G20 performance on the digital economy

Low binding language correlates with high compliance when it comes to the G20’s digital economy commitments – an essential finding as leaders must do more to keep up with the rapid pace of digital innovation

When G20 leaders meet for the 2020 Riyadh Summit, they will discuss the rapidly evolving digital economy, employment and education in the digital age, and the role of digital technologies in fighting COVID-19. Saudi Arabia’s presidency has focused on harnessing digital technologies to realise the emerging digital opportunities for all, by identifying new avenues to improve standards of living through human-centric, data-driven and evidence-based policy, to increase competitiveness and to develop high-quality jobs. G20 leaders will likely emphasise the role of connectivity, digital technologies and policies in responding to the pandemic and enhancing their ability to prevent and mitigate future crises.

Conclusions

G20 leaders first referred to the ‘digital economy’ at the 2013 St Petersburg Summit, to address the growth of online transactions and existing gaps in the international taxation framework, which includes information and communications technologies. However, they first acknowledged the opportunity presented by the digitalisation of the economy at the 2008 Washington Summit, dedicating 88 words (2%) to the subject. They recognised the digital economy required strengthening the international financial regulatory system at the 2009 Pittsburgh Summit, dedicating 289 words (3%). Little attention was paid at the 2010 Toronto Summit with 229 (2%) words, the 2011 Cannes Summit with 372 words (3%), the 2012 Los Cabos Summit with 169 words (1%), the 2013 St Petersburg Summit with 760 words (3%) and the 2015 Antalya Summit with 299 words (2%). It jumped to 3,042 words (19%) at the 2016 Hangzhou Summit, when the G20 acknowledged that the digital economy and innovation were key drivers of economic growth. It remained high with 5,029 words (14%) at the 2017 Hamburg Summit, 1,420 words (17%) at the 2018 Buenos Aires Summit and 1,265 words (19%) at the 2019 Osaka Summit.

Commitments

Between 2015 and 2019, the G20 made 94 collective, politically binding, future-oriented commitments on the digital economy, or 0.35% of the total 2,668 commitments on all subjects since 2008. The first commitments on the digital economy were two (1%) made at the 2015 Antalya Summit. The 2016 Hangzhou Summit made 48 commitments (23%), the most made to date, followed by 27 commitments (5%) at the 2017 Hamburg Summit. The 2018 Buenos Aires Summit decreased to 11 commitments (9%), followed by the 2019 Osaka Summit with just six (4%).

Compliance

The G20 Research Group has assessed 10 of the 94 commitments for compliance, and found average compliance of 69%, close to the 71% compliance on all issues. The one commitment assessed from the 2015 Antalya Summit had 55% compliance. Six commitments from the 2016 Hangzhou Summit averaged 65%. These scores contrast with the 95% compliance with the commitment at the 2017 Hamburg Summit. Two commitments assessed from the 2018 Buenos Aires Summit averaged 74%.

Causes and corrections

Digital innovation continues to outpace policymakers’ work, evolving faster than regulation can be implemented. Although G20 digital compliance has been on par with its overall average, there is a substantial and immediate need for more robust commitments on the digital economy, and for fulfilling those commitments. G20 leaders can implement several low-cost accountability measures under their direct control to do so.

One measure is to use less binding language in the commitment. Of the 10 assessed commitments, three had low binding language and seven had high binding language. There is a correlation between low binding language and high compliance.

Another measure is to increase the number of words dedicated to the subject in the summit documents. Summits with the highest compliance averaged 85% and had a higher total of 6,449 dedicated words. Summits with the lowest compliance scores averaged 60%, with only 3,341 words. More words on this issue correlates with higher compliance.

The G20 can therefore improve its digital economy compliance by outlining clear expectations in less binding language to highlight that the commitments should be realised.

The leaders should also increase the number of words and commitments they make on the digital economy.

Finally, G20 leaders should act to keep up with the rapid pace of digital innovation by reviewing current trends and innovations in digitalisation, to identify areas requiring regulation and policy change.