Where to next on e-trade at the WTO?

Last month, the World Trade Organization held its annual Public Forum, with over 2,000 participants joining discussions on how to make trade more inclusive. Along with colleagues from the World Bank Group’s Trade & Competitiveness Global Practice, including our Senior Director Anabel Gonzalez, we were at the Forum to hear the views of civil society, business, traders and governments– and to share our thoughts on what we can do to help understand the changing nature of trade, and help developing countries make the most of the opportunities created.
 

One of the key topics being discussed was e-trade. We’ve written before on this blog about our framework for looking at e-trade and some of the most relevant policy issues involved.
 
At the Public Forum, with the McKinsey Global Institute, we organized a session that highlighted developments in e-trade and the implications for international trade policy. For example, Susan Lund, Partner at McKinsey & Company, showed how digital flows are rapidly growing in contrast with goods trade flows, with investments in infrastructure, institutions, and healthy business environments essential for stimulating innovation and productivity. Daniel Crosby, Partner at King and Spalding, addressed the importance of GATS rules in the regulation of the digital economy.
 
More than 20 other sessions were held on different aspects of e-trade. From our perspective, some of the key ideas that emerged from the discussions included the following:
 

• How e-trade can foster inclusion: There was a strong optimism about the potential e-trade presents for bringing new participants into trade. The Forum was full of examples like those of Kenya’s Soko, Serbia’s Farmia, and many others we have worked with through our infoDev program. By lowering the cost of trade significantly, e-trade can be a powerful driver of inclusion for small firms and entrepreneurs, which are least able to absorb high trade costs.

 

• Regulating e-trade without creating distortions: There was a lot of discussion about the trade implications of regulations in areas like privacy and consumer protection. While many acknowledged the need to have or update appropriate regulation in such areas, it is important to do so in a way that doesn’t distort trade. Core WTO principles of non-discrimination need to be upheld. A better understanding of the cross-border spillovers of e-trade related regulations is needed. There is also scope for deeper cross-border cooperation between regulators in order to minimize trade distortions.

 

• E-trade facilitation: Many touched on the issue of whether border procedures could be more effectively structured to facilitate the small shipments that are growing rapidly through e-trade. For example, the Global Express Association highlighted proposals on key procedures for streamlining border procedures that affect small shipment trade, including a more standardized global approach to de minimis duty thresholds, and simplified declarations for low-value trade.

 

• Many existing WTO rules remain relevant despite the fast pace of technological change. A number of speakers reminded us that while technology is changing trade, it doesn’t mean that the existing WTO rules are irrelevant. From the core principle of non-discrimination enshrined in the GATT and GATS to the specific measures in the Trade Facilitation Agreement that facilitate border clearance, much of the WTO framework continues to be relevant.

 

• The digital divide needs to be addressed to take full advantage of e-trade opportunities. The World Development Report 2016 highlighted the scale of the challenge in improving digital connectivity, which is a pre-condition for participating in e-trade: nearly 60 percent of the world’s population has no access to the internet. The infrastructure and policy investments needed to address this will be an essential part of future multilateral efforts on e-trade. This is an area where the Bank Group is already very active and it is clear that demand for support continues to be high.

 

• E-trade lowers trade costs, but it doesn’t eliminate them. Connectivity is not a substitute for reforms and programs to lower trade costs. For example, the debate on border procedures for small shipments shows how long-standing trade facilitation issues are just as, if not more, relevant in a world where e-trade is growing rapidly.

 
The energy for action in the WTO on e-trade was clear at the Forum. Many in the international trade community are looking to a range of ideas - from making the moratorium on customs duties for e-commerce permanent; to taking on services commitments that would particularly facilitate e-trade; to exploring whether approaches taken in FTAs on e-trade could be brought to the WTO. These might not all be short-term objectives but the growing interest is clear.
 
At the same time, it is important to acknowledge that many aspects of the e-trade agenda cannot be addressed through the framework of WTO rules. Issues like the technical aspects of electronic payments, privacy regulations, the skills agenda, or connectivity infrastructure are all essential in facilitating participation in e-trade, but the WTO is ultimately not where international cooperation on these topics takes place.
 
This means that it will be essential to work together with international partners like the World Bank Group, and the private sector and other stakeholders, to provide confidence that action in the WTO will be complemented by efforts outside it. The goal will be to complement efforts in the WTO by intensifying our programs to bridge the digital divide and help countries make the most of the potential offered by e-trade.