that do not have a complementary domestic environment conducive to using ICTs will be marginalized from the globalized production process and global economy, at increasingly great cost to their citizens. However, for the full range of productivity benefits associated with the New Economy to accrue, domestic use and diffusion of networked ICTs is key. How does global engagement through trade and cross-border investment facilitate domestic use and diffusion? Costly technology products (such as PCs), high and metered telecommunication rates, inefficient financial systems, and cumbersome delivery systems are primary obstacles to a New Economy based on information and transformation.
These areas are ones where domestic policy reforms can be complemented by a strategy of international openness. 14 APEC members were the first to recognize that liberalization of trade and cross-border investment in technology products could jump-start productivity growth at home. The Information Technology Agreement is the exemplar of the role that APEC can play in pushing to the multilateral forum of the World Trade Organization an agreement that has both domestic and international consequences. Communications systems simply are critical and evidence shows that foreign direct investment can play a very important role in improving the competitive climate in even the smallest economies.
15 Going beyond the Basic Telecoms Agreement in the context of an overall new Round of multilateral trade negotiations will enable broader access in the domestic marketplace. 16 A supportive financial payments infrastructure is crucial to achieve the cost reductions promised by technology-based commerce. As discussed more completely in the section on banking and financial markets, cross-border liberalization along with appropriate regulation and supervision will help bring international best-practice as well as global technologies to bear to improve the functioning of the domestic financial sector.
Finally, delivery logistics (including customs) round out the set of service infrastructures that are key support structures for the New Economy. Government policies have a direct impact in 14 For a more complete discussion of trade and investment liberalization in the context of the WTO, see Catherine L. Mann and Sarah Cleeland Knight (2000) “Electronic Commerce in the WTO,” in Jeffrey Schott, ed. The WTO After Seattle, Washington DC: Institute for International Economics, and Catherine L. Mann (2000), “Electronic Commerce and the WTO: What’s In IT for the Developing Countries?” World Bank WTO Handbook.
15 See references in section “Privatization, Competition, and Regulation” in Chapter 3, “Infrastructure: Communication Systems” in Global Electronic Commerce , op cit. pp. 50-52. See OECD (2001), LOCAL ACCESS PRICING AND E-COMMERCE Working Party on Telecommunication and Information Services Policies, DSTI/ICCP/TISP(2000)1/FINAL,23 May 2001,. And George R. G. Clarke, “Bridging the Digital Divide: How Enterprise Ownership and Foreign Competition Affect Internet Access in Eastern Europe and Central Asia,” Working Paper 2629, Washington: World Bank, July 2001.
16 For a discussion of what this might entail, see OECD (1999) A REVIEW OF MARKET OPENNESS AND TRADE IN TELECOMMUNICATIONS , Working Party on Telecommunication and Information Services Policies, DSTI/ICCP/TISP(99)5/FINAL, 20 September 1999 - 19-