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Embracing Digital Trade for Global Development: A Preview of E-Commerce at the WTO Ministerial

· December 7, 2017

Next week, the World Trade Organization (WTO) will convene for the 11th Ministerial Conference (MC11) in Buenos Aires. Over three days, the 164 member countries of the WTO will meet to discuss matters under multilateral trade agreements and current policies. With multiple proposals offered on e-commerce specifically, the delegates at MC11 will certainly have plenty to discuss. It is promising that a number of these proposals embrace the potential of using digital trade to advance sustainable development goals.

This post provides a short preview of some of the e-commerce proposals at the upcoming Ministerial (note that this post uses “e-commerce” and “digital trade” interchangeably) and assesses the potential of digital trade to reshape the development agenda.

Background of E-Commerce at the WTO

E-commerce has long been a feature of the World Trade Organization. The 2nd Ministerial Conference in 1998 produced the Declaration of Global Electronic Commerce which called for (1) the establishment of a work programme on e-commerce and (2) a moratorium on customs duties on electronic transmission (which has been renewed at each subsequent ministerial). Four WTO bodies currently carry out the e-commerce work programme – the Council for Trade in Services, the Council for Trade in Goods, the Council for Trade Related Intellectual Property, and the Committee on Trade and Development. Since the 2015 WTO Ministerial in Nairobi, the work programme has conducted periodic meetings to discuss digital trade issues (outlined here).

The WTO also, of course, plays a role in the general administration of world trade through international agreements and dispute resolution. Existing WTO agreements – the General Agreement on Tariffs and Trade, the General Agreement on Trade in Services, the Agreement on Trade-Related Aspects of Intellectual Property Rights, and the Information Technology Agreement – all have possible implications for digital trade including cross-border data flows, market access for digital services, copyright, and competition.

As digital trade issues become a critical part of the discussion at the WTO and as digital chapters are increasingly adopted in regional free trade agreements, some members argue that the WTO must now do more to address digital trade issues. Leading up to the Ministerial, members noted that limited work has been accomplished under the current work programme.

Developing countries in particular have raised their voices and taken on strong leadership roles in the discussion, identifying a number of ways to use digital services to open up new opportunities for economic growth.

E-Commerce Proposals for MC11

A large number of countries have offered up proposals for positive steps that the WTO could take on digital trade. Some countries simply would like to obtain clarification on how existing WTO rules apply to issues such as cross-border delivery of data services. Other countries would like to kick off negotiations in order to create new rules on digital trade.

One common thread that runs through almost all of the proposals is a recognition that small and ‘micro’ businesses have the most to gain from broader access to the tools of digital trade. Many proposals call for the creation of a dedicated e-commerce working group in which to discuss these issues. Most members are also seeking to renew the moratorium on duties on electronic transmissions until the next meeting, although India’s proposal would make this renewal subject to other conditions.

It has traditionally been difficult to achieve consensus on how to move forward with a new plan for e-commerce. Prior efforts to begin negotiations on digital trade rules at previous ministerials were unsuccessful. Disagreement persists among members on the path forward including on the relation of the work to other development initiatives such as the Doha Development Agenda. Yet when considering these proposals as a whole, there is clearly more agreement than disagreement on the potential benefits of digital trade rules, both from developed and from developing countries:

●      United States: The U.S. offered a “non-paper” in 2016 that did not advance specific negotiation proposals, but rather outlined “examples of positive contributions to a flourishing digital economy.” Examples included prohibiting digital customs duties, securing basic non-discrimination principles, enabling cross-border data flows, promoting a free and open Internet, preventing localization barriers, safeguarding network competition, and preserving market-driven standardization and global interoperability, among others.

●      Japan: The draft proposal would establish a working group on e-commerce which would conduct an evaluation on whether clarification or strengthening of the existing WTO rules is necessary.

●      Joint Proposal from Australia, Canada, Chile, Colombia, the EU, South Korea, Mexico, Montenegro, Norway, Paraguay, Peru, and Ukraine: The proposal would establish a working party on e-commerce that would conduct preparations for and carry out negotiations on trade-related aspects of electronic commerce on the basis of proposals by members.

●      Costa Rica: The draft proposal is to create an “E-Commerce for Development Agenda.” The proposed Agenda includes goals such as reducing the digital divide, facilitating trade through simplifying customs procedures for exports to developed countries, and encouraging financial tech and facilitating mobile payment services. It also seeks to facilitate a regulatory environment to open up markets for small businesses.

●      Russia: The draft proposal would establish an e-commerce working group dedicated to a continuation of issues pursuant to the work programme. Topics include examining the application of current rules to e-commerce and identify any gaps in current trade rules, identify existing barriers, trade facilitation measures, and intellectual property rights.

The number of proposals highlight the increasing importance of ensuring a trading system that adequately promotes digital commerce. Fair rules that facilitate digital trade while protecting users — such as cross-border data flows, localization prohibitions, and balanced approaches to copyright — are essential to the growth of the digital economy.

Benefits of Digital Trade to Development Goals

Among the proposals on the table, there is a new positive trend from developing and least developed countries who are taking on strong leadership roles in the discussion and embracing the benefits of digital trade. This is reflective of a growing consensus around the benefits of digital trade for countries at all stages of development.

The Friends of E-commerce for Development (FEDs) — comprising Argentina, Chile, Colombia, Costa Rica, Kenya, Mexico, Nigeria, Pakistan, Sri Lanka, and Uruguay — launched this year and is working to “advanc[e] the discussion on the link between e-commerce, trade and development,” noting that e-commerce is a tool to drive growth and narrow the digital divide. Costa Rica’s proposal discussed above for an “E-Commerce for Development Agenda” also has many promising aspects. Exporters in both established and emerging markets are able to expand and find new customers, exporting new services and engaging in global commerce at little cost to entry or barriers.

However, not all are convinced. Notably, the African Group suggests that new trade rules might restrict a country’s ability to regulate e-commerce within their own borders. Some civil society groups have also argued to delay negotiations on dedicated trade rules. Previous WTO sessions indicate that some members of the African Group may be skeptical of the benefits of cross-border data services within developing markets. These criticisms ignore or downplay many of the potential long-term benefits of the Internet for sustainable and inclusive development.

In fact, digital trade and Internet-enabled commerce are key tools to be championed in developing areas to allow access into the international market and facilitate the creation and growth of small and medium enterprises. As reports show, exports increase with the adoption of Internet services. The Internet makes it easier for countries to access international markets. It is undisputed that more is needed to address the digital divide and promote Internet deployment around the globe. However, these goals can be accomplished in tandem with removing digital trade barriers. Indeed, removing digital barriers can help enable access to services that make it easier for users to create, share, and find locally relevant content — which drives greater local demand for Internet access and higher investment in Internet infrastructure. For example, the availability of a wide array of apps in sub-Saharan Africa is predicted to drive an increase in mobile broadband connections from 28 percent in 2015 to 60 percent in 2020.

WTO Director General Azevedo recently praised the benefits of digital trade, observing that the international community can leverage the potential of e-commerce to ensure more people can join global trade flows. In addition to expanding market access, proliferation of global digital services is a tool for expanding free expression. As scholar Anupam Chander has put it, “digital trade is more than access to markets: it is about access to information.”

While the 11th Ministerial may or may not be the landmark moment for e-commerce that some predict, it is very encouraging to see digital trade at the forefront of the international trading community and to see wide recognition of its ability to further economic development around the world.

Digital Trade

Companies rely on clear, predictable rules that facilitate digital trade to export their products and services around the world. These rules include balancing the competing interests between encouraging investment and enabling information access; promoting the free flow of information online; and maintaining balanced intermediary liability regimes.