E-commerce and trade

We engage in e-commerce transactions several times a week, whether we know it or not. Have you recently purchased a digital product such as software, movie, e-book, or service (e.g. buying tickets to a concert)? Have you ordered a physical product such as clothing and paid online? Have you ordered a physical book from a website and paid cash upon delivery? All these examples can be classified as e-commerce. In 2021, over 2.14 billion people worldwide are expected to buy goods and services online, up from 1.66 billion global digital consumers in 2016.

Global flows of goods, services, and finance have historically underpinned economic and social development. These flows have been transported in many ways: in ships across oceans, in chariots, in trucks over paved roads, and by cargo planes. In the 21st century, global flows are increasingly carried by datagrams – packets of digital information flowing through fibre-optic cables.

The ability to make data flow instantaneously through the Internet and the digitisation of information have transformed the composition of world trade. The impact of cross-border data flows on GDP growth is now larger than the impact of the traditional flow of goods. The fact that digital flows underpin and enable every other kind of cross-border flow helps explain this changing scenario: Even when ships carry physical products, customers increasingly order and pay online.

The most visible interfaces connecting individuals to global flows are digital platforms. Amazon and Alibaba are the world’s largest e-commerce companies, maintaining enormous market shares. Platforms facilitate access to market information and reduce transaction costs for consumers. They have the potential to democratise e-commerce by allowing micro, small, and medium enterprises (MSMEs) to have access to the global market. Nevertheless, many MSMEs face obstacles to access these platforms, such as platform fees. It may also become difficult for MSMEs to compete with the products offered by the platforms themselves.

The World Trade Organization (WTO) and e-commerce

As the key policy player in modern global trade, the World Trade Organization (WTO) has established a system of agreements regulating international trade, namely: The General Agreement on Tariffs and Trade (GATT) dealing with the trade in goods; the General Agreement on Trade in Services (GATS); and the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS). Other important agreements developed at the WTO include: The Information Technology Agreement (ITA) in 1996, with an impact on the price of hardware and connectivity; the ITA-II in 2015; and the agreements and reference documents that guided the global opening of telecommunications services such as the GATS Annex on Telecommunications, the Fourth Protocol on Basic Telecommunications, and the WTO Reference Paper on Basic Telecommunications.

Specific work on e-commerce has been conducted under the WTO’s Work Programme on Electronic Commerce, established in 1998. The programme instructed four councils of the WTO to examine and report on the treatment of e-commerce to the general council. Over these last two decades, digital regulation has been a significant component of trade talks. Discussions on e-commerce have traditionally touched on online consumer protection, privacy, and authentication. However, the explicit connection between trade and digital issues has only been established recently, for which important topics include: cross-border data flows, data localisation, intermediary liability, provisions on access to the source code of computer programs, and spam control measures.

In that context, opinions have been divided between members of the WTO who show willingness to develop binding frameworks in the field of e-commerce and members who believe that the WTO should focus on other priorities (such as access to infrastructure and digital skills) before discussing regulatory frameworks. Due to the lack of a general consensus, in March 2019, over 70 WTO members decided to start plurilateral negotiations on an e-commerce treaty.

The goals of the group have been expressed in two documents: the Joint Statement on Electronic Commerce (WT/MIN(17)/60) released at the 11th Ministerial Conference in Buenos Aires in 2017 and the second Joint Statement (WT/L/1056) released during the 2019 World Economic Forum Annual Meeting in Davos, These documents establish the intention to begin e-commerce negotiations at the WTO, based on existing WTO agreements and frameworks. The work of the JSI is led by negotiating rounds that revolve around 15 categories of issues, clustered in focus groups. The outcome of JSI discussions was supposed to be discussed at the 12th WTO Ministerial Conference (MC12), originally scheduled to take place in Kazakhstan in June 2020, but has been postponed due to the COVID-19 outbreak.

E-commerce in regional trade agreements and economic integration arrangements

The ever-growing importance of digital commerce has found its way into regional initiatives, including regional trade agreements (RTAs). Nowadays, a growing number of RTAs worldwide have standalone digital commerce chapters. They include provisions on several topics, such as the elimination of customs duties, consumer protection, digital authentication and e-signature, paperless trade, cross-border data flows, and data localisation.

Provisions related to digital commerce are also common in economic integration arrangements and initiatives. The EU, for instance, has launched a Digital Single Market Strategy with a strong focus on digital commerce, aiming to facilitate better online access to digital goods and services, and to strengthen the digital economy as a driver for growth. The EU has also implemented an E-commerce Directive, as well as a set of other legal instruments dealing with e-signatures, data protection, and electronic financial transactions.

In the Asia-Pacific region, the focal point of digital commerce co-operation is the Asia-Pacific Economic Cooperation (APEC). APEC has established the E-Commerce Steering Group, which addresses various e-commerce issues, including consumer protection, data protection, spam, and cybersecurity. APEC’s most prominent initiative is the Paperless Trading Individual Action Plan, which aims to create paperless systems in cross-border trade. Within the Association of Southeast Asian Nations (ASEAN), the Working Group on E-commerce and ICT Trade Facilitation has initiated the E-commerce Legal Infrastructure Project in order to formulate guidelines for an e-commerce legal infrastructure and facilitate the development and growth of trusted e-commerce within ASEAN countries.

Other international e-commerce initiatives

One of the most successful and widely supported international initiatives in the field of e-commerce is the UN Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce. The focus of the model law is on mechanisms to integrate e-commerce with traditional commercial law (e.g. recognising the validity of electronic documents). The model law has been used as the basis for e-commerce regulation in many countries. Another initiative designed to develop e-commerce is the introduction of e-business XML (ebXML) – a standard for the secure exchange of business data – by the UN Centre for Trade Facilitation and Electronic Business (UN/CEFACT).

The Organisation for Economic Co-operation and Development (OECD) touches on various aspects related to digital commerce, including consumer protection and digital signatures. Its involvement in digital commerce issues started with the 1998 Action Plan for Electronic Commerce, structured around four main issues: building trust for users and consumers, establishing ground rules for the digital marketplace, enhancing the information infrastructure for electronic commerce, and maximising its benefits. Such issues have since been tackled in OECD recommendations and guidelines.

The UN Conference on Trade and Development (UNCTAD) is particularly active in research, analysis, capacity development, and technical assistance, focusing on digital commerce for development. It monitors the evolution of the information economy and publishes the Information Economy Report each year, which assesses the role of new technologies in trade and development. An innovation introduced in UNCTAD’s 2015 Information Economy Report on digital commerce was the ICT Policy Review Programme’s (ICTPR) Integrated E-commerce Assessment and Enabler Strategic Framework. The framework advanced an integrated, holistic, and systematic approach to formulating and assessing national e-commerce strategies by considering eight strategic policy areas ranging from ICT infrastructure and telecom services to electronic payments. UNCTAD maintains a Global Cyberlaw Tracker, a repository of information concerning digital commerce related national legislation.

In 2016, UNCTAD launched the eTrade for All Initiative, a multistakeholder initiative aimed at improving the ability of developing countries to use and benefit from digital commerce. The platform enables different stakeholders to share resources and experiences in developing digital commerce projects and to facilitate mobilising resources among member countries.

The International Trade Centre (ITC) provides capacity development through a set of solutions that enables small and medium-enterprises (SMEs) to trade via digital channels. The ITC also provides advice for policy formulation with the objective to facilitate SME participation in digital commerce.

The World Intellectual Property Organization (WIPO) recognises the strong interplay between Intellectual Property and e-commerce, and has published a primer on the issues related to both subjects. WIPO considers e-commerce to be important to intellectual property (IP) because a significant portion of the main component value traded by e-commerce is essentially IP: music, pictures, software, designs, and more. IP is also essential for e-commerce to function since many of the systems that facilitate electronic marketplaces and transactions forms of IP and protected by IP rights,

The UN Industrial Development Organization (UNIDO) is also concerned about e-commerce and strongly supports the development of related initiatives around the world where it believes that its systematic co-operation platform might be used to promote the facilitation of trade and expansion of export opportunities through harmonisation of standards, especially within the BRICS countries. UNIDO has produced a report on the development and co-operation between SMEs in China and BRICS countries through e-commerce.