Could global trade rules on e-commerce do more harm than good?

Photo by: Negative Space

The internet has transformed the way companies and consumers do business. While global trade growth has been slow for several years, the value of online business grew from $16 trillion to $22 trillion between 2013 and 2015.

But many developing countries are being left behind — stranded on the wrong side of the digital divide. In Africa, only 1 in 4 people has access to the internet, and across the developing world the majority of small and medium sized companies still have no online presence.

This month’s “E-Commerce Week” is an effort by the United Nations to speed the entry of developing countries into the global digital economy by strengthening national capacity and encouraging international cooperation.

“E-commerce has the potential to be a major engine for trade and development on a global scale.”

— Mukhisa Kituyi, secretary-general of the U.N. Conference on Trade and Development

Yet as the World Trade Organization mulls introducing global trading rules on e-commerce, in developing countries there is controversy about whether that could cause more harm than good.

Key challenges

The U.N. Conference on Trade and Development — the body behind E-Commerce Week — defines e-commerce as “the trading of goods and services through electronic media.” In practice, that usually means buying and selling things over the internet — whether between businesses, business-to-consumer, such as Amazon, or consumer-to-consumer, such as eBay.

Running from April 24-28 in Geneva, Switzerland, this will be the third and largest installment of a now annual event. It brings together government ministers from at least 10 developing countries alongside senior representatives from the private sector — including Jack Ma, CEO of China's e-commerce giant, the Alibaba Group — government agencies, international organizations and civil society to discuss some of the key obstacles to e-commerce in the developing world.

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Those include weak internet infrastructure, a lack of legal and regulatory frameworks in many countries, cybersecurity, trade barriers and a need for payment solutions.

Several million dollars worth of aid is expected to be announced during the week to help address some of these issues, particularly in the least developed countries. An online platform — "eTrade For All" — will also be launched, intended as an information and matchmaking site for requests for assistance and offers of support between developing countries, development actors and the private sector.

As the digital economy expands, there is a pressing need for “policies that can help to harness e-commerce for sustainable development,” said Mukhisa Kituyi, secretary-general of UNCTAD, in a statement. “E-commerce has the potential to be a major engine for trade and development on a global scale.”

In March, UNCTAD and Egypt’s Ministry for Communications and Information Technology presented a national e-commerce strategy, which notes that e-commerce offers an opportunity for Egypt to “boost exports, create jobs and innovation and inclusive development.” The document urges the country to build on its strengths in the ICT sector: Egypt’s internet penetration is relatively strong at 38 percent.

In addition to helping countries beef up their national e-commerce capacity, “there are trans-border challenges that we have to address,” such as data protection and cybercrime, said Cécile Barayre-El Shami, program manager for e-commerce at UNCTAD.

Speaking to Devex, Pakistan’s Representative to the WTO Syed Tauqir Shah described E-Commerce Week as “a huge opportunity for information sharing.”

“Pakistan’s experience shows that if you provide the right regulatory environment and level the playing field, ICT will flourish and the digital divide will be bridged,” he said.

Global rules

Five minutes down the road from UNCTAD's headquarters in Geneva, the WTO is considering adopting global trade rules for e-commerce to ease some of the trans-border challenges.

The organization says there was a surge of interest from member countries last year in negotiating such rules. Little has been done since 1998, when the organization adopted a “moratorium” on taxes or tariffs on the electronic transmission of goods or services across borders. The moratorium does not prohibit fees on items ordered electronically but imported in physical form.

Many countries feel that trade rules are needed to cover issues such as:

Data storage and privacy: Can countries prohibit credit card and other data on their citizens from being stored by foreign companies?

Digital signature: Should there be international norms by which electronic signatures         would have the same legal validity as signatures on paper?

Cross-border data flow: Should there be rules guaranteeing that data from one country can flow unimpeded through others?

Protection of source code: Should trade rules protect the ownership of digital programs and other materials?

Electronic payments: Should there be common rules to facilitate and safeguard         cross-border payments?

Speaking about the possibility of global rules to govern e-commerce, Pakistan’s Shah told Devex: “This is a train that is not going to stop. We want not only to board this train, but also to have a say in where it goes.”

But developing countries are divided, and some say they are not ready to discuss new rules, which they fear would force them to open their markets to established online companies that dominate the global market. South Africa’s ambassador to the WTO, Xavier Carim, told Devex that rules now would only “lock in the imbalances.”

“Our focus,” he added, is “to build up our capabilities and have a bigger share of this trade.”

Aileen Kwa, coordinator of the trade for development program at the South Center, a Geneva-based research and lobbying group for the developing world, agreed. She also noted that the rapid development of e-commerce can have “profound implications in terms of disrupting [traditional] sectors in countries — just look at Uber.”

Kwa suggested that fast developing online financial services could gut traditional banks in developing countries, for example. Digital trade could even start to undermine traditional manufacturing and retailing, she predicted, as cross-border trade develops with plans for goods to be produced anywhere with 3-D printers.

To help ensure that developing countries can benefit from e-commerce, they need to retain the right to create trade barriers to allow new digital industries to develop inside their own borders and become more competitive, said Kwa, just as they have done in the past to protect manufacturing industries. As digital commerce grows, developing countries must be free to "help their companies deal with it." Adopting global trade rules now could take away their ability to do that, she suggested.

Nonetheless, even among those countries that reject negotiations on trading rules at this time, there appears to be widespread support for the opportunities that this month’s meeting in Geneva offers.

“Because you’re not negotiating rules, this allows for a freer exchange of information,” said South Africa’s WTO Ambassador Carim.

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About the author

  • Burton Bollag

    Burton Bollag is a freelance journalist living in Washington, D.C. He was based for a number of years in Europe (Geneva, Prague and Bratislava) and as chief international reporter for Chronicle of Higher Education reported widely from Europe, Africa and the Middle East. He has also done radio reporting (for NPR from Geneva) and TV reporting from various locations.