The US Council of Economic Advisers released their Annual Report. In this Report, the advisors focus on the Digital Trade, Assets and the competition in Digital Markets.
Thanks for sharing the Report by G. Petropoulos and E. Brynjolfsson from MIT Technology Review.
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Digital Trade
The Report demonstrated that the pandemic was deemed to be the motivation of the growth of digital trade. In absence of the standardisation, it distinguished digital trade into three conceptual categories: (i) traditional e-commerce, (ii) online services, (iii) data transactions, including the empowerment to the AI tools. The cross-border data flows have increased by a compound annual growth rate of 45% between 2010 and 2019 and by about 40% between 2019 and 2021. The “potentially information & communications technology-enabled” services have grown strongly over time. Their real exports and imports escalated at an average annual rate of 7.0 – 8.5% respectively between 1999 and 2021. The Report addressed the absence of a sharp increase in regulatory hurdles. Thus, it maintains the digital trade poised for further dramatic increases of digital trade services.
Competition law in Digital Markets
Regulators must now face the challenge to deliver all the benefits of competition, e.g., innovation, privacy, low prices, in a setting where economic factors may drive the market toward fewer competitors. Thus, they seek to lower barriers to entry and refrain a dominant firm from exploiting its power. The Report also mentioned its concern of misuse of consumer data and collusion by pricing algorithms. It also pointed out several practical issues. For example, the network effects (i.e., the messaging services may be more useful for users because they have more of them) create a competitive moat.
It is challenging to preserve competition in digital markets due to the provision of free goods and services with no monetary price (i.e., consumers pay for the “free” services by their privacy through ads or surveys mediums). To demonstrate anticompetitive harm, it may require alternative measures rather than prices. Furthermore, according to the Report, the dominant firms in one market could use this position to gain market power in or dominate adjacent markets. Therefore, it is necessary to adapt the competition regulation and enforcement to changes brought on by the digital revolution, create digital markets that work for everyone and allow them to share their potential.
Digital Assets
The Report defined Digital Assets as “electronic representations of value and operate as part of a complex and interconnected digital ecosystem”. Then, it reviewed the potential benefits of crypto assets as a main subset of digital assets. It uses cryptographic techniques, distributed ledger technology (DLT) – which still has some limitations, and excludes central bank digital currencies. Despite providing a trusted clever solution, crypto assets currently do not offer widespread economic benefits. They are largely speculative investment vehicles and are not an effective alternative to fiat currency. It is risky to use them as payment instruments. The Report also discussed the feasibility of introducing a central bank digital currency as a digital form of money and the FedNow instant payment system.
Source: https://www.whitehouse.gov/wp-content/uploads/2023/03/ERP-2023.pdf
https://www.technologyreview.com/2021/06/10/1026008/the-coming-productivity-boom/
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https://www.astraiagear.com/2023/03/20/eapil-position-on-law-application-to…/