Digitalization and E-Commerce: New prospects for tackling inequality? (IISD Trade and Sustainability Hub)

Event report

As the COVID-19 pandemic has highlighted the importance of e-commerce, digital divides and inequality have become increasingly urgent issues in the developing world. Panellists of this round table came together to unmask the phenomenon of these divisions, the causes behind them, and to discuss potential solutions. They have concluded that development policies, cross-ministry collaboration, and regulatory frameworks need to be put in place. 

Thanks to the digital revolution, e-commerce has leapt onto the centre stage of global economic activities. Despite the promises that digitalisation will bring down physical barriers, digital divides in terms of access and skills still stand tall, especially in developing countries. 

Mr Torbjorn Fredriksson (Head, E-commerce and Digital Economy Branch, UN Conference on Trade and Development (UNCTAD)) highlighted that COVID-19 has accelerated the use of digital technologies around the world, including data sharing in the health sector, the development of new contact tracing apps and remote software, and e-commerce activities. The pandemic boosted dataflows, as global internet bandwidth use rose by 35% in 2020, and increased online purchases from 53% in 2019 to 60% in 2021. 

However, the benefits of these activities are not equally felt everywhere in the world. Fredriksson stated that the biggest online platforms (Alibaba, Amazon, etc.) benefit the most, compared to smaller platforms. Digital and data divides remain stark, alongside education and skill levels, and gender and infrastructure gaps. These gaps are especially visible in developing and low-income countries as they lack institutional capacities such as legal and regulatory frameworks, and strong representation in global policy debates. 

Ms Maríla Maciel (Digital Policy Senior Researcher, Diplo) explained that the value of raw data can only be extracted when data is aggregated and analysed, generating information, knowledge, and wisdom. In this sense, the data economy fits into the broader context of the ‘information economy’ and ‘knowledge economy’, which were buzzwords in the early 2000s. Access to data is a precondition for companies to have access to the knowledge necessary to produce competitive digital services. It is important, therefore, that nascent digital industries in developing countries do not become caught in a ‘data poverty trap’, importing knowledge-based digital services without acquiring the conditions to economically exploit the data generated at the national level. 

Tracing the road of the EU’s approach to the data economy, Maciel identified a shift of emphasis from copyright protection of databases to data sharing of both industrial and public data. The evolution of EU policies, especially with the holistic approach adopted by the EU data strategy, could provide lessons to other regions that wish to create digital single markets, such as Africa.

Ms Jamie Macleod (Trade Policy Consultant; Research Assistant, London School of Economics and Political Science) zoomed in on the African continent to examine the digital inequality phenomenon and its causes. The biggest digital divide, in terms of the percentage of individuals using the internet, happens across urban and rural areas, with a whopping 35% difference. Other divides include gender and age gaps. The number of digital platforms differs across countries as well, with francophone countries lagging behind anglophone ones. One key reason, according to Macleod, is the relatively high cost of the internet, which is substantially above the UN Broadband Commission for Sustainable Development’s target of 1 GB for less than 2% of monthly GNI per capita. 

This issue could be attributed to the uncompetitive and monopolistic nature of a large share of African telecom markets. Almost half of African markets are not regulated by a competition authority. Another reason is that entry-level handsets, which are one of the most important ways for individuals to access the internet, remain relatively expensive. More Africans have the internet available to them than a smartphone that could access the internet. Lastly, proportionately few individuals have financial accounts for online payments, and those who do tend to be well-salaried, more educated, and male. 

These divides call for policy actions and e-commerce regulations that aim to leave no one behind. Maciel recalled the importance of proposals on capacity building and technical assistance, advanced by developing countries in the context of the WTO Joint Statement Initiative (JSI) on e-commerce. Fredriksson highlighted cross-ministry cooperation, as the issue calls for better infrastructure, education, economic innovation, and improvements in many other domains. 

Panellists also discussed the potential of an African digital single market, especially through the African Continental Free Trade Area (AfCFTA). Nevertheless, policy provisions and frameworks would take time to build, and Macleod explained that progress in this regard has been delayed. He proposed that policymakers could prioritise work in two dimensions: (a) working on the negotiation process of policymaking, making it adaptive, appropriate, consultative, transparent, proportionate, and efficient, and (b) work on the content of policies, be it ICT infrastructure, digital platforms, online payments, legal frameworks, or upskilling. 

The main foundations remain to be more affordable and better internet connections, the availability of digital payment methods, and digital literacy development. Just as the EU took steps to foster the data economy, the AfCFTA needs to further regulatory harmonisation, build trust through online consumer protection, strengthen competition policies, and increase coordination in technical assistance. 

By Yung-Hsuan Wu