government support for state-owned enterprises and enhancing transparency measures on currency manipulation that he could have used in his trade discussions with China. Withdrawal from the TPP is a blow to U.S. global leadership in determining the rules for international trade and investment in the Asia-Pacific region. There were also important security gains to the United States from the TPP. The deal would have supported the economic growth of U.S. allies, resulting in stronger, more capable partners over time. Former Secretary of Defense Ash Carter considered the TPP to carry the same national security significance as an additional aircraft carrier.

Former Secretary of Defense Ash Carter considered the TPP to carry the same national security significance as an additional aircraft carrier.

President Trump inaugurated his presidency by surrendering all of these gains. His decision to withdraw from the TPP will not be a one-off, but will have ongoing negative consequences for the United States. For starters, this decision undercuts key allies, such as Japan, and emerging regional partnerships with nations like Vietnam. Leaders in most of the involved nations committed substantial political capital to agreeing to the TPP and the significant economic reforms it entailed.

Removing the U.S. from the TPP also increases uncertainty among U.S. allies about the reliability of the U.S. across a range of foreign, economic, and security matters. The damage here in terms of lost trust will outlast the Trump administration and will be hard to rebuild. That Trump has withdrawn from the TPP is, however, no surprise. He made it central to his campaign, repeated his intention to leave the TPP following his election win, and, in his inauguration speech, stated that “protection will lead to greater prosperity and strength.”  In this regard, Trump’s decision to leave the TPP is likely the first step in an increasingly closed and inward-looking United States.

The costs to the United States from this policy will be significant, but will only manifest clearly over time. American business will become increasingly disadvantaged in its access to the 95 percent of consumers living outside the United States. In addition, the U.S. economy will experience meaningful drops in business efficiency and competitiveness.

In this context, his decision to renegotiate NAFTA is also worrying. The TPP accomplished the modernization of NAFTA, incorporating new disciplines on the digital economy and further liberalizing the North American market. In contrast, Trump has threatened tariffs of 35 percent on Mexican imports and expressed his view that protectionism makes the United States stronger, suggesting that any renegotiation of NAFTA will aim to raise tariffs and reduce trade and investment. These actions will stunt the growth of supply chains and the free movement of goods and services that have underpinned so much prosperity.

Trump has identified the need to help working-class Americans. This should be a key priority for any administration, but it cannot be achieved by misdiagnosing the problem and opting for counterproductive solutions. Raising tariffs will destroy trade-dependent jobs and disproportionately tax lower-income Americans who depend on low-cost daily necessities. Moreover, the loss of manufacturing jobs in the United States is fundamentally driven by technological change, like automation, with import competition playing a smaller role.

Most estimates show that trade was responsible for 15 to 20 percent of job losses in the 2000s and manufacturing employment has rebounded since then. Nations that record trade surpluses, such as Germany, have also seen similar reductions in manufacturing employment because of technological change and their transitions to service-based economies. Moreover, eliminating the trade deficit by imposing trade restrictions is not doable—the trade deficit is driven by larger macroeconomic forces and reflects inadequate national savings—nor will it lead to job creation.

As history and economics have demonstrated repeatedly, protectionism has severe costs. President Trump’s first executive order is a self-inflicted harm with long-lasting consequences.

      

 

 

2015 was a milestone year in which the world set clear and ambitious objectives through the Third International Conference on Financing for Development in Addis in July; the UN Summit in September that adopted the Sustainable Development Goals and the 2030 development agenda; and the COP21 in Paris in December that resulted in the milestone climate agreement. The three central challenges now facing the global community, as crystallized in 2015, are to reignite global growth, deliver on the sustainable development goals (SDGs), and invest in the future of the planet through strong climate action. At the heart of this new global agenda is the imperative to invest in sustainable infrastructure.

As an essential foundation for achieving inclusive growth, sustainable infrastructure underpins all economic activity. Inadequate infrastructure remains one of the most pervasive impediments to growth and sustainable development, and consequently in tackling poverty. Good infrastructure unshackles and removes constraints on economic growth and helps increase output and productivity. Investment in sustainable infrastructure can help generate employment, boost international trade, industrial growth, and competitiveness while reducing inequalities within and among countries.

Sustainable infrastructure also holds the key to poverty reduction and societal well-being in part because it enhances access to basic services and facilitates access to and knowledge about work opportunities, thus boosting human capital and quality of life. Sustainable infrastructure helps reduce poverty and extreme hunger, improve health and education levels, assist in attainment of gender equality, allows for the provision of clean water and sanitation, and provides access to affordable energy for all.

Sustainable infrastructure promotes sustainable consumption, production, and resource utilization to ensure that habitats and settlements are resilient, and that ecosystems and marine resources are used in a sustainable manner. On the one hand, it enhances food security through more efficient resource use and reduces vulnerability to environmental shocks. On the other, bad infrastructure can and does kill people on a large scale mainly via air and other pollution, and puts pressure on land and natural resources to an extent that may compromise the viability of future generations and create unsustainable economic burdens in the future.

How we undertake the massive investments that are needed will have an enduring impact on climate resilience. The existing stock of infrastructure and its use accounts for more than 60 percent of the world’s greenhouse gas (GHG) emissions. The scale of the new investments that must be made offer a unique opportunity for accelerating the transition to an economy based on low-carbon energy, but, if not done well, also pose a great danger of locking in capital, technology, and patterns of economic activity that will last for decades and become progressively unsustainable.

Ramping up ambition as well as spending on sustainable infrastructure is particularly timely, given the global macroeconomic context and the slowdown in growth and declines in investment in all regions, and when other policy instruments are highly constrained. First, monetary policy is reaching its limits. Second, fiscal policy is constrained as well: those with fiscal space seem reluctant to use it and most do not have fiscal room for maneuver. Third, while supply-side structural reforms are important, their effects take time. A fourth means of jumpstarting growth at this juncture is public-private investments in sustainable infrastructure. In the near term, such spending can stimulate demand at a time when many countries have been hit by economic contraction and the commodity slump. In the medium term, investment in sustainable infrastructure can augment and improve the efficiency of energy, mobility and logistics—thereby boosting productivity and competitiveness in all sectors and spurring the domestic drivers of growth. It can also unlock waves of innovation and creativity. And it underpins the only sustainable long-term growth path on offer.

Download the full report »

      

 

 

Specifically, Trump will withdraw the United States from the Trans-Pacific Partnership (TPP), renegotiate the North American Free Trade Agreement (NAFTA) and label China as a currency manipulator. His administration will identify all foreign trading abuses that unfairly impact American workers and respond using all tools under American and international law. He has also proposed a tariff on goods from U.S. companies that relocate to other countries.

The aim of these policies, as stated by Trump, are to address harms to U.S. workers from trade and to improve trade deals he sees as not being in the U.S. interests. These are certainly worthwhile goals. The problem is that Trump’s current trade proposals will work against each other, threatening to cancel out any gains, and likely inflicting additional costs on the very people he has pledged to help. And, as the U.S. is approaching full employment, the key challenge is less about more jobs but rather about getting at the concentrated losses in particular communities.

Further, the policies proposed are likely to have a range of broader security implications that will be negative for the U.S.

So what ways forward are there for trade under Trump?

Mexico and China 

Part of Trump’s diagnosis of U.S. economic ills was explained by trade with Mexico and China.

For instance, Trump has stated that he plans to renegotiate NAFTA—the trade agreement with Mexico and Canada. Mexico and Canada are the U.S.’s largest export markets, together buying more U.S. goods and services than any other country. President Obama also proposed renegotiating NAFTA in 2008 and the TPP was his response. So from one perspective the TPP already achieves this goal.

But should Trump withdraw from the TPP and then seek to renegotiate NAFTA, any concessions on the part of Canada and Mexico will also require concessions by the U.S., i.e., lower tariffs and other trade barriers.

If instead he wants to raise U.S. tariffs on Canadian and Mexican imports, there will be two major effects. First, U.S. exports will also face higher tariffs, and the costs to U.S. industries, workers, and consumers will be particularly large because the North American market is integrated and goods that are part of supply chains often cross-borders multiple times, magnifying the impact of even small tariff increases. Second, tariffs that raise business costs will also reduce the competitiveness of U.S. products overseas.

Trump also plans to label China a currency manipulator. The impact of currency manipulation on trade is a legitimate concern. However, a specific focus on China misses other countries that might manipulate their currency. It is also ill-timed given that China’s trade surplus has declined from over 10 percent of GDP in 2007 to under 3 percent today (in comparison, Germany’s is 8.5 percent). And China is now taking measures to support its currency rather than artificially keeping it low.

What’s more, as part of the TPP negotiations, measures were agreed upon to provide transparency on currency markets and opportunities to address currency manipulation. Further rules on currency manipulation could be developed and a Trump administration could also seek to extend such rules globally.

So what about the TPP?

Trump’s plan to withdraw the U.S. from the TPP will limit his negotiating options, reduce the effectiveness of his other trade goals, and ultimately dampen U.S. growth.

For one, TPP would produce net economic gains for the U.S.—with annual gains estimated at between $57 billion and $131 billion a year.

The TPP also includes rules and enforcement mechanisms that would strengthen the hand of a Trump Administration in dealing with a range of trade practices by other countries that are not currently disciplined by existing trade agreements.

It is also the case that withdrawing from the TPP would further make the U.S. worse off with respect to other countries in Asia who are negotiating trade agreements. In particular, 16 countries in Asia are negotiating a separate trade deal, called the Regional Comprehensive Economic Partnership (RCEP), which includes such players as China and Japan, as wells as important emerging economies such as Vietnam and Malaysia, while excluding the U.S. Withdrawing from the TPP would make RCEP the primary vehicle for trade integration in the fastest growing region in the world, exclude the U.S. from having a say in how these rules are developed and placing China in the driver’s seat. U.S. exporters would also be placed at a comparative disadvantage in Asia. For example, in the absence of TPP, RCEP would make businesses in China more competitive in Japan compared to U.S. companies.

The strategic implications of the TPP

Trump has expressed concern that China has been taking advantage of the U.S. and promised to stand strong against such action. Implementing the TPP would be one of the most effective ways of doing this. On the contrary, withdrawing from the TPP would hand China a significant economic and strategic boon.

President Obama has stated repeatedly the importance of the TPP for establishing trade and investment rules in Asia consistent with U.S. interests. And U.S. Defense Secretary Carter has stated that the TPP would be preferable to another aircraft carrier group in Asia.

In parallel with statements by Trump questioning the value of U.S. alliances, withdrawing from TPP will further confirm for countries in Asia that the U.S. is no longer as committed to upholding security in Asia. This will create space for a greater role for China—the only other country that seeks to challenge and possibly replace U.S. dominance in Asia. Withdrawing from the TPP will only hasten the rise of China and the relative decline of the U.S.

Such an outcome would begin the reversal of 60 years of U.S. foreign and economic policy premised on the understanding that having security and trade arrangements in Asia (and globally) is less costly and more beneficial to the U.S. than dealing after the fact with discriminate trade outcomes or having to later intervene in conflicts.

A trade policy for U.S. workers

Getting at the challenges to workers of adjusting to an open and dynamic economy—whether from trade or technological change—could be the focus for a Trump administration. From this perspective, Trump’s proposals to allow income tax reductions for childcare expense and to expand technical and vocational training are good first steps. Lowering the cost of education, federally mandating maternity leave, and improving wage insurance would also support those who need it the most.

Trump’s proposals to invest in infrastructure and reduce taxes on repatriated business income earned outside of the U.S. could also help improve U.S. competitiveness, which should lead to higher growth, more trade, and jobs.

A proposal for moving forward

Given the recent campaign, it is not surprising that Trump has stated his intention to withdraw from the TPP. In order to maximize Trump’s chances of achieving his other goals of growing the U.S. economy and improving U.S. standing in the world, he should restate his TPP goal as renegotiating the TPP to respond to the interests of U.S. workers, failure which will lead to the U.S. withdrawing from the agreement. While a renegotiation of the TPP would be difficult, if managed successfully it would allow Trump to remain true to his political commitments and allow him to use such a new agreement to achieve many of his other economic and strategic aims.

      

 

 

As the internet goes global and data becomes an increasingly significant driver of economic growth, data flows are estimated to have contribute $7.8 trillion to global economic activity during the last decade—approximately 10 percent of global GDP. Moreover, the internet economy could double for G-20 between 2010-2020, employing a further 32 million workers.

The pervasive use and impact of the internet across economic sectors means that the internet and data are best understood as general purpose technologies (GPT)—technologies that have the potential to reshape economies and boost productivity. Other GPTs include railway, internal combustion engine, and electricity. Deepening and broadening the capacity of government, business, and people to use these technologies will be a key determinant of economic prosperity. In fact, maximizing the use of the internet and data across Colombia’s economy will provide a basis for sustainable and inclusive growth in the 21st century.

This report analyzes the ways that the internet and data flows are improving the productivity, efficiency, and competitiveness of the Colombian economy. For instance, businesses are using access to digital services such as cloud computing to reduce IT costs and thereby increase their competitiveness in domestic and global markets. Internet platforms are providing small and medium-sized enterprises in Colombia with access to consumers globally and providing an opportunity to expand participation by Colombians in international trade.

Businesses are also using the internet and data to provide digital services as part of more traditional goods offerings, thereby increasing their overall value.

The internet is also increasing the importance of services in international trade. Trade in digitally deliverable services—services that can be provided online already represent over 12 percent of Colombia’s total exports and this increases to over 17.5 percent once digital services embodied in goods exports are included. Businesses are also using the internet and data to provide digital services as part of more traditional goods offerings, thereby increasing their overall value. This includes using sensors and data analytics to trace agricultural products and improve the efficiency of mining and manufacturing operations. The follow figure captures the opportunities for economic growth, jobs, social inclusion, and better government from an effective use of the internet and data flows.

The figure underscores how realizing the opportunities of the internet and data requires Colombia to establish a comprehensive enabling environment. This includes expanding internet access, lowering costs, and building a skills base that can maximize the opportunities of the internet for innovation and production. Colombia also needs to strengthen consumer trust in using the internet, such as by ensuring the security and privacy of personal data and implementing regulatory protections for consumers engaged in online commerce. Competition in the telecommunications market is another important factor that affects internet cost and availability, and this extends to ensuring competition across the economy so that new online businesses can grow. A balanced set of intellectual property laws is also key—one that protects digital content and addresses online privacy while not overburdening internet service providers or stifling the innovative opportunities of the internet. In turn, success here can deliver a broad range of economic and social gains, including economic growth, more and better paying jobs, new opportunities to improve governance and government services, and broader levels of inclusion as the internet enables often marginalized communities in rural areas to engage more fully in their countries social and economic life.

Progress has been made on expanding digital access and use, including growing Colombia’s content industry, and using the internet to improve the transparency of governance more broadly. Despite these gains Colombia still faces a number of challenges to creating a digital economy. In particular, Colombia needs to address the following limitations in its enabling environment:

• There is limited internet access, particularly in rural areas, high costs of internet services and mobile devices, as well as relatively slow internet speeds compared to the region.
• Not enough competition in various markets, including in the telecommunications market stifles innovation and the uptake of digital opportunities.
• Insufficient local online content reduces the usefulness of the internet for Colombians.
• There is a lack of consumer trust in making purchases online, in part reflecting a relatively underdeveloped e-commerce environment, including delays in having goods delivered or accepting returns and receiving damaged goods at rates higher than in other countries in the region.
• A patchwork of regulation supports e-commerce, including laws on electronic signatures and consumer protection online.
• Colombia’s large informal economy is a broad structural constraint to expanding online transaction. For instance, low levels of financial inclusion—such as the lack of bank accounts and use of credit cards—leads to the use of cash on delivery, reducing the efficiency and attractiveness of online commerce for consumers and creating logistical challenges for businesses.
• Colombia’s privacy laws have been modelled after the European Union, placing limits on the ability to transfer personal data outside of Colombia and thereby restricting how companies can use data for business purposes, including international trade.
• Colombia has failed to implement the full set of intellectual property laws needed to grow a digital economy, including intermediary liability protection.
• Access to capital, particularly for startups, is limited; regulations restrict the capacity for innovative financing options such as crowdfunding; and high levels of market concentration in the financial sector stifles innovation.
• Colombia lacks the skills needed to build a digital economy, including in information technology but also lacks the skills needed in different economic sectors to take advantage of the opportunities of the internet and data. The Colombian education system, while improving, is not addressing this challenge, and in the short term Colombia is having trouble attracting overseas talent.
• Regional disparities still exist with low levels of capacity in many government departments to promote digital technology.

Given these challenges, this paper proposes a comprehensive range of policy reforms. The main ones are as follows:

Expand internet access and reduce costs

• Expand internet access, particularly for micro, small, and medium enterprises (M-SMEs).
• Increase competition in Colombia, including in the telecommunications sector, which will require better enforcement of competition laws and clarification of regulatory jurisdiction between the Superintendency of Industry and Commerce and Communications Regulation Commission. This includes avoiding regulating internet platforms in ways that would limit competition.
• Consider building another internet exchange point to reduce cost and latency.
• Consider removing the 16 percent value-added tax (VAT) on smart phones and the 4 percent tax on mobile services.

Improve use of digital services

• Educate business and government about new digital services such as cloud computing.
• Avoid data localization laws that would raise the costs of digital services for the economy.

Strengthen Colombia’s digital commerce environment

• Build infrastructure to facilitate the movement of goods within Colombia and international trade.
• Update the regulatory environment, including laws on digital signatures and protection of consumers for online transactions.
• Develop mechanisms to improve trust in online commerce, such as trust marks.
• Review Colombia’s application of its privacy law and its impact on digital commerce, including how to obtain consent for processing personal data and the conditions under which personal data can be transferred out of Colombia.
• The requirement to register databases should be repealed or made more flexible to better reflect how business uses and maintains such information.
• Ensure a balanced set of intellectual property laws, including implementation of intermediary liability protection and balanced use of copyright protection, which should be combined with more effective enforcement of existing intellectual property laws to address online piracy.

Expand access to financial services and capital

Greater competition in the financial sector and lighter-touch regulation could unleash innovation and improve access to capital.

• Greater competition in the financial sector and lighter-touch regulation could unleash innovation and improve access to capital. This could require more bank licenses and lows fees for small clients.
• The regulation that limits companies to collecting finance from more than 19 people should be repealed as it is a barrier to crowdfunding.
• Increase the usury rate, which should increase financing available for higher risk (often small and medium enterprises) business.
• There should be more creative use of government funds and innovative financing to reduce risk and crowd-in private finance into supporting tech startups.

Develop a digital trade policy

As outlined in the report, the implications of the global internet and data flows for digital trade requires government trade policy to be aimed at maximizing these opportunities. This should include the following:

• Address regulatory barriers, such as the need for exchange declaration that hinder the ability for online platforms to process international payments and the Central Bank restriction on paying for imports in a foreign currency.
• Raise the de minimus duty above its current level of $200.
• Join the Trans-Pacific Partnership at the earliest opportunity.
• Improve customs administration to reduce the time it takes to move goods across the border. Colombia has made progress digitizing this process, but gaps remain. The country should also consider joining the World Trade Organization Trade Facilitation Agreement.
• Reduce barriers to imports of digital services.

Strengthen Colombia’s human capital

• Work with all levels of government and business to map Colombia’s skills needs for a digital Colombia, and assess the capacity of the education system to meet these needs over time.
• Align training with a skills maps and develop centers of excellence for each core area of expertise in the university system.
• Engage business in the design and teaching of courses.
• Expand programs for students to study overseas with a focus on getting access to the key skills Colombia needs to build a digital economy.

Maximize government use of the internet and data

As outlined in the paper, this has three components—improving services design and delivery; expanding democracy and building trust; and supporting growth of a digital Colombia. While the government has made significant progress here, additional steps could include:

• Expand Crystal Urn to make it interactive in real time and allow use of mobile phones or texting messaging.
• Use the internet and data to improve government responses to natural emergencies.
• Collect data to better design government services and target delivery to where need is highest, which could include giving citizens scope to contribute to design of government services using social networks.
• Support development of apps that increase government awareness of local issues and improve ability to respond, such as reporting crime and identifying where road repairs are needed.
• Improve access to government data and strengthen the capacity of regions to use government data to design solutions to local challenges in areas from health to education.
• Use the government procurement process to drive demand for local digital content and to align digital standards, e.g., online health apps.