What can WTO do to facilitate digital trade?

Event report

[Read more session reports from WTO Public Forum 2019]

Mr Shige Zhang (Senior Trade Expert and Acting Head of Trade Facilitation and Market Access, Huawei Technologies) highlighted that e-commerce democratises trade. Anyone can become a trader, anywhere in the world. In this context, the WTO plays a key role in developing the rules that will facilitate the growth of digital trade and mitigate the risks that come along with it. Zhang invited the speakers to share their views on key policy issues and actions that the WTO should prioritise.

Mr Zhang Xiangchen (Permanent Representative and Ambassador of China to the World Trade Organization (WTO)) delivered a keynote speech. He started by highlighting two fields in which the WTO could facilitate e-commerce: the moratorium on customs duties on electronic transmissions and providing aid for trade and capacity building. The moratorium is an important achievement and has contributed to the rapid growth of e-commerce. Nevertheless, with the exponential growth of trade, there is a need to understand the implications of the moratorium, especially for developing members. For the moment, the WTO members should not make the moratorium permanent, but renew it every two years.

Aid for trade and capacity building are important pillars of the WTO. Developing countries need help to improve their capacity to engage in e-commerce discussions. The WTO needs to redouble its effort of these areas and better co-ordinate the contributions that member states provide, especially to least developed countries (LDCs). China encourages developing members to join the open-ended e-commerce plurilateral negotiations taking place at the WTO. Developing countries may not be fully ready to discuss these issues, but these talks provide a learning path to members. Nevertheless, it should be considered that countries need policy space to attain policy objectives, therefore liberalisation needs to be gradual and respect different levels of development.

Ms Lee Tuthill (Counsellor, Division of Trade in Services and Investment, World Trade Organization) highlighted that there are many WTO agreements that already cover digital trade. It is mostly the subtleties of e-commerce that the WTO needs to take into account. The organisation has been exploring these issues for some time without reaching a conclusion. Tuthill reminded the audience that the WTO exists to promote a transparent, predictable, and reliable environment for trade and foreign direct investment. It should continue to do so for digital trade. Currently, the main challenges related to e-commerce discussions are the status of the moratorium on electronic transmissions and the elaboration of broad principles to clarify the relation between the WTO and digital trade. The moratorium is the most pressing issue because the moment to decide on its renewal is approaching with the next WTO Ministerial. For the first time, discussions at the WTO are being dedicated to understanding the practical implications and the scope of the moratorium. This is not a North versus South discussion. Although developing countries rely more on taxation, there are countries all over the world struggling with tax issues such as de minimis and VAT. These topics are being discussed, for example, in the Organization for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF).

The discussion on trade principles includes issues such as e-payment, restrictions on data flows, data localisation, and paperless trade. In these areas, there are key differences among WTO members with regard to how norms should look like. A common understanding of what is considered ‘best practice’ on e-commerce regulatory issues has not yet emerged. Governments are still on a learning curve and feeling their way forward.

Mr Sean Doherty (Head, International Trade & Investment, World Economic Forum) singled out three elements that are key for trade: e-commerce, data flows, and trade technology. The latter is very important and refers to technology that makes trade easier. These technologies impact the areas that go beyond e-commerce, such as new technologies for delivering parcels, and advanced technologies for production. These technologies will have a massive impact on all forms of trade.

E-commerce is still constrained at the global level by deficient logistics, lack of consumer trust, of digital payment capabilities, and of an enabling business environment for small businesses. There is also considerable international disagreement on data flows and data sharing. In these areas, there are the things that can be done domestically, such as making sure that rules that deal with data flows are transparent and non-discriminatory. Moreover, non-personal data should be allowed to flow more easily.

Mr Edwin Vermulst (Partner, VVGB Law firm) summarised the results of a research on discriminatory trade measures. According to him, some of the most restrictive measures are policies on data (such as data localisation and privacy protection), discriminatory rules on online sales, local context requirements, and forced disclosure of source code or algorithms. Vermulst opined that the best way forward for e-commerce discussions would be the approval of a new plurilateral agreement negotiated at the WTO. The second-best solution would be to add new annexes in the General Agreement on Trade in Services (GATS) to cover aspects related to e-commerce. The third option would be the negotiation of e-commerce issues in free trade agreements (FTAs).

Ms Marion Jansen (Director and Chief Economist, International Trade Centre ITC) explained that ITC looks at digital trade from the point of view of small and medium-sized enterprises (SMEs). For SMEs to engage in cross-border digital trade, they need to follow a multi-step process: go online, transact e-payments internationally, successfully get their goods through the border, deal with consumers abroad, and interact with other players, such as platforms. Platforms and other large companies are gatekeepers to the online environment. They control the marketplace, the payment ecosystem, and the delivery services. There is an asymmetry of power between SMEs and these large players, which creates issues from a competition policy standpoint.

Regulatory issues cut across all the steps necessary for SMEs conduct business. If national regulations are not convergent, costs for doing business increase. Traditionally we think of regulation as an additional cost for businesses. SMEs, however, need regulation to protect them. The WTO provides an interface to seek convergence in regulatory aspects.