Digital Trade for Development

Ulrik Knudsen

Digitalization and its potential to drive inclusive outcomes are highlighted by various speakers. They argue that digital trade brings numerous benefits, such as increased trade and opportunities for countries at all levels of development and across all sectors. For instance, a 1% increase in digital connectivity can lead to a 1.5% increase in trade. Ulrik Knudsen strongly believes in the importance of digitalization for achieving inclusive outcomes.

However, there are concerns about the rising restrictions on digital trade and the absence of global regulations. Despite evidence of positive reforms, digital trade restrictions are on the rise. This underscores the need for more international cooperation. The internet is global, but regulations are not. To address this, increased interest can be seen in building regulatory bridges and common approaches on digital trade issues.

In stimulating digital trade, various areas are identified as priorities, including open markets, education, digital connectivity, and data governance. Ulrik Knudsen calls for more policy formulation and investment to reap the benefits of digital trade. While positive reforms have taken place, there is still work to be done.

On the issue of applying customs duties on electronic transmissions, Ulrik Knudsen supports the renewal of the moratorium. The collective work conducted at the OECD supports the case for renewing the moratorium, as it has a positive impact on decent work and economic growth.

One of the biggest challenges in digital transformation is the uneven distribution of its benefits. Speakers argue against giving digital transformation and globalization a bad name based on this uneven distribution. They highlight that both globalization and digital transformation have benefits that are not evenly distributed. The world economy depends on the “globalization engine” and digital transformation to increase productivity.

To address the uneven distribution of benefits, speakers suggest that getting the discussion on digital trade and development right is crucial. This can help resolve issues of uneven benefits distribution and drive positive change. Addressing the nexus between trade and digital is essential. The decisions taken now will impact the perception and acceptance of digital transformation and globalization.

In conclusion, the speakers emphasize the importance of digitalization and digital trade in driving inclusive outcomes. They highlight the benefits and opportunities it brings, but also express concerns about the rising restrictions and lack of global regulations. More international cooperation and policy formulation are needed. The uneven distribution of benefits in digital transformation and globalization is seen as a challenge, but speakers argue against giving them a bad name. Getting the discussion on digital trade and development right is crucial for addressing issues of uneven benefits distribution and ensuring positive change.

Shamika Sirimanne

Digital trade has the potential to greatly benefit developing countries, as it currently represents 55% of global services exports and has shown significant growth since 2010. This indicates a promising opportunity for these countries to participate in and benefit from the global digital economy. However, there is a significant inequality in digital trade, with developed countries accounting for 76% of global exports of digitally deliverable services, while developing countries, including major economies like China, contribute only 24%. This highlights a clear disparity in participation and benefits between different regions.

One of the reasons behind this inequality is the lack of necessary infrastructure and skills in many developing countries. Less than half of the least developed countries have access to fast 4G networks, which are crucial for efficient digital communication and trade. Additionally, digital skills are lacking, hindering the ability of individuals and businesses to fully participate in and leverage digital trade opportunities. Furthermore, many countries still lack reliable e-payment systems, which are essential for secure and efficient digital transactions. It is important to address these infrastructure and skills gaps to create a level playing field for developing countries in the digital trade arena.

Another aspect that impedes the participation of developing countries in digital trade is the presence of outdated laws and regulations. These laws are not enforced and thus fail to create an enabling environment for digital trade. Additionally, women entrepreneurs face difficulties in breaking into the digital economy due to various barriers. These include limited access to resources and networks, as well as discriminatory societal norms. It is crucial to address these barriers and create an inclusive digital economy that provides equal opportunities for women.

Evidence-based decision making is vital in shaping effective policies and strategies for digital trade. Shamika Sirimanne highlights the need for countries to be aware of their position in the spectrum of digital trade to make informed and effective decisions. By basing decisions on evidence, countries can better understand their strengths and weaknesses in digital trade and tailor their policies accordingly.

Governments play a crucial role in creating an enabling environment for digital trade. Specifically, they need to focus on investing in infrastructure development, such as fast and reliable internet connectivity, that supports digital trade. Additionally, the development of domestic payment solutions is essential to facilitate secure and efficient digital transactions. These initiatives will help bridge the gap between developed and developing countries in terms of digital trade capabilities.

To support the participation of least developed and developing countries in digital trade, it is important for development partners to increase their support. Currently, the digital sector represents a very small portion of aid commitments. By increasing investment and providing targeted assistance, development partners can contribute to the growth and inclusivity of digital trade in these countries.

Furthermore, the challenges and magnitude of the issues surrounding digital trade require integrated support from various organizations. Addressing cross-border data governance is crucial, as data is an integral part of digital trade. Countries need to be aware of the larger implications of data governance and its impact on digital trade, as it goes beyond the realms of trade and has implications on privacy, human rights, and global cooperation.

Lastly, it is important to address gender equality in the digital trade sector. While women face double the difficulties in the digital world compared to men, they also have immense opportunities in e-commerce. Mentorship programs and initiatives that support women entrepreneurs in the digital economy can help unlock their potential and contribute to a more inclusive and diverse digital trade landscape.

In conclusion, digital trade holds great promise for developing countries, but there are significant challenges and disparities that need to be addressed. By investing in infrastructure, developing digital skills, updating laws and regulations, and providing targeted support to developing countries, the potential of digital trade can be fully realized. It is crucial for countries and development partners to collaborate and take collective action to ensure that digital trade benefits all economies and contributes to sustainable and inclusive economic growth.

Ralph Ossa

Digital technologies play a significant role in providing opportunities for global markets. They contribute to increased productivity, promote innovation, and enhance resilience to shocks. By leveraging digital tools and platforms, businesses can streamline their operations, improve efficiency, and reach a wider customer base. This ultimately leads to economic growth and the creation of decent work opportunities (SDG 8: Decent Work and Economic Growth). Additionally, digital technologies enable businesses to adapt and thrive, even in challenging circumstances, making them more resilient to shocks such as economic downturns or natural disasters.

However, it is important to note that low-income countries require support to fully benefit from digital technologies. Despite the potential for growth, the contribution of digitally delivered services exports in Africa is less than 1%, highlighting the need for targeted interventions and capacity-building initiatives to bridge the digital divide and unlock the full potential of digital trade (SDG 10: Reduced Inequalities). Similarly, least developed countries only contribute 0.2% to globally exported digitally delivered services. Therefore, efforts must be made to address the structural and technological barriers that hinder these countries from fully participating in digital markets.

The implication of the moratorium on government revenues, which refers to the suspension of taxes on digital trade, is found to be minimal. While concerns are raised about the potential loss of tax revenue, existing estimates suggest that the impact is limited. Alternatives exist for taxing digital trade in a less distortionary manner, and many countries are extending their Value Added Taxes (VATs) or Goods and Services Taxes (GSTs) to include the digital economy. Therefore, discussions around the tax implications of digital trade should focus on finding equitable solutions that balance the needs of governments and the growth potential of digital markets (SDG 17: Partnerships for the Goals).

Policymaking for the digital economy requires a whole-of-government approach and global cooperation. The complexities and cross-cutting nature of digital trade issues demand collaboration across ministries and jurisdictions. By fostering a cooperative environment, countries can effectively address policy challenges, establish common frameworks, and ensure inclusive benefits from digital trade (SDG 17: Partnerships for the Goals).

Regulatory frameworks are crucial for facilitating smooth and fair digital trade transactions. It is essential to ensure that there is easy entry and exit of firms in the digital market, promoting healthy competition and preventing anti-competitive behavior. Concerns about market power and anti-competitive behavior have emerged as digital trade expands. Therefore, it is important to establish and enforce regulatory measures that maintain a level playing field for all participants, while also fostering innovation and growth in the digital economy.

The World Trade Report emphasizes the need to embrace international trade, specifically digital trade, to promote security, inclusiveness, and sustainability. During the COVID-19 pandemic, digital trade acted as a lifeline for many, enabling them to continue working, producing, consuming, and trading. By embracing digital trade, countries can enhance security, as it reduces reliance on traditional supply chains and enables diversification. Furthermore, digital trade presents opportunities for inclusiveness by allowing businesses from diverse backgrounds and regions, such as Africa, to engage in e-commerce. Africa, with its young population and suitable time zones for many services, has immense potential in harnessing digital trade for economic growth and reducing inequalities.

Embracing digital trade also has significant environmental benefits, as it reduces transport emissions and enables more efficient organization of production, consumption, and trade. By leveraging digital technologies, businesses can reduce the cost of trading, providing particular benefits for women-run businesses in regions like Africa. Consequently, digital trade aligns with the goals of responsible consumption and production (SDG 12: Responsible Consumption and Production) and climate action (SDG 13: Climate Action).

Ralph Ossa, a prominent expert in the field, emphasizes the need for a cooperative approach to addressing the challenges of digital trade. While trade liberalization alone is not sufficient, collective efforts, skill upgrading, and improved infrastructures are crucial for fully reaping the benefits of digital trade. Ossa applauds the initiative that aims to reduce trade costs, promote skills upgrading, and increase digitally delivered services. He acknowledges measurement issues and uncertainties regarding the tax implications of the moratorium but advocates for further discussions and follow-up on the issue in a cooperative manner (SDG 17: Partnerships for the Goals).

In conclusion, digital technologies provide immense opportunities for global markets, as they enhance productivity, promote innovation, and improve resilience to shocks. However, support is needed for low-income countries to bridge the digital divide. The implications of the moratorium on government revenues are minimal, and alternative taxation mechanisms exist. Policymaking for the digital economy requires a whole-of-government approach and global cooperation. Regulatory frameworks are essential for smooth digital trade transactions. Embracing international digital trade can promote security, inclusiveness, and sustainability. Africa, with its young population and suitable time zones, has significant potential for digital trade. Embracing digital trade also offers environmental benefits, reducing transport emissions and enabling more efficient production and consumption. A cooperative approach is needed, alongside skill upgrading and infrastructure development. Ralph Ossa advocates for collective work, infrastructure development, and skills enhancement, while also calling for further discussions and follow-up on the issue.

Audience

The analysis provides a comprehensive overview of various topics related to digital trade and taxation, with a particular focus on their impact on developing countries and gender equality. It covers a range of arguments, evidence, and perspectives to shed light on the complexities and implications of these issues.

One of the main arguments highlighted in the analysis is the negative effect of current digital trade rules on governmental regulation. The analysis suggests that these rules may hinder the ability of governments to effectively regulate technologies due to restrictions such as the banning of source code revelation, which can inhibit the regulation of artificial intelligence. This argument points to the need for a careful balance between facilitating digital trade and ensuring effective governance.

In addition, the analysis raises concerns about the disproportionate negative impact of non-discriminatory taxation on women in the context of digital trade. It highlights that VAT (Value Added Tax) has disproportionately negative effects on women due to their consumption patterns and lower income. This argument emphasizes the importance of considering gender-specific impacts when formulating digital trade taxation policies to promote greater equality.

The role of the World Trade Organization (WTO) in advancing the conversation on business and human rights is another important point discussed. Although no specific evidence or arguments are provided regarding this topic, the mention of the WTO suggests that it plays a significant role in shaping the discourse around the intersection of business activities, trade, and human rights.

The analysis also touches upon the transformative potential of emerging technologies such as 3D printing and automated manufacturing in reshaping digital trade. It highlights that these changing technologies enable more manufacturing and services to be done remotely, demonstrating the evolving nature of digital trade and its relationship to technological advancements.

Furthermore, the analysis emphasizes the importance of cross-border data governance and its relevance to global issues such as climate change. It suggests that cross-border data governance is not just a trade issue but also a development issue, as exemplified by the crucial role data sharing played during the COVID-19 pandemic for vaccine development. This argument highlights the need for effective mechanisms for data sharing to tackle global challenges and facilitate cooperation.

Overall, the analysis argues for the need to implement more advantageous policies for developing countries in the context of digital trade and taxation. It recognizes the enormous opportunities for women in the digital world, such as conducting business from home while fulfilling caring duties. However, it also acknowledges the double difficulties faced by women due to the challenges posed by the digital world. These arguments underscore the need for inclusive and gender-responsive approaches to digital trade and taxation.

In conclusion, the analysis provides a nuanced understanding of the various aspects related to digital trade and taxation, ranging from their impact on governmental regulation and gender equality to the role of the WTO and the transformative potential of emerging technologies. It highlights the need for careful consideration and the formulation of policies that address the specific needs and challenges faced by developing countries and women in the digital realm. The analysis underscores the importance of data governance and cooperation to tackle global issues and ensure a fair and equitable digital trade landscape.

Mona Haddad

The World Bank plays a crucial role in supporting developing countries in boosting digital trade. It achieves this through its strong presence at the country level, providing financing and financing instruments, and offering policy advice. The World Bank adopts a comprehensive approach towards digital trade, which includes focusing on improving digital connectivity in these countries.

Improving digital connectivity is essential for enabling digital trade. Many low- and low-middle-income countries are currently lagging behind in terms of digital connectivity. For instance, in Africa, out of 35 countries, only 39 have connection speeds lower than 10 megabits per second. To address this issue, the World Bank has launched the Digital Economy for Africa (DE4A) program, aiming to improve digital connectivity and infrastructure on the continent.

Additionally, it is not enough for developing countries to have access to digital connectivity; they need to adopt and make productive use of digital technology. While 84% of people in sub-Saharan Africa have access to 3G and 4G mobile connectivity, only 22% actually make productive use of the Internet. Similar situations persist in many other developing countries. Therefore, adopting and using digital technology for productive purposes is crucial for enhancing digital trade.

In order for digital trade to thrive, creating an enabling environment is necessary. This includes ensuring affordability, digital literacy, and supportive regulations and institutions. Affordability, especially for businesses, is a major concern. The World Bank is involved in various projects aimed at facilitating digital trade by addressing these concerns. For example, there is a major project in Eastern Africa focused on regional digital connectivity and another project in the Philippines aimed at fostering digital technology.

The World Bank’s efforts in promoting digital trade have shown positive results. Digital trade is rising as a share of exports in lower-income countries, indicating its growing importance in their economies. Furthermore, there is a notable trend in some African countries, where they are leapfrogging from agriculture to services instead of going through traditional manufacturing. This leapfrogging is attributed to various obstacles such as transport, logistics, and infrastructure problems. The World Bank’s support and investment in digital trade can enhance this transition.

However, there are challenges that must be addressed for digital trade to thrive. The regulatory environment needs to be adapted to the unique characteristics of digital businesses. Analogue regulations and policies are no longer fit for this new type of business model. Digital businesses require regulations that recognise e-invoices, e-contracts, e-signatures, e-payments, and e-transactions. Additionally, regulations that deal with possible market dominance by new digital business entrants need to be put in place. Financing considerations also need to be rethought due to the lower collateral and higher risk associated with digital businesses.

While trade offers opportunities for development in developing countries, it is important to acknowledge that the world today has concerns apart from trade liberalisation. Issues such as climate change, human rights, and national security also need to be prioritised and addressed.

In conclusion, the World Bank’s support and investments can significantly contribute to boosting digital trade in developing countries. By focusing on improving digital connectivity, fostering the adoption and productive use of digital technology, and creating an enabling environment, the World Bank can help these countries realise the benefits of digital trade. However, it is crucial to adapt the regulatory environment and address challenges faced by digital businesses. Additionally, it is important to recognise and address other important global concerns alongside trade liberalisation.

Usha Canabady

The future of trade is moving towards a digital landscape, driven by services, green practices, and inclusivity. Global exports of digitally delivered services have tripled since 2005, reaching a value of $3.82 trillion in 2022. This growth is fueled by the digital transformation, which promotes economic growth and employment, while also bringing marginalized communities into the global marketplace.

However, to fully benefit from digital trade, it is important to improve infrastructure, develop skills, and establish supportive policy frameworks. Enhancing digital infrastructure regulations could reduce trade costs in Africa by 20% for goods and 30% for business and professional services.

It is crucial to maintain the WTO’s moratorium against customs duties on electronic transmissions to support the growth of digital trade. The exemption of customs duties on electronic transmissions has facilitated its rapid expansion and innovation.

A forthcoming joint report will provide insights into the current state of digital trade and how policymakers can further strengthen its impact on growth and development.

In summary, the future of trade is digital, with services, green practices, and inclusivity driving its growth. The expansion of digitally delivered services has created economic growth and employment opportunities. However, investment in infrastructure, skills development, and supportive policy frameworks are necessary for fully harnessing the potential of digital trade. Maintaining the moratorium against customs duties on electronic transmissions is essential. The upcoming joint report will offer valuable insights for policymakers.

Michele Ruta

The analysis delves into several topics related to tax policy, digital goods, and digital currencies. One key aspect discussed is the need for tax policies to adapt to the evolving landscape of online commerce. In the past, when physical goods were involved, tariffs could be imposed by customs officials. However, with the shift towards digital goods, a new system is needed to regulate and tax these transactions.

The argument presented in favour of broad-based non-discriminatory taxes, such as value-added taxes (VATs), over tariffs for digital goods, is supported by several reasons. Firstly, tariffs can distort consumption decisions, while VATs are considered to be non-distortionary in nature. Secondly, there is more experience and learning in collecting VATs for digital goods compared to tariffs. Lastly, VATs tend to provide higher revenue collection abilities compared to tariffs.

Another related argument is the use of a moratorium as a commitment device to encourage countries to focus on implementing efficient tax reforms. The idea is that by granting a temporary suspension on specific tax policies, countries can evaluate and steer their reforms towards more efficient and effective systems.

Capacity development and technical assistance are highlighted as crucial elements for assisting developing countries in adopting efficient taxation models. The analysis emphasizes the need to invest in development and technical assistance to support developing countries in their efforts to reform towards more efficient taxation systems.

The significance of digital currencies in international trade is also discussed. Digital currencies are portrayed as the backbone of international trade, capable of improving cross-border payments and filling gaps in trade finance. However, it is noted that their widespread implementation necessitates substantial investment in infrastructure and the establishment of new regulations requiring regulatory cooperation.

While digital currencies offer numerous potential benefits, it is cautioned that their adoption might exacerbate the digital divide in areas lacking adequate internet access and infrastructure. Countries and communities with limited access could be negatively affected by the emphasis on digital currencies, widening the existing inequality.

The analysis suggests that further research is required to fully comprehend the potential benefits and challenges associated with digital currencies. Currently, the understanding of their implications remains incomplete.

In opposition to discriminatory taxes, Michele Ruta argues for efficiency in tax policies, emphasizing that discriminatory taxes are not in the best interest of everyone, including developing countries. The focus should be on implementing efficient tax practices that benefit all.

The negative impact of tariffs on inclusion, particularly for women, is also discussed. A report by the World Bank and the World Trade Organization (WTO) suggests that tariffs do not promote women’s inclusion. Michele Ruta further supports this by stating that while different types of taxes may have varying effects on inclusion, tariffs are not the solution.

To conclude, the analysis highlights the need for tax policies to adapt to the digital age and emphasizes the advantages of broad-based non-discriminatory taxes over tariffs for digital goods. It recommends the use of a moratorium as a commitment device to steer countries towards efficient tax reforms. The importance of capacity development and technical assistance for developing countries to reform their taxation models is also stressed. Furthermore, the significance of digital currencies in international trade is discussed, advocating for investment in infrastructure and regulatory cooperation. However, it is cautioned that the adoption of digital currencies should not further widen the digital divide. Research is still required to fully understand the implications of digital currencies. Finally, arguments against discriminatory taxes and the negative impact of tariffs on inclusion are also presented.

Moderator

The future of trade is set to be digital, inclusive, green, and services-oriented, according to various perspectives discussed. One key point is that global exports of services delivered via computer networks have more than tripled since 2005, indicating the increasing prominence of digital trade. In fact, trade in digitally delivered services was worth $3.82 trillion in 2022, which is equivalent to 12% of all trade in goods and services. This growth in digital trade is seen as positive as it creates new opportunities for international market connection and export-led growth.

However, it is noted that low-income countries face challenges in harnessing digitalisation for inclusive trade and growth. Least Developed Countries (LDCs) contribute only 0.2% to globally exported digitally delivered services, and this number has even decreased since 2010. The barriers to digital trade in developing countries include inadequate infrastructure, lack of high-speed internet, unaffordability, lack of necessary skills, unreliable e-payment systems for cross-border transactions, and outdated or unenforced laws on data protection, privacy, and consumer protection.

Bridging the digital divide and creating a conducive regulatory environment require international cooperation. It is highlighted that 66% of the world population is estimated to be able to connect to the internet, leaving 2.7 billion people offline, many of them in low or lower-middle-income countries. There is a need for international cooperation to manage the global nature of the internet and ensure that the benefits from digital trade are inclusive. The importance of a whole-of-government approach to policymaking for the digital economy is also emphasised.

The World Bank is recognized as being well positioned to support developing countries in boosting digital trade. With its strong country-level presence and engagement, financing instruments, and policy advice, the World Bank can provide comprehensive support to developing countries in overcoming the challenges they face in digital trade.

Furthermore, it is noted that digital trade can contribute to sustainability efforts. Digital technologies cause fewer transport emissions than traditional trade, and they have the potential to improve the efficiency of production, consumption, and trade. This highlights the potential for digital trade to align with sustainable development goals.

Overall, while digital trade presents opportunities for inclusive, sustainable, and services-oriented growth, there are challenges and barriers that need to be addressed. International cooperation, infrastructure development, digital literacy, and a conducive regulatory environment are crucial in ensuring the benefits of digital trade are realized by all. Continued engagement, discussion, and support from organizations are necessary to further advance digital trade and assist developing countries in benefiting from digitalisation.

Usha Canabady:
Good morning, everyone. It’s good to see you here. Ambassador Kanabade, Indomitable Ambassador, colleagues from the other international institutions, excellencies, ladies and gentlemen, I’m really delighted to welcome you to the WTO Public Forum and to this session on our forthcoming publication that we’ve been working on with the World Bank, the OECD, the IMF, and UNCTAD that goes to the heart of the present and future of digital trade. May I pause to say that I’m very proud of the type of collaborations we’ve been having with other international agencies and institutions. This is the way we are meant to work. And I think it’s resulting in very good products. It’s not just in terms of analytical work, but also in terms of actual programs that we are working with them on projects. So thank you all to our colleagues for this. Now, most of you have probably heard me say that the future of trade is digital, it is services, it’s green, and it’s inclusive. Analysis by statisticians show that when it comes to digitally delivered services, the future is already here. Since 2005, global exports of services delivered via computer networks have more than tripled, growing far faster than trading goods and other services. Trade in digitally delivered services, think of things like streaming, entertainment, remote learning, software services, and cloud computing, was worth $3.82 trillion in 2022, equivalent to 12% of all trade in goods and services. This is up from 8% a decade ago. Not only is the digital transformation driving growth and employment, it has also emerged as a powerful new instrument for bringing people and places from the margins to the mainstream of the global marketplace, what we are calling at the WTO re-globalization. And this is a word I want you all to take away with you. It’s the new word. By reducing trade costs, especially for services, digitalization opens up a range of new opportunities for connecting to international markets and thus for making trade and growth more socially inclusive, more diversified, more resilient. And there is evidence that digitalization is particularly useful in enabling small firms and women to trade, amplifying the benefits of inclusion. By reaping the benefits of digital trade, but reaping the benefits of digital trade does not happen automatically. It requires adequate infrastructure and skills and an overall enabling policy framework. And it also demands social policies to help dislocated workers take advantage of new opportunities. Trade and regulatory frameworks matter. WTO research finds that coupling digital infrastructure improvement with better regulations could reduce trade costs in Africa by up to 20% for goods and 30% for business and professional services. Trade cost reductions on this scale would mean considerably more opportunities for African business of all sizes to join regional and global markets. That’s why it’s very positive that a group of nearly 90 of our members have made substantial headway in negotiations here at the WTO to set out some basic shared rules for digital trade. These negotiations complement initiatives on services domestic regulation. and investment facilitation, as well as discussions under the e-commerce work programme ably led by our Chair today, Ambassador Usha Dakwa Kanabadi of Mauritius. It is also why the WTO Secretariat is partnering with the World Bank to help interested African countries close gaps in connectivity and regulatory infrastructure. All five international organisations represented here have roles to play in empowering our members to harness the full potential of digital trade for growth and job creation. As part of our efforts in this regard, we will, in November, release a joint report that leverages our respective expertise to shed light on where things stand with digital trade and what policymakers can do to make it an even stronger force for growth and development. It will yield new insights on how digital trade can contribute to development and how members can work together to reap the full benefits of such trade and build a more resilient and inclusive global trading system. The report will be timely, coming out soon before our 13th Ministerial Conference in Abu Dhabi next February, where Ministers face important decisions for digital trade, notably the future of WTO’s long-standing moratorium against customs duties on electronic transmissions. Even before the MC12 decision to extend the moratorium and reinvigorate the work programme on electronic commerce, many members were asking for more facts, evidence and analysis about the moratorium’s impact on digital trade. Members’ views about the moratorium differ, but making informed consensus decisions requires a shared set of facts on the table. And this is precisely why we thought a joint report to set these facts out by objective international agencies. would be helpful, a report that is evidence-based, independent, and balanced. The WTO’s Chief Economist, Ralph Orser, will offer a preview of the contents in a minute, but let me first highlight one aspect of it. The report documents on the basis of the evidence available how the moratorium is working in practice. The rapid growth in digital trade I referred to earlier has happened under a regime of no customs duties on electronic transmissions. The forthcoming report will help us better understand the legitimate concerns some members have expressed about the moratorium, identifying issues such as a lack of clarity regarding its definition and scope, as well as losses of policy space and tariff revenue as formerly physical products become digital. Importantly, the report will help members understand the opportunity cost of the moratorium so that members can assess the various trade-offs. Let me conclude by congratulating the teams from the IMF, OECD, UNCTAD, the World Bank, and the WTO who have been working hard on the report and on this event. Let me also thank Ambassador Kanabadi for relentlessly working on this issue and gaining the confidence of members. Please stay tuned. The report will come out in November and will hopefully help members to take decisive action at MC13. Thank you.

Moderator:
DG, thank you very much for being with us this morning. What was the key word that you said was important for us? Re-globalization. Please remember that one. And I just want to add one more word to this, DG, from the perspective of facilitator. DG-globalization. DG-globalization. Which both refers to you and also to digital. So you can lead the globalization for us as well. Well, thank you again for this very interesting introductory remarks. We all stay tuned for the report in November, but we’re going to start this morning with Mr. Ralph Ossa, who is the WTO’s Chief Economist and also Director of Research and Statistics Division as well. Maybe Ralph, can you share with us the main findings of this report? You can use a lectern or here, whatever is easier. Thank you.

Ralph Ossa:
Thank you very much, Ambassador. Thank you very much, Director General. I still have to get used to these kind of speeches, so first of all, there’s a hammer here that I never know what to do with. And also, in my previous life, I was a professor, so I could speak for myself, I could speak freely. Now, I’m at the WTO. I have learned how to speak also for the WTO on behalf of the WTO, but now we have five international organizations, so for me, this is a new opportunity to also speak on behalf of five international organizations, and some of you who know me know that I sometimes improvise and speak freely and do these things, and I won’t do that today, so I stick to the script and present the findings of the report. First of all, let me thank you all, in particular our colleagues from the IMF, the OECD, UNCTAD, the World Bank, and of course also my team here at the WTO for putting together this, I think, really important report. And it’s an important report because it’s on a really important topic that clearly affects us all, and if you just think about it, you’ll see very clearly that digital transformation is of course having profound effects. For example, digital technologies clearly provide new opportunities to engage in global markets. and promote inclusive growth. But at the same time, you know, harnessing digitalization for inclusive trade and growth also raises important challenges, of course, particularly for low-income countries. But what’s clear is that international cooperation is needed to help bridge the digital divide and put in place an enabling regulatory and policy environment. And you know, the DG mentioned this in our opening remarks, but that’s why we came together here as international organizations to inform discussions on these issues, these very important issues, and provide an evidence-based kind of foundation to them. Let me start by talking about some of the opportunities that digital technologies provide. First of all, digital technologies can act as an important engine of growth, increasing productivity by reducing production costs, fostering economies of scale, and also offering more efficient financing. Also, they can promote innovation by exchanging ideas in some way. You know, we are doing this now, or at least with the ones who are watching this online. Interestingly, digital technologies can also underpin the growth of all trade, and not just digital trade, by reducing trade costs also in areas that are not perhaps directly affected by digitalization. And it can also promote new services, export-led growth, and more inclusive growth. As we have seen during the COVID pandemic, it can also promote more resilience to shocks. You know, we saw this during COVID, how important this type of digital communication interaction became. But of course, at the same time, it’s also disrupting existing processes. and business models, thereby not only creating opportunities, but also creating risks. So let me provide some context here for you. First of all, what is digital trade? Digital trade refers to all international trade digitally ordered and or digitally delivered, a pretty intuitive definition that is widely agreed upon. And while it’s possible or easy to define digital trade, measuring it is of course much more challenging, so the data on the size of digital trade is incomplete. But what we know or what we estimate is that digitally delivered services exports are estimated to be 12% of all goods and services exports of the world. And perhaps more strikingly or more importantly, that they have grown very quickly over the past years, since 2005, outpacing the growth rate of goods trade, and also services trades are growing at a rate of 8.1%. Now, you know, when you think about the component of digital trade that is about digitally ordered trade and not delivered trade, so there we know much less. So as you can imagine, some countries are more ready than others to take advantage of the opportunities of digital trade. Services exports have been growing in most developing economies, but some developing economies and also some developing economies in Africa, such as Ghana, such as Morocco, such as South Africa, have been strong performers and still are in digitally delivered services. At the same time, Africa’s contribution to globally exported digitally delivered services is still very small, at the moment less than 1%, while least developed countries contribute only 0.2%. So as a result, clearly support is needed to ensure a more inclusive digital trade. And you know, what you need to do that, so what you need to, you know, promote digital trade is a whole ecosystem, and in some sense that’s, you know, one of the main points of this report that we are working on. So you really need a kind of a multi-pronged approach to stimulate digital trade. And the first thing you need, quite intuitively, is reliable and affordable digital infrastructure, but also the skills that you need to leverage this infrastructure. So just to give you some facts, at the moment around 66% of the world population are estimated to be able to connect to the Internet, which is twice as many people as 10 years ago, but at the same time, you know, still leaves 2.7 billion people offline, and as you can imagine, most of them live in low or lower middle income countries. High tariffs on the imports of information and communication technologies, restrictions on imports of enabling services, so for example, if you think about telecommunication services, could also limit the affordability and also slow the adoption of digital technologies. And there’s already international cooperation ongoing that’s helping to improve digital connectivity skills, capabilities, and so on. Also from the international organizations represented here, we have the Aid for Trade program coordinated by the WTO, E-Trade coordinated by UNCTAD. and also the digital advisory and trade. Digital advisory and trade, I forget what the last A stands for. Anyways, it’s about promoting also this kind of work. But good infrastructure is of course not enough. We also need to put the right regulatory environment in place. You need to have the right policies in place. And clearly digital trade requires a set of policies and regulations that allow for smooth cross-border transactions that would enhance trust in digital markets and also promote affordable access and enable cross-border deliveries. When thinking about these regulatory policies, it’s important to ensure easy entry and exit of firms and also an open trade regime so that this is all functioning well, leveraging competitiveness. And what’s really interesting is that we talk about some estimates or we are preparing some estimates in the report that point to interesting or important complementarities, in particular that the trade cost reducing effect of improved connectivity is more than double in middle and low-income countries with an enabling regulatory environment in place, which points to the fact that you really need both to successfully pull this off. So I’ve already alluded to it. There’s already important progress in that direction that has been made, important international cooperation that is taking place. One thing to know is that the governance of digital trade-related issues so far has primarily taken place in bilateral and regional trade agreements, and you see kind of a similar pattern emerging from what I was talking about before. You know, 33% of all regional trade agreements have explicit provisions related to digital trade, but few low-income countries have signed regional trade agreements with such provisions, so a similar theme emerges to what I was discussing before. We have the WTO Work Program on e-commerce since 1998, which has allowed consideration of how WTO rules apply to e-commerce, and DG mentioned that our members are also negotiating new rules on digital trade-related aspects under the Joint Statement Initiative. Now one issue that is, of course, important in the WTO context and that is attracting a lot of attention in the lead-up to MC-13 is the issue of the moratorium. The DG already alluded to it in her introductory remarks, and she already pointed out that WTO members’ views about the renewal of this moratorium and customs duties on electronic transmissions differ, and a key consideration in that discussion is the impact of the moratorium on government revenues. This is also a topic that this report tackles, as the DG was saying, just providing, you know, the facts, providing some evidence-based… for our members to be able to make their decision. You know, maybe, you know, one thing to say before I share some of the estimates with you is that there are some uncertainties, or maybe, let me say more broadly, that the impact of the moratorium on government revenues depends on several factors, and therefore, you know, there’s also some challenges in terms of kind of estimating this impact. For example, there’s uncertainties about the scope of the moratorium, also about the definition of electronic transmissions, which, of course, then, you know, mean, you know, that there’s also some uncertainty about the tax base that we have. So it is difficult to fully grasp the impact of the moratorium, but existing estimates point to the moratorium as having kind of a limited effect on government revenues. So the estimates that we have is that the potential revenue that could be collected using tariffs on electronic transmissions vary between 0.01% and 0.33% of overall government revenues on average with a handful of outliers. And one thing to know is that these estimates don’t even take into account that the administrative costs that are associated with raising this revenue. So the evidence, so far at least, with all its caveats seem to suggest that the revenue implications are not substantial. Also, what is important is that, you know, there’s alternative ways of taxing digital trade in a less distortionary manner, in particular, nondiscriminatory taxation. We think about a VAT or a GST, as it’s sometimes called. And so the terminology differs a little bit across countries. And there’s many countries, of course, that have these VATs or GSTs in place. And many of them either already have or are in the process of kind of extending it also to the digital economy. Also, new regulatory issues have emerged with digital trade that require global solutions and therefore also global cooperation. We have measures that affect data flows that are risking, you know, that are increasing the risk that regulatory, increasing the risk of regulatory fragmentation off regulatory fragmentation without necessarily providing the necessary interoperability. We have network effects and economies of scale and scope that give rise to concerns about market power and anti-competitive behavior. I mean, that’s a broader concern, I think, with the digital revolution that’s not limited to digital trade. And then also we have a divergent consumer protection regulations and also enforcement that can hinder consumer trust in the digital economy. So in conclusion, let me just say that policymaking for the digital economy requires a whole-of-government approach as issues cut across ministries. I think this is a point that the report makes very clear. Also, global cooperation is essential so that the benefits from digital trade are not only realized, but also realized in a way that makes them inclusive. And this report, at least from our perspective, is a contribution to that cooperation. So, thank you very much.

Moderator:
Thank you very much. I think you have summed up a number of issues that we will be seeing in the report in November and we look forward to that. But now my role is to turn to the other organisations who contributed to this report and to hear from them what their perspective is. I first turn to the World Bank. Mona Haddad is the Global Director for Trade, Investment and Competitiveness of the World Bank. Mona, World Bank is one of the big actors in development financing for countries who want to accelerate their digital trade. Can you share with us some of the things you have been doing and what you think we could be doing more? Thank you.

Mona Haddad:
Thank you very much Madam Ambassador and thank you Ngozi for spearheading all these efforts and bringing us all together to make sure that each organisation is really putting forward its comparative advantage towards this important goal of not only maintaining the multilateral trading system and strengthening it, but more specifically to this forum, to this topic is to really boost digital trade. So, the World Bank Group is really well positioned to support developing countries in boosting digital trade because of our strong presence at the country level and strong country engagement. Second, because of our financing and financing instrument. And third, because of our policy advice through analytics and country experience. And our approach to digital trade is really to be comprehensive because to succeed digital trade has many different components which I will talk about and we need to put them all together to make it happen. So, first is digital connectivity. without having the physical infrastructure of digital connectivity. It’s very hard to talk about digital trade. And we see that in many countries, low- and low-middle-income countries, they are lagging behind in the digital connectivity. In Africa, out of 35 countries, only 39 have connection speeds lower than 10 megabytes per second, which is considered the minimum necessary for consumers to fully participate in digital activity. So, back to basics, we need to have that in place. And for that, the World Bank launched in 2020 an initiative called the Digital Economy for Africa, DE4A program, which provides technical assistance as well as lending to ensure that digital connectivity is available, including in lagging regions. But we know that connectivity alone is not enough. It’s a necessary but not sufficient condition. So, adopting and using digital technology for productive purposes is really what is important to get economic gain. So, we are also focusing on that. For example, we have a study that shows that 84% of people in sub-Saharan Africa have access to 3G and 4G mobile connectivity, but only 22% actually make productive use of the Internet. And we see similar numbers actually elsewhere in developing countries. So, that was just an example. So, for us, working on providing the right enabling environment for digital trade and digital business to happen, is very important, and this includes affordability. So sometimes there is access, but it’s very expensive. So affordability is important, especially for business. Digital literacy is important, not only for consumers and producers, but also for governments. And three, the enabling environment in terms of regulations and institutions to better manage new areas such as e-commerce, digital payments, cross-border data. Just to give you a couple of examples, we have a big project in Eastern Africa on regional digital connectivity, and it focuses on first, expanding the digital infrastructure, including the last mile, and second, improving the conditions for digital trade by enabling the cross-border electronic payments, facilitating regional data flows, and fostering convergent approaches on digital platform regulations, e-signatures, and so on. In the Philippines, we also have a new project on fostering digital technology. The Philippines, of course, is doing already quite well in services export and export of digital services, but it can do a lot better. And the key problem there is cost and affordability. The cost, there is good access to the internet, but the cost is very high. So our numbers or studies show that only 10% of the Philippines’ medium and small enterprises actually are using digitalization productively in their business. And the project that we have focuses on providing the regulatory environment. to increase the uptake of e-commerce by consumers and producers, having competition in digital services, and increasing value addition, as well as skills development. Let me stop here. Thank you.

Moderator:
Thank you very much, Mona. I think that was useful in setting the role of the World Bank in the issue of digital trade. I next turn to the OECD and Deputy Secretary General Ulrich Nielsen. Now, the OECD has been working for a long time on the digital agenda and how it connects to digital trade. Would you want to share with us what perspectives you bring in this report and what you think the OECD could also, like the World Bank, be doing more? Thank you.

Ulrik Knudsen:
Sure. Thank you, Moderator. But let me start by really thanking Ralph for not having improvised on behalf of the OECD. I will then also be humble and try to stick to my script, except for one thing, maybe. I would also like to embrace and recognize the concept of re-globalization. I mean, if nothing else comes out of this conference, if we can move the mindset from one of de-globalization to one of re-globalization, I think we’ve come a long way. Let me give a little bit more thought to de-globalization and take it back to Member States, but maybe we could also consider that for the November report. Thank you so much, Director General Ngozi and the WTO Secretariat, for having led and coordinated our joint efforts in this endeavor. I think speaking with one voice on digital trade and development has never been more important, and it’s a very, very strong sign that we have these five international organizations here on stage doing exactly that speaking with one voice. So thank you for your leadership. Turning to some of the OECD contributions to this, I’d like to highlight three points that I think are really crucial to these discussions. The first one is the importance of digitalization of inclusive outcomes, and I mean that in several ways, whether it’s smaller firms, whether it’s women-owned enterprises or even people like us. Digitalization can bring us closer together, both socially and economically. Digitalization does enable really substantial new benefits from trade. Our work suggests that a 1% increase in digital connectivity can lead to 1.5% increases in trade. I think that’s quite formidable. It also shows that benefits arise for countries at all levels of development and across all sectors of the economy, including, in fact, agriculture. My second point is that making the most of these opportunities is not straightforward. It’s well reflected in the report. A range of policies and investments, more often than not spanning many different ministries, are actually needed to ensure benefits for all. Of course, we need open markets. That goes without saying. We need to enable access to goods and services. But we also need more education. We need more digital connectivity. And we need also renewed efforts to tackle issues around data governance. Now I’m speaking probably only on behalf of the OECD when I say that when it comes to the moratorium on applying customs duties on electronic transmissions, we also need to consider who pays the costs of tariffs and what are the alternative sources of tax revenue. But let me be frank and say that at the OECD, our work suggests that there is a pretty strong case for renewing the moratorium at MC13. My third and last point is that while the Internet is truly global, our regulations are not global, so we need more international cooperation. The OECD Digital Services Trade Restrictiveness Index shows that, despite evidence of positive reforms, not least on the African continent, restrictions on digital trade are actually on the rise. At the same time, however, our digital trade inventory shows renewed interest in building regulatory bridges and common approaches on digital trade issues. This is happening here at the WTO, but also in digital trade provisions, in trade agreements and in emerging digital economy agreements. So let me perhaps end by saying that I think discussions like the one we are having here today can help move the digital trade agenda in a more inclusive way, again, in many dimensions. And I think the IOs working together, we collectively hope that our analysis will help policymakers build a better world where digital trade can really work for all. Perhaps a digital trade agenda could even bring us closer to re-globalization.

Moderator:
Thank you very much. Thank you also for being brief. It will allow us time for questions from the floor as well. I will next turn to the IMF. Michel Gauthier is the Deputy Director of Strategy and Policy Review, if that’s right. Now we know that the IMF released last week, was it, a study on tax policy for digitally traded products. And I was wondering whether you could enlighten us a little bit about what you want to share with us on that report.

Michele Ruta:
Thank you very much. So also from the front point of view, it’s excellent to be here. It’s excellent to be working together on this topic. Let me say I’m a former WTO staff member, so I’m always happy to be back and always a bit intimidated to be on this side, because generally I will sit on the other side. And the last thing that just hit me is that Ralph and I shared a podium, I think 15 years ago, when Patrick and I traveled to Rome to give the first CESI award, so it’s really nice. And it also shows that time is passing fast. So let me say something about the work that we have been doing at the Fund that was published just last week. And this is really a contribution to the debate. It’s not an official view of the Fund, it’s really a research piece. There are several studies out there that have been done on the issue of the moratorium, looking specifically at the fiscal cost of the moratorium. And this is an important topic, because as we know, several developing countries rely on tariff revenue for their fiscal capacity. Now one issue that seems to be lost somehow in this discussion is that it’s really technology that has changed. So the book that used to pass at custom, where the custom official would impose a tariff, now moves online. And so that’s really the problem. And so what this suggests is that countries that want to regain that tariff revenue, they need to create a new system. And in order to create a new system, they need to upgrade their tax infrastructure. And this begs the question, how to optimally do that? And that’s the space that we are looking at. And specifically, the question that we ask is, if we need to upgrade the system in order to collect these revenues, should we do it through broad-based, non-discriminatory taxes, such as value-added taxes, or should we do it through tariffs? And the findings, the main findings that we have is that a non-discriminatory tax system, so one that, for instance, could be based on value-added taxes, is preferable for two main reasons. One that is on efficiency grounds, and the second one is in terms of revenue. So let me just briefly say something about these two points. Based on efficiency, there are two simple arguments why broad-based, non-discriminatory taxes are preferable. First is because tariffs discriminate, and by discriminate, they create some extra cost. They distort consumption decisions, they distort production decisions. So the same revenue is collected through distortionary means, which means higher cost. Second, the argument that is generally used in favor of tariffs, the practical argument, is that they’re easy to collect. So if customs are already in place… case, the book goes through custom, is taxed at the border. It’s easy. Now, if you think about electronic transmission, it’s exactly the opposite. Because there is no experience worldwide with these tariffs on electronic transmissions, while there is lots of experience on things like value-added taxes, because virtually all countries do that. So there is much more experience and learning in that sphere, so that the usual argument for tariffs is lost. Now, let me move to the revenue side. Here on the revenue side, we provided some calculations of the effects. And the question is simply, what is the maximal revenue that can be collected using VATs or using tariffs? And what we find is that through VATs, the revenue that can be collected is 150 times higher than with tariffs. Now, this, to be fair, is mostly due to advanced economies, because advanced economies have very low tariffs, and they also are the ones that trade most in digital products. But if we look at developing economies, most developing economies are either better off, meaning they collect more revenue through non-discriminatory taxes, than they do through tariffs, or they are about the same. So the argument of revenue collection is really not an argument there. Now, let me say just a final word on where this leads us on the moratorium. Now, if you see the moratorium from the optimal taxation argument that I was using, then the moratorium is what economists would call a commitment device. That’s just a fancy way to say that it’s a tool that allows countries to focus reforms, or steer reforms, towards efficiency. Now, the big question there is that, obviously, doing these reforms is costly, and so there is a need to invest more in terms of development, capacity development, and technical assistance to allow developing countries to reform. towards efficiency. So let me stop here. Thanks.

Moderator:
Thank you. And I’m sure we’ll have lots of questions. It remains, of course, a sovereign right of countries to decide the kind of taxation policy they want to apply. But I’m sure there will be loads of questions on that. I turn to UNCTAD. Now, UNCTAD, I don’t know whether Sharmani needs an introduction, because she’s been known to everybody in this room. But can I ask you, Sharmani, UNCTAD has been doing work for a very, very long time for developing countries. What you do is not always known. And I’m a little bit surprised at that, because we at developing countries, we know what you’re doing. And we’re not able always to connect it to what is happening in the other institutions. And now, we’re very glad to see that not only you’re part of this report, but also that you’re working more actively with a lot of countries to be able to bring your views to the table as well and share it. What can you tell us about UNCTAD’s role in assisting developing countries? Thank you.

Shamika Sirimanne:
Thank you, Ambassador. So we understand that the digital trade holds a lot of promise. The internet basically can give businesses a virtual shop window to the entire world. That’s the potential. So our businesses, UNCTAD, how do we develop countries’ capabilities so that they can engage in this fast-moving and amazingly potential for the developing countries emerging? But to put this into context, I want to start with some numbers on digitally deliverable services we at UNCTAD just issued. So it is just hot out of the press. But I want to start with a caveat. You see, the problem is, I think we will discuss this a bit later when we talk about digital trade and what it means and all that. The statistics on digital trade is pretty bad. It’s chaos. And even when the countries have a bit of it, it’s very bad quality. And this is why the brand new, how can I say, Let me put a plug here, we have a brand-new IMF OECD UNCTAD WTO handbook on measuring digital trade, and this is important because this is the elephant in the room. If you don’t know what it is, you know, and how are you going to make any policies based on nothing. So that’s the situation right now. But nonetheless, you know, we have the information, we have available points to a very interesting story I want to take you through this. Digitally deliverable services account for 55% of global services exports today, and this is one of the fastest growing areas of trade. Since 2010, the exports of digitally deliverable services have more than doubled, so that’s how it’s going, you know, that’s how it’s becoming big. And this trade is highly unequal. Now, 76% of global export of digitally deliverable services are from developed countries, okay, and only 24% comes from developing countries, and this also includes China and other big economies. And here is the shocker, LDCs share is a mere 0.2%, and it’s really shocking and it has actually decreased since 2010. So that’s the reality. I think we need to understand the reality before we jump into it. So Ambassador, why is it so pathetic and bad? I think Mona, you started to talk about the connectivity, so let me put a bit. You see, business needs access to networks and devices that are fast enough to engage in digital trends, so basically it’s like a 4G network. You need that. It’s not just, you know, typing some text in your sister and brother, but if you want to engage in. digital trade, especially cross-border, you need fast internet. Almost all LDCs are covered by mobile networks. Less than half have access to faster 4G networks. That can really support digital trade. So this is our situation. And Mona, you mentioned the connectivity, simply unaffordable in many countries. We just take it for granted. And women entrepreneurs that have an enormous amount of potential in the digital economy, it’s difficult for them to break into this. Another layer is the skills. We are not talking about the skills of typing onto, I don’t know, this WhatsAppping onto a smartphone and posting on Facebook. It’s not that skill. We need a lot more skills to do engaging trade. You need to develop your platform. You need some coding. You need to understand the security. So these skills are lacking. This is what we find. We have worked in 50 countries, understanding the constraints for e-commerce and the digital economy is coming very clearly. And these skills cannot be developed within two days. This is a long haul story. You have to be with the countries, working with the countries to develop skills. Now, very few countries have reliable e-payment systems to engage in cross-border transactions. I was in a landlocked country a couple of months ago. The minister told me that they used to have PayPal. And the PayPal decided it’s not worth it, and it’s too small. So they backed off. So they don’t have an international payment platform. And the big elephant, I don’t know why I’m talking about elephants today, but the big elephant is the regulatory environment that puts online transaction on a firm legal footing, gives clear protection for buyers and sellers, and has provisions to safeguard privacy and against cybersecurity. Because honestly, I’m not going to put my credit card. on some funny platform. I mean, I’ll tell you right now. Now, less than half of LDCs, OK, less than half of least developed countries and SIDs have adopted data protection, privacy, and consumer protection legislation. And we work with many countries. My colleagues are here to update the laws. And they are so outdated. And they are not enforced. Enforcement is sorely lacking. OK, so this is our experience. So Ambassador, you asked me, how do I assess the opportunities for developing countries? And it’s pretty dismal for the LDCs and SIDs. I am not talking about international trade. This is where the digital exports, digitally deliverable exports, because this is the lucrative trade. I’m not talking about offering a yoga class to your neighbor through the internet, or running around and delivering food in town. It’s not that. How do we get into the export markets? Because this is where the profits are. And they cannot do it. And LDCs are out of it. So I just want to put into context, as you take forward your negotiations to understand, the problems in the least developed countries, and SIDs especially, are immense. And this is a technology that moves so fast. And the window of opportunity open to developing countries is very limited. Windows close, and that’s it. So let me, I know this is a sad note, but let me stop here on this sad note.

Moderator:
I know, I’m glad I don’t have tissues. But I mean, thanks, Shamika. And I was just thinking, you know, you’ve just been pointing again to what Dr. Kurzweil has been saying, about our developing two worlds. And that’s the reality of it. DG, I know there’s pressure right behind you, trying to take you out of this room. Before you go, I was wondering whether you would add a few comments on what you’ve heard so far. WTO launched its World Trade Report this week, and I was going to ask Ralph later to give us. some findings about that, but is there anything you would like to add or comment on in the light of what you’ve heard?

Shamika Sirimanne:
No, it’s just I’m so glad I have to run, but I was so glad to stay and hear the different perspectives because this is what I want to say so we are now getting facts. I think a lot of our debates and negotiations have not really been evidence-based, and you cannot make the right decision for your country until you know what evidence there is. Are you really getting revenues from this? So if you’re not even part of it, why are you arguing against it? Are you getting a lot of revenues? And if you’re losing, then what can we do about it? So this will enable members to see where they are in this spectrum. Some emerging markets and developing countries are in it, not very much, but they’re still, how do we take account of their issues about they don’t want to see loss? And if they have prospects for greater participation in digital, we should think ahead also, not only static, but dynamic. How do we take account of their issues? But, you know, so my point is evidence-based is very important. So let’s look at what we’ve heard a lot of it here. It’s very enlightening. What I want to end up saying is that I see a big opportunity. Where you’re sad, Shamika, that we are not so present, my mind is going, what do we need to do to get us into the game? And then how do we make sure we have the regulatory framework, the infrastructure, the human resources to participate? So for me, I’m always on the other side. I see a big opportunity for LDCs and developing countries to take advantage of a fast-growing segment. trade, and we need to focus our minds on how we help them do it. Thank you.

Moderator:
Thank you very much, teacher. That was very useful. And thank you for being with us today. Thanks. Just before I open the floor, I want to turn once again to Ralph, and I will pose the second question to all of you. What are the challenges that are awaiting us? What can your organization do? What do you think we could be doing more? I know I come back to the same question, but in practical terms, what is it we could be doing more? But just before that, Ralph, can you just very briefly tell us a little bit about the World Trade Report launched this week? Thank you.

Ralph Ossa:
Thank you very much for the question, and I’ll be very brief because I already spent half of Tuesday explaining the World Trade Report to people at this public forum. But perhaps I can say how it relates to this issue that we are discussing today, the issue of digital trade. So the main point that the World Trade Report is making is that we need to embrace international trade if we want to make the world more secure, if we want to make the world more inclusive, and if we want to make the world more sustainable, contrary to some of the narratives that are emerging at the moment. And a point the report is also making is that embracing digital trade, in particular digitally delivered services, is particularly important in that regard. So let me maybe just briefly comment on how embracing digital trade can deliver on these three dimensions. Let’s start with security, and I already mentioned that in the presentation. And when I say security, I mean resilience, supply chain security, economic security. This angle, and we’ve seen it during the pandemic, how important digital trade was. If you remember this chart that I showed you, digital trade did not tank during the pandemic. In fact, it was the lifeline for many of us. in terms of how we worked, in terms of how we produced, consumed, traded, and so on. So I think that should be relatively clear. If we talk about inclusiveness, the same thing. And I really hear both sides, and I think they’re both correct, that where we are at the moment in terms of LDC participation in digital trade is not where we want to be. Where we are in terms of even just Africa’s participation, I don’t recall if you mentioned that statistic, but it’s also less than 1% of digitally delivered exports come from Africa. And the infrastructure issue, the connectivity issue, and so on. At the same time, I’m also with the DG, and that’s also what we emphasized in the report, that there’s a lot of opportunities, in particular for regions like Africa. If you think about the fact that the very young population are in the right time zone for many of these services, and so on. So I also want to kind of focus on the positive aspect. And one just interesting statistic that we highlight in the report, it’s one of many, but it’s kind of one that’s stuck in my head. There’s a study that shows that three out of four businesses in Africa that are exclusively engaged in e-commerce are owned by women, are run by women, which suggests that if you reduce the cost of trading in that space, that is likely to have a disproportionate effect on them. That’s just one example. And just an anecdote, of course, I don’t want to push it too hard, but I do think there are these opportunities. And then finally on sustainability, so remember the report makes these three points, security, inclusiveness, sustainability. I mean, sustainability, one part is obvious. Digital trade doesn’t cause any transport emissions, or at least not any meaningful transport emissions. Perhaps a little bit of… energy that is needed. So kind of moving in that direction, as Michele said, the e-book is probably better for the environment than the actual book. But it’s really much more than that. Of course, digital technologies can also help us organize our production, our consumption, our trade in more efficient terms. So I think they’re also big opportunities. Thank you.

Moderator:
Thank you, Ralf. I’m just so sorry that we have such little time for the panel, because there are loads of questions waiting there. Mona, you are doing an initiative with the World Bank, with the WTO right now. Can I ask you this very blunt question? Is this a good confidence initiative, or is it likely to have a real impact on Africa? This is about advancing digital trade in Africa. Thank you.

Mona Haddad:
Thank you very much. So let me be a little bit more optimistic than Shamika as well. You presented, Shamika, numbers that show that the LDCs or lower-income countries are participating less in digital trade globally. But if we look at it differently and look at how much digital trade is rising as a share of their own exports, it’s actually less insignificant. And that’s really what matters. So I don’t want to compare Mauritius to the EU. I want to compare Mauritius today to what Mauritius was doing maybe 10 years ago, and the progress is very positive. So that’s one point. The second point is that in Africa more particularly, many countries will not be able to kind of industrialize and become competitive in manufacturing, either because they’re small, such as Mauritius or Rwanda and so on, or because there are so many other problems, such as transport, logistics, infrastructure, and so on, that it might be easier for them to leapfrog from agriculture to services than necessarily to go through manufacturing. manufacturing, and we are seeing that in some of the African countries, and therefore again digital business and digital trade is a great opportunity for them. So I just wanted to put forward at least two arguments that are slightly more positive. On this data initiative, which actually we have created a data fund with Australia and Switzerland, and we are working on what we think really matters right now, which is digital policies, and putting the regulatory enabling environment for these new types of businesses because the analog regulations and policies are no longer fit for purpose for this new type of business model, which is a digital business model. We need regulations that recognize e-invoices, e-contracts, e-signatures, e-payments, e-transactions, and so on. We need regulations that deal with possible market dominance by new entrants into this new digital business. We need to think differently even about financing of such businesses because they have very small collateral and higher risk. So a lot of complementary regulations and regulatory systems need to be put in place, and that’s what we are focusing on. Thank you.

Moderator:
Thank you, Mauritius. I know that country. The 17th in the world for cyber security, so don’t fall with them. I turn to OECD. Now, you’re the guys who have a lot of influence on the digital agenda. What according to you is going to be the biggest challenge in the years to come on this?

Ulrik Knudsen:
That’s a pretty hard question, right? I was just thinking, taking the train here yesterday, that one year ago when we had the last WTO public forum. Nobody in this room probably knew about generative AI. We hadn’t seen chat GPT-4 yet, right? That’s 10 months ago, and maybe some of us even hadn’t heard about it eight months ago. Now, it’s up there as one of the big transformative sources of our societies alongside pandemics, climate change, de- or re-globalization or de-de-globalization, whatever, and everyone is talking about it. So I think it’s difficult to predict, but if I had to point to one thing, I’d say, now my biggest worry is digital fragmentation and digital divides. I think for a while, at least, globalization was given a bad name because the benefits that all of us would, all of us would subscribe to the fact that there are benefits from globalization, but they were not evenly distributed, and that gave globalization a bad name in some parts of the memberships of the organization on stage here today. My worry is that this will happen to digitalization as well. If we don’t get the digital transformation right, if we don’t get the benefits distributed, and it’s about not only connectivity, it’s also about access and skills, I think we will give digital transformation a bad name. So there’s a lot at stake here because if the globalization engine for the world economy is not turned back on, we will have to rely on digital transformation to increase productivity, to enable, you know, people across the world to grab the opportunities of the digital transformation. So that is what we need to get right. That is why this nexus between trade and digital is so important, and if we get this discussion right, if we get digital trade and development right, we may give both digital transformation and globalization a good name again. So I think there’s a lot at stake here.

Moderator:
No, thank you. That’s good for thought, I think. And Michel, turning to you, what about digital currencies? How do you see their role in digital trade in the years to come?

Michele Ruta:
No, thanks. That’s an area that we at the Fund have been trying to push the other international organizations to try to discuss in this report. Because I think it’s a fascinating area, but it’s an area where we don’t know enough. Now, the payment systems, and obviously currencies are at the core of payment systems, are somehow the backbone of international trade. It’s something that I, you know, when I was working here at the WTO, I didn’t realize that moving to the fund, it came out more clearly to me. And so digital currencies have a lot of potential. This potential comes from the fact that essentially they can make cross-border payments more efficient, and second, that they can reduce some gaps that are in trade finance. So they have potentially a very large role. At the same time, and I think this is in line with what we have heard in other areas, there are important challenges. So let me just highlight two. So one is just as anything that has to do with digital, there is a need for investment in infrastructure, and especially in regulatory, in new laws. And this requires regulatory cooperation. The second element is that digital currencies, in addition to the benefit that they can bring, can also bring more exclusion. And this relates to the broader argument of digital divide. So if they become more prominent, it’s obviously difficult for those countries or those communities that don’t have access to internet, don’t have access to good infrastructure, don’t have the means to join the system, it’s more likely that they could be left out. So it’s another challenge that needs to be taken out. It’s in line with everything else that we’ve been discussing so far this morning. Thank you very much.

Moderator:
And turning to you, Samika, your last question, because there’s such a big divide. So how do you make digital trade more inclusive?

Shamika Sirimanne:
Okay, this is the another elephant in the room. Okay. I mean, as Ulrich, you said this is a digital transformation is so important. This is the technological revolution of our time. And we cannot let countries and the continents to be left behind. It’s not right. So how do we make it inclusive? I mean, let me give you three points. The governments need to do a lot more to develop the enabling environment. That is a must. And part of the reason governments cannot do much is because they don’t know what it is that they’re supposed to, because there’s no data. So again, can I put this out? Handbook on measuring digital trade, unless you have data, it’s very difficult for you to convince your finance minister to put some large sums of money into projects. So it’s important. And we, because we do this ET-ready implementation, Ambassador, and we are in 50 countries and we have tracked the countries, how do, how they, what do they do, we find the governments have been paying a lot of attention to infrastructure development, 76% of governments are, you know, very much into that, 77% of implementation rate. And they are also working very hard on, a lot of developing countries have payment solution, but mostly domestic, like 63% of implementation rate. Access to finance is not really taking up, and a lot of unfinished business around skills and regulations. So governments have a role to play. Number two, for the development partners, we need to scale up support to least developed countries and other developing countries. At the moment, despite we all talk about this digital revolution, enabling this sector currently represents only about 2% of total aid for trade commitments and 1% of total disbursements. And that’s, to me, I really don’t understand. Number three, us, we here, sitting there, we need to have integrated support by development partners, because we, as Mona, you said, and Michelle, you also mentioned, we have different competitive advantages. If we come together, because the problems are immense, we have to come together. And, for example, we do this, UNCTAD, we have an e-trade for all initiative, and it’s almost like a clearinghouse. We all come together, and countries will come to us for payment systems. I mean, we don’t do payment systems in UNCTAD. We would go to the World Bank and say, okay, you know, please take care of this. And that kind of coalitions are necessary for international organizations, because what we need out there is big. So last, let me put another plug. I don’t know, I’m doing a lot of advertising for our, we have the UNCTAD e-week coming on the 4th of December, and there will be a lot of these conversations around that, and also a lot of conversations around the data governance issues. We haven’t even gone into that. Because unless you have that resolved, cross-border data governance issues, and that will be yet another barrier to do international trade in this area. Thank you.

Moderator:
Thank you. Any other Jamaica questions? The lady on the right.

Audience:
Thank you so much, and thank you for this exciting panel. Most of my questions are to Mr. Ralph Assa. You mentioned that open trade regime plays a fundamental role in not only allowing businesses to access digital technologies, but the only country that is really competitive with the United States in terms of these digital behemoths is China. And as far as I know, they did not do so through an open system. Europe has an open system, and it cannot compete with the U.S. businesses that are active in these markets. So if the U.S. doesn’t have anywhere near the market share of industries as U.S. or China, how can you expect developing countries using that same open system to be able to compete? And on tax, we went through the same debate in the United States with Amazon. At first, they didn’t have to collect sales tax. When we started having the debate saying that they were putting thousands of MSMEs out of business by not having to pay taxes, just like is happening on the international sphere now. they said that it would make them go out of business but it didn’t they now do administration of tax collection still around as far as i can tell and actually some of our local businesses uh… local bookstores have come back now on development the way to help countries take advantage of digital trade are the issues that shamika was talking about helping them scale up their infrastructure but none of those issues for supporting e-commerce are in the digital trade rules instead we’re talking about banning governments from being able to require a local copy of data to be stored locally which would prevent them from being able to do it digital industrialization themselves and i have been on government being able to require the disclosure of source code which we’ve just had the situation and the need to regulate a i completely explode in the last four months and yet the digital trade rules would prevent government to be able to appropriate regularly a i because it bans the disclosure of source code and you also said that the nondiscriminatory taxation systems represent an alternative leftist sort of way to collecting government revenue cdm are one of the most trade-destroying ways to achieve climate objectives because it’s imposing trade taxes and forcing other countries to pay for the emissions of the e-mail but you guys are advocating carbon pricing now the most trade distortion of trade around the globe which artificially intervenes in economies to create monopolies and artificially increased prices is patent so if we had a waiver on technology patents in climate or in digital it would really scale up so would you mind just dropping up a little bit then we can go to the next question yes ma’am i agree so i’m interested in why you guys seem to keep cherry picking data that actually supports the agenda of the developed countries instead of taking a look at what would actually support developing countries to participate more switzerland has a netflix tax let’s let the moratorium expire and see what happens i don’t think there’s going to be a huge explosion of taxes but countries will have the right to be able to use it strategically for their own development including potentially building up their own domestic industries, which they have a difficult time doing when they’re being slaughtered by digital imports. Thank you.

Moderator:
Thank you very much. We’ll take two more questions, one from here and one from there. So the middle question first, ma’am. Thank you. And one more, and then we’ll get all the panelists to give a quick comment on that. Please go ahead.

Audience:
Okay. Thank you so much for the opportunity. My name is Michelle Mazuisa. I’m from the African Women’s Development and Communication Network based in Nairobi. Can you hear me? Okay. So digital trade is fairly new for me, so please bear with me. My questions could be pedestrian, but I have three questions. The first one pertains to the stats that were given about three quarters of businesses in Africa that are exclusively operating in e-commerce being run by women. I hope you can hear me. You look like you can’t hear me. Okay. All right. So the question that I have there is, what measure was used to come up with those numbers? The reason I’m asking is because having a large number of women operating in e-commerce is not the same thing as looking at the market margin and the profit margin, which is typically dominated by large corporations. So I wonder if in the report, the full report, which I haven’t had access to, actually details the challenges surrounding that or balances that argument so that we don’t have just one perspective, because we also know there’s a digital divide and so forth. I’ll quickly move to the second question. My second question pertains to the issue of taxation of customs duties. The current moratorium makes it difficult for developing countries, as you are aware, to collect revenue, which is important for the realization of human rights and also for the provision of public services for which many women are dependent. But also you mentioned value-added tax, which the OECD itself has reported that because of women’s consumption patterns, women’s income, which is usually lower than men’s because of the wage gap and because of precarious employment conditions, structurally VAT has disproportionately negative effects on women. So I wonder what are your thoughts on that, having made your contribution on customs duties and value added tax. And then my last question relates to business and human rights. I am happy that there are so many organizations that are here meeting together to talk about trade, which largely relies on businesses operating across the globe. So what is your perspective on the role that the WTO should be playing in the conversation on business and human rights, considering that the business and human rights treaty under the UN framework is not really progressing? And climate change is one of the aspects, but what more tangible role is the WTO planning to take in this discourse? Thank you.

Moderator:
Thank you. That was one question within three parts. Next speaker.

Audience:
I am Pritam Banerjee from the Center for WTO Studies in India. I have a question about the report itself and some of the assumptions. So we know that there is a rapidly changing technology as far as things like 3D printing is concerned, but not just 3D printing, but automated manufacturing, et cetera. So what can be done remotely, both in terms of manufacturing, so when you talk about digital trade, and in terms of services, is a very dynamic field. Similarly, we know in customs administrations around the world, technologies are evolving very, very fast, and how they can actually monitor and tax these activities, the capacities are increasing very, very rapidly as well. So your assumptions on both these aspects, to what extent trade can be digitized in the sense that they can be done remotely, and also in terms of how customs can capture these activities and tax them, would define your total, the results that you have come to. So I would be very interested in the assumptions that you made. as to what extent of trade, both in goods and services, can be digitized, by what time, and the ability of customs, given the change in technology, to be able to tax it, because your final results are absolutely dependent on the two assumptions on this count.

Moderator:
Thank you very much for that. I think we all have to go to panels after this one, but, Ralph, I’ll give you the floor, followed by Ulrich, and then IMF, and Mona, and then finally Shamika. Ralph, you have the floor.

Ralph Ossa:
Yeah, thank you very much. I need to run in a minute, so thank you very much for giving me the floor. I mean, I really like, you know, the public forum, and that we, you know, can have these exchanges that we sometimes don’t have, you know, when we are in our echo chambers. I guess I’m very grateful for the remarks, even if they’re critical at times. You know, one thing I do want to say is that I think we are really way past this mindset of, you know, let’s stabilize, let’s liberalize, and let’s privatize, and then the world is going to be good. And I think that W.E. Joe’s also, you know, past this mindset, if it has ever been there. I mean, I haven’t been here for that long. But we are certainly not saying that, you know, all you need to do is liberalize digital trade, and then, you know, life is all good. In fact, this very initiative here, you know, I think is testament to the fact that this is exactly not what needs to be done, and that, you know, we need to reduce trade costs and digitally deliver services, but we also need the skills upgrading. We also need the infrastructure, and we need to all come together to deal with these issues collectively. So for me, you know, it’s just a very important point that, you know, I also, you know, really want to convey, that we also see this as a challenge that needs cooperative approaches in many domains, and not just in trade policy. So let me maybe stop there. I’ll just briefly echo and build on what Ralph said. Even also the OECD, we are not just saying liberalize, liberalize, like we perhaps did many decades ago. We understand fully that also when we talk about trade, although we are a very, very staunch defender of the multilateral trading system and the W.E. Joe. We do realize that there are social concerns, environmental concerns, climate concerns, and, like it or not, in a world with geopolitical friction, the national security concept is also encroaching on trade, investment, technology, research, and so on. These are facts of life, so if you want to preserve globalization, you want to re-globalize, and you want this next big digital transformation agenda to succeed, we have to be mindful of all these things, of course. And I don’t have answers to all the three parts of your question around gender and trade, but I think it’s extremely important, and we at the OECD are launching new work on trade and gender, so thanks for putting that also to our attention today. Thank you. Michel?

Michele Ruta:
Yeah, thanks for the question and the comments. Just a couple of points to clarify. So the argument that we were making, that I was making, and that we have in this paper, is not an argument against taxes. Obviously, governments need to impose taxes in order to finance the public goods that are needed. The argument that we were making is an argument against the use of discriminatory taxes. So that’s the point. And it’s an argument about, essentially, efficiency, and efficiency is in the interest of everyone, and it’s in the interest of developing countries. So that’s the main point. That said, I agree with the comments that were made. There is a need to invest more in capacity development, because doing this transition to different upgraded tax systems requires investments, and many developing countries need support on that. The Fund does quite a bit, but obviously could always do more in this area. And the other point about the inclusion and women, it’s a well-taken point. But let me be clear, I don’t think there is any evidence that tariffs promote women. If the report that was done by the World Bank and the WTO last year would suggest exactly the opposite. There is a different argument, which I agree, that different types of taxes, income taxes, VATs, and other domestic taxes can have different effects on inclusion, and that’s an important argument. In recent years, in line with what my colleagues were saying at the IMF, we have entire divisions that deal exactly with the issue of inclusion, and so they spend a lot of time looking into these things, including how tax systems can be designed to promote inclusion. But tariffs are certainly not the way to promote inclusion. Thank you.

Mona Haddad:
And thank you again for your questions. It’s very important to us to hear your questions and listen to your concerns, and we take that very seriously. I want to say that I’m a strong believer of trade. Trade has provided, and I’ve seen it in my eyes, I have seen countries really grow tremendously and much faster because they engaged in trade and were able to take advantage of the opportunities of trade and the global market. I have seen this in Morocco, in Laos, in Cambodia, in Vietnam, in Mauritius, and in so many other countries. So trade truly offers an opportunity for development for the developing countries that we deal with. Having said that, today is absolutely not the same world as 10 or 15 years ago. There are many other concerns that are coming to the fore. We cannot anymore just talk about trade liberalization. There are issues of climate, human rights, as you mentioned, national security, access to critical minerals, and inclusion, not only women but also the youth. and disadvantaged, lagging regions and so on. So the trick is really to be able to come up with a new offer on trade that allows developing countries to take advantage of the opportunities from trade and at the same time do it while in a sustainable manner, looking at all these factors. Thank you.

Shamika Sirimanne:
Thank you so much. I mean, there were so many questions asked. I think we probably have to go into another session to answer these questions. Two things. The women have enormous opportunities in this emerging digital world, but what we see in our own work, we have a mentoring program, e-trade for women program. What we see is the women are facing basically double difficulties. The things that they are facing, the analog world, and now they have another layer of the digital world. But the opportunities for women to be away from a brick and mortar shop and to open up for the whole world and to sell goods from their home while they have their caring duties, this is immense. And I think we need to pay a lot of attention to this. And the last point, I think everyone talked a bit about the whole data governance issues. And I just want to say the cross-border data is not just a trade issue. So please be aware of that when you’re doing your negotiations. Cross-border data is a development issue. Cross-border data, you need cross-border data to do trade because otherwise you’re not going to have international trade. But the cross-border data is also extremely important. We saw during the COVID-19, the genome of the virus was shared among many scientists across the world. And that’s how we got these vaccines going real fast. And that sharing of data needs to be there. As we are facing climate change, we have to share a lot more data. The data sharing mechanism should be there. Yes, data has a private angle, data is a trade angle, but data is a much bigger thing. And the human rights is also a data issue. So please be aware the data governance, the cross-border data governance is much bigger than trade. Thank you.

Audience:
No, but the question on the assumptions that you have made, because that’s the fundamental part of the report results, you know, what you can digitize and do remotely, that will define what you can tax or not tax. So for example, if I can manufacture a car completely using robotics and digitally somewhere inside the country, instead of importing it physically, that takes away the revenue that I can apply on importing that car. So the conclusions you came to would depend critically on the technologies that you assume will happen in the next five to 10 years.

Moderator:
Thank you for the comment. I think there are going to be many, many more questions like this in the room. Ralph, did you want to add something?

Ralph Ossa:
Yeah, I mean, I think it’s a, I’m not trying to dodge the question, I just have to run to a panel and I promised to meet the speaker at 12, so he’s probably freaking out on the other side of the building. But I’m happy to follow up. I mean, the quick answer, I mean, you’re asking about the tax implications of the moratorium. And you know, as I’ve said, in the presentation, there are all sorts of measurement issues. The best guess we have so far is that the revenue implications are not, you know, that massive. But, you know, of course, there’s all sorts of assumptions and we can follow up perhaps afterwards on this issue. So feel free to reach out. By the way, also to you, I would, I mean, I’m happy to meet for coffee or something because I really want to, you know, hear these things and really understand and discuss. And so I’m not trying to dodge it, I just really need to run.

Moderator:
Ralph, thank you. You beat me to it. I was just going to say, you know, there are thousands of questions still in the room. It’s just that we have a time constraint. So I would say, panelists, don’t go away, and those you want to engage with, feel free to contact them and to talk to them. The good thing about this is that there’s engagement. People actually want to discuss this. So I think it’s a really very good thing that way. And it’s going to be digital engagement, if I may say. Absolutely. But thank you. Thank you for the panelists for being here this afternoon, this morning. We’ve reached afternoon already. And thank you for all the participants for your questions, your comments. Sorry we had to cut some of you short. But thank you again, and have a great day. Thank you.