Global and Regional Impacts of Trade Digitalisation Beyond Trade *

Abstract

Trade digitalisation, or the improvement of international trade processes using digital technologies and digitised data, has become an important priority to accelerate economic integration, as evidenced by the growing number of related provisions included in multilateral and other trade agreements. This study estimates partial and general equilibrium impacts of trade digitalisation using data from the United Nations Trade Digitalization Index (UN TDI) and a structural gravity model. Based on the gravity model estimates, a general equilibrium model is constructed. Counterfactual simulations indicate that global trade increases by nearly 13% when full implementation of the trade digitalisation measures included in the UN TDI is achieved. Real wages also increase by over 3%, and producer prices fall by nearly 4% globally under the full implementation scenario. While the size of impacts varies across regions, the direction of impacts is consistent across all regions, confirming that trade digitalisation offers great opportunities in inducing trade, as well as in increasing wages and reducing costs for consumers. Within Asia and the Pacific, less developed and more geographically isolated economies emerge as the top beneficiaries in terms of potential trade growth, suggesting that trade digitalisation be prioritised as part of their sustainable development plans.

JEL Classification: D50, F13, O14