In digital trade talks, the voices of least developed countries are missing

The COVID-19 pandemic forced many people and businesses to work remotely, accelerating the trend toward digital trade and demonstrating its importance to the global economy. Yet developing countries have lagged behind advanced economies in harnessing the power of digital technology and risk missing out on its increasingly important economic benefits. That is why the World Bank has established a pilot Digital Advisory and Trade Assistance (DATA) fund to help developing countries adopt policies and regulations that enhance trust in digital markets, make it easier to do business online, and promote their involvement on international governance of digital trade.

Digital trade is a critical aspect of trade and competitiveness for developing countries. Participation in digital trade offers significant economic benefits, including diversification of export markets and products and lowering the costs of trade in goods and services.  Digital trade has also proven to be an effective tool for inclusion. It allows small businesses and those owned by women to reach consumers directly, without going through costly intermediaries. A World Bank survey shows that women-led firms are more likely to be involved in exporting goods and services than those led by men  in 14 of the 18 countries surveyed in the Middle East, South Asia, and Southeast Asia regions.
Figure 1. Digital Trade Regulatory Readiness scores by country income group

Source: Digital Trade Regulatory Readiness database. (World Bank, forthcoming 2023)
 

Unfortunately, regulations governing digital trade in developing countries are far from adequate. As shown in the World Bank’s forthcoming Digital Trade Regulatory Readiness database, essential rules in areas such as personal data protection, online consumer protection, intermediary liability, and the licensing regime for digital firms are often either missing entirely or offer only broad frameworks that lack adequate regulatory solutions for the digital era.

And as global trade in goods and services increasingly incorporates digital technologies, regulations aimed at fostering digital trade are also becoming a central component of trade agreements.  Several international initiatives seek to promote rules that ensure an open and conducive regulatory framework for global digital trade while safeguarding legitimate public policy concerns in areas such as data privacy and consumer protection. Chief among these efforts is a Joint Statement Initiative (JSI) to establish global rules on digital trade under the auspices of the World Trade Organization.  These plurilateral talks have gained traction since their launch in early 2019, and negotiations have advanced substantially.

While differences remain over its specific content, the JSI also suffers from a worrying shortcoming in representation. Among the 87 WTO Members involved in the discussions, only 30 are developing countries, of which just four are Least Developed Countries (LDCs). Many low- and middle-income countries are reluctant to engage in rulemaking in policy areas where their domestic regulation is still to be developed and their trade opportunities remain largely untapped. This group compares poorly with the 154 WTO Members that signed the WTO’s Trade Facilitation Agreement, including all 35 LDC WTO Members.

Recent bilateral and regional trade agreements also include provisions on multiple aspects of digital trade, including requiring the adoption of regulatory tools for remote transactions, promoting trust-enhancing regulation, and advancing rules on the digital trade ecosystem. Nevertheless, except for some countries in East Asia and Latin America, developing countries, and especially LDCs, have rarely been involved in rulemaking on digital trade.

The new DATA Fund aims to help developing countries adopt policies and regulations that will better equip them to take advantage of rapid advances in digital trade.  The DATA Fund will also support capacity building through specialized training for policymakers and stakeholders. The fund is part of the World Bank’s Umbrella Facility for Trade and is currently supported by Australia’s Department of Foreign Affairs and Trade and Switzerland’s State Secretariat for Economic Affairs.

The main focus of the DATA Fund is to contribute to client-facing, results-oriented projects that have a direct impact on developing countries’ ability to benefit from trade in digital services and e-commerce. Areas of “soft infrastructure” covered by the DATA Fund include support to:

• the legal, regulatory, and institutional framework for digital trade
• development and analysis of digital trade statistics
• border management and logistics for e-commerce
• digital skills and entrepreneurship
• fiscal regimes for e-commerce and digital services
• capacity building for policymaking and for international negotiations

The DATA Fund builds on the World Bank’s extensive capacity and engagements on digital trade governance at the country and regional levels. For example, the World Bank has been advising the government of Morocco, as chair for e-commerce negotiations for the African Continental Free Trade Agreement, on paths to advance an e-commerce protocol, both in terms of disciplines as well as flexibility and options for international cooperation. The Bank is also a major source for infrastructure investment that enables digital trade, both related to digital connectivity, as in the case of the Eastern Africa Digital Integration project, and customs procedures and logistics for e-commerce, as captured in the Southern Africa Trade and Connectivity Project.

As part of its capacity building initiatives, the World Bank has also provided training on digital trade governance. Examples include: training for Kenyan officials involved in negotiating bilateral rules with trade partners; helping the central bank of Lao PDR implement data-related provisions under the WTO; and in Albania, the Bank is advising the government on modernizing domestic e-commerce legislation.

As digital trade governance becomes a priority both domestically and internationally, the World Bank and its global partners are joining forces to ensure that developing countries and LDCs can meet the challenges and harness the benefits of digital commerce.