Digital trade plays an increasingly important role in modern economies and world markets.
Yet, little is known about the political economy of digital trade policy. Why do some countries pursue liberal and others protectionist digital trade policies? We argue that countries’ geopolitical alignment and domestic institutions are the key determinants of digital trade policies.
Drawing on contract and institutional economics and sociological institutionalism, in this seminar, we will theorise that democratic, high-quality legal and regulatory institutions are crucial to digital trade flows and predispose countries to liberal digital trade policy. Geopolitics, in turn, promotes policy learning and diffusion among aligned countries, leading to policy convergence.
We will present quantitative methods and two in-depth case studies of Argentina and Tunisia to analyse the link between institutions, geopolitics, and digital trade policies. We will then further show that economic interests, as rooted in national factor endowments and openness to foreign direct investment, are not associated with digital trade policies. The findings suggest that (1) the political economy of digital trade policy differs in important regards from classic trade policy and is in need of IPE research and (2) yield several policy implications to manage the digital transformation and emerging digital world economy.
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