DIGITAL ECONOMY

Slightly more than 20 years after WTO members established the first work programme on e-commerce, digital trade is again on the agenda. In January 2019, 76 members signed the joint statement on the launch of “negotiations on trade-related aspects of electronic commerce”. Analysts of policy making decisions often refer to the concept of a “window of opportunity” as the reason behind a new legislation. This window would open if streams of problems, solutions and political desires to act meet together. This seems to be the case with digital trade.

By Ribagnac Enzo

December 19, 2020

In 2020, purchasing online became ordinary for companies but also individuals, mostly from younger generations. In fact, the COVID-19 pandemic might even have increased this phenomenon while policy makers are trying to rule and support it. 

For instance, on the 15th of December, the European Union introduced a set of measures to update its digital single market. A central point in the debate is the reliability of online marketplaces and ecommerce actors such as Amazon, eBay or Alibaba.

This question is also discussed at the multilateral level. However, regulating such actors of the booming sector of digital trade and cross border ecommerce will have important consequences. In fact, simply defining digital trade and cross border ecommerce is already choosing a side in vivid multilateral negotiations.

The value of e-commerce exchanges is growing, and small and medium-sized enterprises (SMEs) are grasping this opportunity to access new customers and markets. The digitalisation of global trade also significantly increased the speed of trade, and the rate at which a company or individual can reach connected customers.

This phenomenon directly impacts the economy. In 2017, services related to information and communications technologies (ICTs), employed more than a 100 million people around the globe. More and more micro, small and medium-sized enterprises (MSMEs) in least developed countries (LDCs), are able to integrate into global value chains and support their national exports.

However, these fast changes also bring societal and regulatory challenges. Digital divide remains an important factor. Enterprises need access to ICTs and their employees need new competences to face an internationalised competition. Most countries are not well prepared in this respect. Therefore, international rules accommodating these hurdles for integration are necessary to ensure a fair access to new opportunities offered by ICTs.

Discrepancies among national rules will not help digital trade and consumers

Approximately 87% of the members at the United Nations Conference on Trade and Development (UNCTAD) have adopted or are about to adopt rules on online commercial transaction (E-transaction laws). While positive at first sight, the figure masks the underlying discrepancies which challenge the potential of sound international agreements. 

Among them, legal and statistical differences exist between countries and sometimes even continents. 

In fact, around 95% of European and American UNCTAD members have adopted e-transaction laws, versus 60% percent of African members. The discrepancy is even greater concerning consumer protection laws. Only 25% of African members have adopted such legislation.

The lack of protection reduces the trust of online buyers, which de facto reduces the integration of non-regulated countries in global digital trade. Consequently, not fully integrated countries start with a disadvantage based on the lack of experience, knowledge and weight in international negotiations. Finally, important discrepancies will slow down the process of multilateral legislations due to the important efforts that will need to be made to apply high standards in countries not yet regulated. 

On the other hand, the different national methods – if any – to measure digital trade, and the lack of harmonised definitions and methodologies, restrain the comparability of figures and the capacity to understand trade dynamics.

For instance, European, and Japanese statistics are considered the most complete. However, the United-States and China – the world’s largest B2C sellers - have very different ways of measuring E-Commerce. While China is one of the only developing economies to publish official detailed statistics on B2B and B2C e-commerce, the United-States’ data remains available only for a limited number of industries.

Commonly, missing statistics restrict a country’s ability to support its position in international negotiations due to a lack of deep analyses and understanding. Besides, different definitions and scopes represent a risk for WTO members to negotiate with different agendas and hinder on-going processes.

Bilateral treaties will hardly lead to solutions in favour of all actors

Cross border e-commerce also plays an increasingly large role in free trade agreements (FTAs) but do not seem to go along with a more harmonized pattern of rules. 

Indeed, e-commerce provisions are contained not only in FTAs among developed countries, but also in FTAs among developing and less developed ones. Studies that evaluate FTAs find that the depth and breadth of e-commerce chapters or provisions are heterogeneous. 

Even in FTAs negotiated by the same member – such as China, the EU and Japan - e-commerce provisions vary significantly. This heterogeneity foreshadows the difficulty in identifying strong commonalities across agreements.

For instance, in 2017, the simple topic of defining e-commerce already showed important heterogeneities. Only a few FTAs included an explicit definition of e-commerce. None of them included the definition agreed under the WTO work programme on e-commerce. 

And the list of provisions with particular heterogeneity is long: technological neutrality, electronic authentication, reliability of intermediary services providers (or information society providers as named in EU legislations), etc. 

On the bright side, an important WTO report published in 2017 underlines the existence of “hubs”, in which various groups of countries, parties to FTAs, reached common positions on a majority of topics related to e-commerce. 

Looking for a “window of opportunity” at the WTO

Slightly more than 20 years after WTO members established the first work programme on e-commerce, digital trade is again on the agenda. In January 2019, 76 members signed the joint statement on the launch of “negotiations on trade-related aspects of electronic commerce”.

Analysts of policy making decisions often refer to the concept of a “window of opportunity” as the reason behind a new legislation. This window would open if streams of problems, solutions and political desires to act meet together. This seems to be the case with digital trade.

On the problem stream, the digital divide and the difficulties of developing countries has been underlined. In addition, the COVID-19 crisis has acted as a “focusing event”, forcing actors to look for solutions to lessen economic consequences.

On the solution side, a multilateral frame is presented as a solution through cooperation and support mechanisms. It is not a coincidence that the joint statement specifically underlines the desire to “take into account the unique opportunities and challenges” of developing countries. In addition, stakeholders such as Alibaba, Amazon, or Microsoft have presented – to public authorities and sometimes at the WTO - various digital solutions to support MSMEs and fight the consequences of COVID-19.

Lastly, the politics stream is two sided in this case. Both international organisations (IOs) and members of IOs should have a desire for a breakthrough. Naturally net exporters of digital services and well-developed digital markets such as the US, the EU and China support a multilateral framework. Moreover, a large number of developing countries with diverging interests signed the joint statement to negotiate a multilateral solution.

On the second side of this political stream, the upcoming appointment of a new WTO Director-General is crucial. For now, two candidates remain: Nigerian Ngonzi Okonjo, and South-Korean Yoo Myung-hee. This could potentially be a second wind for an IO already pushing for a multilateral solution and to finalise this window of opportunity.

If this window ultimately opens, the range of economic consequences will be large. Not only in digital services, but potentially in a large number of industrial sectors of production. For over 20 years, this topic has been on the agenda, while bilateral agreements created fragmented sets of rules. A multilateral solution could be used to facilitate access to ICTs around the globe and in the meantime ensure fair access to these new opportunities worldwide.