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Virtual school of ig economic issues_2021

Free lesson provided to attendants of Virtual School on Internet Goveranance

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Virtual school of ig economic issues_2021

  1. 1. Virtual School of IG Internet Governance and Economic Issues By Desiree Miloshevic Evans Senior Advisor, Public Policy and International Affairs Afilias 25. 1. 2021
  2. 2. AGENDA 2 How do the Internet and Economy interact? Digital Economy Business models / Who pays for the Internet? Digital Economy Business Competition /Anti-Trust - examples of IG governance as regulation of digital ecosystems Technology Development and Positive Net Value – RFC 5218 The New Economic context of Internet Governance IG Multistakeholder model & important economic negotiations –Digital Trade Overview of Internet Governance Documents mapping Economic issues
  3. 3. The Internet 3
  4. 4. Economics At the most basic level, economics attempts to explain how and why we make the purchasing choices we do. Four key economic concepts— scarcity, supply and demand, costs and benefits, and incentives—can help explain many decisions that humans make. Nov 2, 2020 Source: Investopedia 4
  6. 6. Internet Governance Talking about the effects of the Internet on society. .. In some cases making recommendations about regulations and practices… “Dev + App of shared principles, norms, rules, decision-making procedures that shape the evolution and use of the Internet” … …better practices, and standards ….. and the .lack of those! 6
  7. 7. The Internet and Economics: Protocol Layers 7
  8. 8. 8
  9. 9. Technology development and economy RFC 5218 9 Thaler and Aboba argue: early adoption outweighs the adoption costs
  10. 10. The Internet and Economics 10 (a) internet is the basis of much of our economy, as most activity needs the internet in some fashion, if not directly then at least indirectly. (b) economics drives much of what happens in the internet, e.g., globalisation, consumers search of the globally cheapest producer of goods, etc
  11. 11. Basic types of business models 11 (c) some basic types of business models in the internet, e.g. selling or brokering something, ad-based business models, user-provided content (fb wikipedia etc), and so on.
  12. 12. Business Models X 12
  13. 13. Competition models in the internet 13 (d) competition models in the internet, e.g., with global audiences and reach, typically we get to "winner takes it all" type outcomes. monopolies and the ability of governments to regulate global (not national) businesses
  14. 14. 14 Antitrust laws also referred to as competition laws, are statutes developed by the U.S. government to protect consumers from predatory business practices. They ensure that fair competition exists in an open-market economy. These laws have evolved along with the market, vigilantly guarding against would-be monopolies and disruptions to the productive ebb and flow of competition. Antitrust laws are applied to a wide range of questionable business activities, including but not limited to market allocation, bid rigging, price fixing, and monopolies. If these laws didn't exist, consumers would not benefit from different options or competition in the marketplace. Furthermore, consumers would be forced to pay higher prices and would have access to a limited supply of products and services. ANTITRUST
  15. 15. What do these names have in common Rockefeller Morgan Carnegie 15
  16. 16. Microsoft Antitrust 1998-2001 Microsoft was accused of trying to create a monopoly that led to the collapse of Netscape The company was sued by the Department of Justice in 1998. The judge ruled that Microsoft violated parts of the Sherman Antitrust Act which brought about the company breaking up into two entities. The decision was overturned following the appeal filed by Microsoft 16
  17. 17. 17 In the United States, the federal government and states have launched landmark antitrust lawsuits against Google (GOOGL) and Facebook (FB), directly challenging the dominance of Silicon Valley's top names. The Federal Trade Commission wants to force Facebook to sell Instagram and WhatsApp, Antitrust Cases
  18. 18. 18 ANTITRUST
  19. 19. 19 “Antitrust cases take too long to resolve. DSA/DMA could be good remedies for Anti-trust behaviour” (Quote: Clifford Chance, Brussels) Digital Services Act released by the European Parliament “Enforcement and cooperation between Member States: E-Commerce” EU and Antitrust
  20. 20. The New Economic Context of IG 20 Funding Aim User requirements Institutions Collaborative Mechanisms Multi-stakeholder environment Market Self-Regulation Market Evaluations
  21. 21. The New Economic Context of Internet governance 21 A lesson learned from financial sector is that lack of multi-stakeholder environment for input and dialogue as a transparency mechanism was the missing link that can improve market self-regulation and evaluation processes.”
  22. 22. IG economic trends within institutions? CCAOI : ” The United Nations Conference on Trade and Development (UNCTAD), the International Trade Centre (ITC) and the World Trade Organisation (WTO) launched the SDG Trade Monitor to track and provide data on global trade’s contribution to the UN sustainable development goals (SDGs). The Middle East announced their Ten Digital Economy Guidelines for a successful digital economy. The organisations which embraced these guidelines are the Union of Arab Banks (UAB), the Union of Arab Chambers (UAC), International Network for SMEs (INSME), and the Global Coalition for Efficient Logistics (GCEL).” 22
  23. 23. Internet governance economic issues 23 E-commerce, Taxation, Currency Trade Agreements
  24. 24. Digital Trade 2021 There are three big issues on the table: Digital trade Digital taxation Sustainable development In 1998 the World Trade Organisation (WTO) agreed on a so-called “eCommerce Moratorium,” which allowed a free flow of data across borders. The moratorium helped to make internationally traded digital services an engine of economic growth. Today, digital trade is a key element of the global economy. For years there is a debate in the WTO to transit the moratorium into a legal instrument. On the other hand, some governments want to terminate the moratorium to get a free hand for digital services duties to bolster national budgets. In 2019, Japan — as Chair of the G20 — proposed a “Data Free Flow with Trust” (DFFT) initiative. The DFFT should have been discussed at the WTO Ministerial Conference in Summer 2020. But Corona changed the timetable and the conference is now scheduled for Summer 2021. 24
  25. 25. Digital Trade 2021 A similar motivation — to get new income sources — is behind the controversy around digital taxation. In recent years, some countries did introduce national digital taxes and risked tax wars, mainly with the US. Already in 2015, the OECD started negotiations on a new global tax regime where taxes are not collected where a corporation is headquartered, but where it does business. The G20/OECD BEPS Group, which includes 137 countries, now finalizes its proposal with a so-called “Two Pillar Approach.” . 25
  26. 26. Digital Trade 2021 Pillar One would establish new rules on where tax should be paid, that is, to ensure that digital intensive multinational enterprises (as Amazon and Facebook or Alibaba and Tencent) pay taxes where they conduct sustained and significant business. Pillar Two introduces a minimum tax to avoid the search for “tax heavens.” The US under Trump did leave the negotiations in June 2020. The EU made clear that if there is no global agreement until mid-2021, they will introduce a “European Digital Tax.” A warning came from OECD General Secretary Angel Gurria: “Failure would risk tax wars turning into trade wars at a time when the global economy is already suffering enormously.” At stake are around $200 billion in taxes annually — a big challenge. 26
  27. 27. WTO E-commerce 27 The work programme will involve the relevant WorldTrade Organization ("WTO") bodies, take into account the economic, financial, and development needs of developing countries, and recognize that work is also being undertaken in other international fora. The General Council should produce a report on the progress of the work programme and any recommendations for action to be submitted at our third session. Without prejudice to the outcome of the work programme or the rights and obligations of Members under the WTO Agreements, _________
  28. 28. WTO E-commerce 28 we also declare that Members will continue their current practice of not imposing customs duties on electronic transmissions. When reporting to our third session, the General Council will review this declaration, the extension of which will be decided by consensus, taking into account the progress of the work programme. _________
  29. 29. Other IG Documents World Trade Organization - On Global Electronic Commerce WSIS Tunis Agenda Report of the WGIG June 2005, The NETmundial Multistakeholder Statement April 2014, The UN CSTD Mapping of international Internet public policy issues (May 2015), Secretary General’s UN Roadmap for Digital Cooperation 2020 “Build an inclusive Digital Economy and Society”, EU call for members digital cooperation - Digital Service Act 2020, accountable-online-environment_en#documents 29
  30. 30. Books/ Papers to read “The Internet Trap” 2018 How Digital Economy Builds Monopolies and undermines Democracy Matthew Hindman BRETT M. FRISCHMAN INFRASTRUCTURE: The Social Value of Shared Resources OECD Principles for Internet Policy-making - June 2011 Dec 2020, OECD Paper Taking Ecosystems Competition Seriously in the Digital Economy– Note by Nicolas Petit and David J. Teece Hearing on Competition Economics of Digital Ecosystems ument/DAF/COMP/WD(2 020)90/en/pdf Classics: “The Wealth of Networks” Y. Benkler 2006 T. Wu Network Neutrality, broadband discrimination 2003 Shapiro C. and Varian H.R. Information rules a strategic guide to the network economy. 1998 30