The framework we are using in international trade is severely outdated, and we must update it to include INTERNET PORTS (online digital-based products and services), besides seaports, airports and land ports. Until we do that, all the conversations around trade gains and deficits will remain unbalanced.
Follow me: If Country A imports physical goods worth $10m from Country B, and Country B imports physical goods worth $30m from Country A, Country A has a trade surplus of $20m, using the current global trade framework.
But look deeper, on services, gaming, banking and software, Country A is importing things valued at $50m from Country B, when Country B records zero from Country A on things which go via Internet ports.
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If we include everything, you can even notice that Country B is the one with a comprehensive trade surplus when you include all “ports”, beyond air, land and sea, to include “internet ports”.
To say that Nigeria has a trade surplus with the US is nonsensical when you know that every major bank in Nigeria runs a correspondent bank partnership with New York banks. In other words, if you look at Nigerian wealth warehoused in those banks, the debate on who is running surplus will not even begin. Add that US banks hold Nigeria’s crede revenue, you will get the big picture that focusing on seaports, airports and landports while neglecting internet ports is not balanced.
Summary
- The US and China need to redefine their relationship in the 21st century, considering the dominance of both countries in global trade.
- Beyond physical goods, services and software play a significant role in international trade, where the US excels and maintains trade surpluses with most countries.
- Traditional trade frameworks focusing solely on physical goods may not accurately reflect the modern economy shaped by digital products and services.
- Nigeria, for example, has a trade surplus with the US in physical goods but a significant trade deficit in services and software.
- When considering all aspects of trade, including services, banking, and software, the US emerges as the leader with comprehensive trade surpluses.
- The importance of including all trade aspects in calculations is emphasized, especially in the context of negotiations between countries.
- The need for updated tools and methodologies to measure total trade balance accurately, considering the impact of modern technology and intangible services.
- Challenges arise when big companies register their businesses in specific countries, affecting how trade balances are perceived and calculated.
- The importance of recognizing the true origins and ownership of companies in international trade negotiations is highlighted, especially in the context of digital services and software.
Context
In the realm of global trade, a paradigm shift is underway as traditional frameworks grapple with the transformative impact of digitalization on economies worldwide. Historically centered on physical goods, international trade is now increasingly shaped by intangible services and software in the 21st century. This evolution necessitates a reevaluation of how we measure trade balances, moving beyond conventional metrics to encompass the full spectrum of economic activities in today’s interconnected world. Recent events, such as trade negotiations between major players like the US and China, underscore the urgency for updated methodologies that accurately capture the complexities of modern trade relationships.
As countries navigate this new landscape, key themes emerge around the significance of services and software in shaping global trade balances. The rise of digital products has not only blurred traditional boundaries but also posed challenges in accurately assessing trade dynamics. Looking ahead, it becomes imperative to consider extensions of these ideas beyond services and software – exploring regulatory hurdles related to intangible assets in trade agreements and envisioning new policies that can effectively address the intricacies of contemporary international commerce. With technology continuing to drive change at an unprecedented pace, nations must adapt their approaches to ensure that their trade policies reflect the evolving nature of global commerce in an increasingly digital age.
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You’re absolutely right the way we measure trade today is stuck in the past. It’s like we’re still counting goods shipped in wooden crates while the world is trading apps, cloud storage, and digital services at lightning speed. The old system just doesn’t see the full picture.
Here’s what I’ve been thinking:
We’re missing something huge data and intellectual property. Right now, if a tech giant in Country B makes billions off ads targeting users in Country A, or trains its AI on their personal data, that doesn’t show up in trade logs. But shouldn’t it? Data is the new oil, and right now, it’s flowing one way without being counted.
A few examples:
– Imagine Country A’s citizens “give” their data to Country B’s apps for free hose companies then turn it into profit. Isn’t that basically an invisible export from Country A?
– Or think about software subscriptions, game purchases, or streaming fees money keeps flowing out, but it’s rarely part of the “trade deficit” conversation.
So what do we do?
1. Call it what it is: Let’s officially add “Internet Ports” to trade accounting digital services and data flows need their own column.
2. Treat data like a resource: If a country’s data is fueling another’s economy, that should count in the trade balance.
3. Fix the rules: Trade deals need to address digital dominance. If one country’s tech giants are vacuuming up value from another, maybe there should be fairer revenue splits or digital tariffs.
Otherwise, we’re fooling ourselves. The numbers might say Country A is “winning” on trade, but in reality, Country B could be taking home way more value just through screens instead of ships.
How do you think we could get big players like the WTO to take this seriously? Any ideas on who’s already pushing for this kind of change?