Developing countries and trade negotiations on e-commerce

Isabelle Durant, Acting Secretary-General of UNCTAD

Over 80 members of the World Trade Organization (WTO) are currently negotiating trade rules on electronic commerce (e-commerce) under the so-called “Joint Statement Initiative (JSI)”. These WTO members seek to make progress in advance of the 12th WTO ministerial conference to be held when conditions so permit.

Digitalization has greatly affected the world of trade in the past two decades with more and more goods and services being sold online.

E-commerce was growing fast even before the COVID-19 pandemic. In 2019, about 1.5 billion people shopped online, an increase of 7% from 2018. The pandemic has further accentuated the shift towards e-commerce as people and businesses have gone online to cope with various lockdown measures and travel restrictions. It is estimated that online shopping as a share of global retail surged from 13% in 2019 to 17% in 2020.

The pandemic has also reminded us of the huge divides that still characterize the world in terms of country readiness to engage in and benefit from e-commerce.

As with in previous technological revolutions, the benefits from digital transformations will be immense, but they will not materialize automatically. The outcome will depend on policies, regulations and measures undertaken at both national and international levels to build the capabilities needed for countries to deal with technological disruptions. Development-friendly e-commerce regulation therefore matters.

Against this background, UNCTAD provides more evidence and analysis that could help developing countries to acquire a better understanding of the development implications of various issues under discussion in the JSI negotiations.

In a new report entitled, What is at stake for developing countries in trade negotiations on e-commerce? The case of the Joint Statement Initiative, we assess various options for harnessing e-commerce for sustainable development. Our hope is that the insights gained would serve to assist developing countries in positioning themselves vis-à-vis the JSI negotiations, as well as e-commerce negotiations in other trade forums, including at the regional level, and in the development of their national e-commerce policies and regulations.

Same goal, different paths

Opinions remain widely divided on how best to regulate e-commerce, especially at the international level. Many developing countries have chosen not to engage in JSI e-commerce negotiations, stating inter alia a preference for first building their regulatory and institutional capacities and safeguarding their policy space to pursue development objectives in this fast-evolving area.

While this is understandable, the possible outcome of the JSI negotiations will likely affect the governance of various dimensions of e-commerce, with implications for all countries, whether they are party to these negotiations or not. One key question that confronts trade negotiators is what negotiated outcome would best enable developing countries – both participants and non-participants – to harness potential benefits of e-commerce for sustainable development.

Multilateral vs “plurilateral” routes

Questions also arise as to whether and how the outcome of the JSI negotiations may be multilateralized.

Defining the JSI outcome as a “plurilateral” agreement is not likely to settle the ambivalence associated with the future e-commerce agreement. Procedurally, incorporating a plurilateral agreement within the WTO framework would require consensus among all WTO members. Moreover, plurilateral approaches should be a temporary journey and not a substitute for multilateralism.

It will also be important to consider how the content and implementation modalities of the possible outcome should be crafted to facilitate greater participation. When it comes to content, the inclusion of certain issues which have yet to reach a certain level of maturity even in domestic policymaking may be challenging for many.

Data challenges

For example, while digital data are increasingly recognized as important economic resource and a key driver of the digital economy, creating and capturing value from digital data has emerged as a central policy challenge.

Policymakers across the globe are considering various approaches for defining categories of data, including to establish ownership of data generated by individuals and communities when using digital platforms and possible compensation for those whose data are being used. Adequate regulation of cross-border data flows will be essential to ensure sustainable development outcomes from the data-driven economy.

But given the impact that privileged access to data can have on the competitiveness of firms, on the overall income distribution and on market concentration, the regulation of data remains complex. It must consider not only the trade dimension but also issues related to national security, human rights (such as the right to privacy) and law enforcement.

This raises concerns among many developing countries as they see the risk of becoming mere providers of raw data to global digital platforms – most of which are based in the United States and China – while having to pay for the digital intelligence produced from those data by the platforms. This would do little to reverse the current trends of rising inequalities. It is very difficult to address all the development dimensions of data through the trade lens, which explains why country positions vary considerably and why broader development policies need to be considered in this context.

What about SDT?

As for the implementation of a JSI outcome, member States will need to consider if special and differential treatment can be applied in a way that makes it possible for developing countries at varying level of e-commerce readiness to assume a higher level of commitments at different speeds.

The report discusses the useful lessons that may be learnt from the scheduling approach used in WTO’s Trade Facilitation Agreement (TFA), which allows parties to take into account individual countries’ implementation capacities, capacity-building support and capacity acquisition.

Old issues applied to a new form of trade

Not all issues addressed in the JSI negotiations are novel. Some concern longstanding challenges that developing countries face in reaping the benefits associated with trade liberalization.

For example, future trade rules on e-commerce could have considerable effects on scarce government revenues for many developing countries. While existing practice has waived customs duties on electronic transmissions, there are concerns that rapid technological advances will increase the number and volume of products that may be transmitted electronically, with adverse effects on customs revenue.

Similarly, in discussing de minimis thresholds to facilitate the e-commerce induced expansion of small, low-value parcels crossing borders, the question is how to strike a balance between reduced government revenues from import duties and taxes, and possible gains to economic agents, including consumers and small businesses. The lack of reliable data makes any assessment of the net effects on developing countries of both the moratorium and different de minimis thresholds values tentative in nature.

Likewise, the regulatory capacity of developing countries would be the key factor that could affect the effectiveness of future disciplines. Many developing countries suffer from lack of national laws regulating, for instance, online consumer protection, electronic transactions, data protection and cybercrime.

As shown by the UNCTAD Cyberlaw Tracker, less than half of the least developed countries have adopted legislation to protect consumers online and to protect data. These regulations are essential in ensuring the validity of contracts and enhancing trust on online transactions.

Many governments are also still considering how best to regulate the access to source codes of software when required for legitimate public policy reasons, which may include transfer of technology. This may however be deemed as an unwelcome regulatory intrusion by operators. In other instances, governments may wish to be able to hold intermediary platforms accountable for illegal or harmful content posted by their users.

How these topics are addressed in future e-commerce rules may have significant consequences for Internet governance and for the digital economy and society more broadly. This also suggests a need to facilitate more interaction between trade negotiators and the Internet community and its stakeholders.

Build e-readiness for sustainable development

For developing countries, irrespective of their participation in the JSI negotiations, formulating national policy and regulatory frameworks to build digital capabilities remains an essential component of a broader national development agenda.

UNCTAD’s e-Trade Readiness assessments done in 27 developing countries show that there are gaping holes in the areas of national strategy, connectivity, skills, logistics, finance, and legal and regulatory environment.

Future e-commerce trade rules should seek to help mobilize more resources for financial and technical assistance to developing countries to strengthen their capabilities to engage in and benefit from e-commerce and the digital economy. International development partners, including UNCTAD, have an important role to play in supporting such national efforts.

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