Information technology and e-commerce
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Are digital advances and inclusive growth compatible goals? Implications for trade policy in developing countries
Recent years have seen policymakers give increasing attention to two significant widespread phenomena: rising inequality (the result of uneven access to productive employment) and the quickening pace of the Fourth Industrial Revolution (4IR) or “digital era”. This chapter explores the concept of inequality and why it is important to promote more inclusive growth especially in developing countries. It also offers insights into how digital advances can serve to accelerate inclusive growth provided countries have well-informed policies regulations and institutions to drive the necessary changes. It is evident from a crosssection of the literature and the initial results from a study on the effects of digital advances on inclusive growth in Africa that digitalization and inclusive growth are ideologically compatible. The areas requiring special attention by policymakers in developing countries include: (i) the problem of data inadequacy; (ii) uneven and costly digital connectivity; and (iii) education systems that are not preparing entrepreneurs for in-demand jobs or for the workplace of the future. Two of the prerequisites for leveraging digital technologies in order to drive more inclusive growth are an effective regulatory framework and a commercial environment that is both trade- and investment-friendly.
Taxation of international e-trade: Russian particularities
Tax rates on e-commerce in Russia should remain moderate given the small size of its digital trade operations (so the rise in tax revenues from higher rates would be small) and substantial growth prospects (so future tax revenues from a developed sector could be quite large). The Russian Federation’s (Russia’s) taxation of e-commerce activities presents two important challenges. First consumer goods purchased directly from foreign online sellers enjoy significant tax advantages compared to imports purchased in Russian retail outlets undermining the profitability of Russian importers and reducing tax revenues. Second the value-added tax (VAT) levied on foreign exporters of electronic services creates uncertainty because the legal definition of electronic services is unclear and impedes the operations of multinational companies in Russia because VAT is taxed on intra-firm imports of services. Russian authorities are establishing effective automated systems for collecting taxes and customs duties on cross-border e-commerce calculating VAT compensation to exporters and accounting for receipts from online stores. These systems will help to prevent abuse of the tax system as well as reduce the cost of compliance by firms.
Convergence on e-commerce: the case of Argentina, Brazil and MERCOSUR
E-commerce is growing rapidly in Argentina and Brazil and in both countries the share of the population participating in e-commerce transactions exceeds the Latin American average. Both countries have established a legal framework for data protection regulation of the internet consumer protection taxation of e-commerce and contracts and e-signatures. Argentina and Brazil also have submitted proposals for negotiations over the treatment of e-commerce transactions in WTO Agreements and included e-commerce provisions in free trade agreements (FTAs). However different approaches to internal regulation of e-commerce and differences in positions in international negotiations indicate diverging regulatory approaches that will increase legal uncertainty and thus constrain investments and market expansion in the sector. An exception is the regulation of data protection where both countries are following principles laid out in the European Union’s General Data Protection Regulation (GDPR). Further negotiations between the two countries over regulatory convergence for e-commerce could best be undertaken through the Southern Common Market (MERCOSUR).
Engaging in the digital economy: issues and agenda in the quest to adopt Indonesia’s e-commerce roadmap
The study explores structural and practical issues following the adoption of Indonesia’s e-commerce roadmap (2017–2019) and its implications for the future of the country’s digital economy. Two major categories of issues are examined in order to identify problems and challenges confronted by related stakeholders. The first category i.e. the structural one relates to the larger governance context of the country’s digital economy to which e-commerce activities are attached. The governance context includes the legal and regulatory context the institutionalizing mechanism and the implementing phases which involve socio- and politico-economic interplays among its key players. The second category represents practical dimensions which involve questions on the mitigation of and adaptation to concepts models and practices in the digital economy. Indonesia’s position on the moratorium on e-commerce and the local initiatives on digital economy are presented to illustrate mitigation efforts by related stakeholders in areas where disagreements and negotiations on certain structural and practical policy issues have arisen i.e. on Indonesia’s position on the World Trade Organization (WTO) moratorium on e-commerce and local initiatives (such as the ones in Yogyakarta) to develop a digital economy.
Note on the WTO Chairs Programme
The WTO Chairs Programme (WCP) was launched in 2010 as a capacity-building project. It aims to enhance knowledge and understanding of the trading system among academics and policymakers in developing countries through curriculum development research and outreach activities by universities and research institutions. Information on the WCP is available at www.wto.org/wcp.
Foreword
We are pleased to deliver preliminary remarks to this compilation of research work on digital trade prepared by the WTO Chairholders Advisory Board members and the WTO Chairs Programme (WCP) team of the WTO Secretariat.
China’s e-commerce development and policy relevance
The dollar value of e-commerce transactions in China has increased enormously over the past 20 years supported by improved infrastructure the rapid growth of mobile telephony and increased financing. The market also is characterized by increasing diversity for example the growth of e-medical services the expansion of cross-border e-commerce and the development of online-offline transactions. China’s national government has played an important role in the development of e-commerce through policies elaborated in five-year plans while regional governments also have participated in planning and adjusting the e-commerce policy framework in light of local conditions.
Assessing trade facilitation implementation in the era of e-commerce: a comparative analysis of Jordan, Oman and Hong Kong, China
The emergence of e-commerce is driving important changes in the ways of conducting international trade. It has become clear that improvements in trade facilitation implementation should be supported by electronic systems. Through a comparative study of a number of reports issued by international organizations – the International Telecommunication Union (ITU) the Organisation for Economic Co-operation and Development (OECD) the United Nations Conference on Trade and Development (UNCTAD) and the World Bank – on topics of e-commerce logistics and trade facilitation we examined the status and performance of Jordan Oman and Hong Kong China. Based on this analysis Hong Kong China shows one of the best practices of modern trade facilitation and customs and we found that governmental willingness is influential in expediting trade facilitation provisions. Jordan and Oman recently made trade reforms to improve trade facilitation but they still need to bridge the gap between policy and actual practice in all governmental organizations in terms of trade facilitation and e-commerce as well as build citizens’ capacity. By improving the implementation of trade facilitation measures and increasing e-commerce capacity as Hong Kong China
Global value chains in the age of internet: what opportunities for Africa?
This chapter analyses the impact of the internet on global value chains (GVCs) in Africa. We investigate the effect of internet adoption on forward participation and backward participation of African countries in GVCs. We conduct the estimations using country-level data from the United Nations Conference on Trade and Development (UNCTAD) Eora GVC database and firm-level data from the World Bank’s Enterprise Survey. We test whether internet adoption facilitates the participation of Africa in GVCs at the country level and the firm level. We find that internet use and internet infrastructure are more important for African firms and African countries in terms of forward GVC participation. To conclude empirical results show that the internet increases GVC participation in Africa. African countries and firms need to improve internet infrastructure in order to make the best of integration into GVCs.
The digital trade era – opportunities and challenges for developing countries: the case of Kenya
E-commerce has grown rapidly in Kenya supported by laws governing information and communications technology (ICT) services e-commerce transactions data protection and access to information. The government has established one-stop shops for the provision of government services to citizens and for trade logistics. The country is well positioned to expand its digital trade with the establishment of the Africa Continental Free Trade Area (AfCFTA) given the policies outlined in the government’s Digital Economy Blueprint. The growth of digital trade will open up new opportunities for the provision of online services promote export diversification boost efficiency and growth in manufacturing improve competition in the financial sector increase access to market-relevant information and increase market access for micro small and mediumsized enterprises (MSMEs). However the potential of digital trade is constrained by lack of access to financial services low income limited broadband and fibre coverage inadequate transport infrastructure and skills gaps. Kenya’s legal and regulatory framework is insufficient to protect against cybercrime ensure privacy support the interoperability of mobile money platforms and banks promote consumers’ trust in online transactions protect intellectual property and protect digital sites from liability for customers’ posts.
Data regulation in trade agreements: different models and options ahead
“Data is the new oil”. Just like oil which powered the economy in the last century data are what moves the world today. This is especially true for international trade. The crucial role played by data can be observed at every step of the process from the conception of a new product and the sourcing of raw materials and parts to the manufacturing process and the transportation of products across borders until they finally reach the hands of consumers from every corner of the world.
The impact of digital technologies on developing countries’ trade
Using the World Trade Organization (WTO) Global Trade Model (GTM) a recursive dynamic computable general equilibrium model we examine the potential future impact of technological innovations in the form of robotization and use of artificial intelligence (AI) servicification of the production process and falling trade costs due to the rise of online markets and platforms on the trade of developing countries. The simulations show that technological change will boost trade growth as a result of both falling trade costs and the more intensive use of information and communications technology (ICT) services. On average between now and 2030 global trade growth would be 2 percentage points per annum higher as a result of digital technologies. Further developing countries’ trade growth would be 2.5 percentage points per annum higher and the increase in their share of global trade will be more pronounced the faster they are able to catch up technologically. Another finding from the simulations is that services exports will become a bigger part of global trade making up more than a quarter of total trade by 2030 and technological changes tend to increase the share of services imports in manufacturing gross output. Finally these technological developments do not appear to portend a reshoring or localization of production suggesting that future technological change can go in hand in hand with continuing globalization.
E-commerce in Africa: issues and challenges
This chapter analyses the potential for e-commerce activities in Africa. The rapid growth of internet penetration and the use of mobile telephony along with the adoption of mobile innovations that have greatly boosted financial inclusion and encouraged reliance on electronic payment have established a strong basis for e-commerce development on the continent. On the other hand still-low banking rates fragile laws and regulations governing the sector and a lack of cross-country harmonization of these rules constrain African e-commerce. Reducing cybercrime increasing participation in the financial sector and strengthening of the legal framework are key steps to promote e-commerce activities.
Acknowledgements
This third book prepared under the auspices of the WTO Chairs Programme (WCP) Adapting to the digital trade era: challenges and opportunities contains contributions from the WTO Chairholders of Phases I and II Advisory Board (AB) members WCP team and WTO staff members who peer reviewed individual chapters and offered their perspectives on the Chairs’ analyses and findings. It contains a total of 16 chapters and 13 commentaries providing various insights on digital trade. Several chapters were presented as working papers during the Aid for Trade side event held at the WTO from 3 to 5 July 2019 and during an academic WCP session held at the Public Forum on 9 October 2019. These events provided opportunities to AB members academics delegates policymakers and representatives from civil society to comment on the papers and discuss the policy options emanating from the analyses.
Converging thoughts on digital trade in preparing for the future
There is a growing convergence on the view that the factor having had the most significant impact on trade in recent years is the introduction of new and innovative technologies. The speed and intensity of the IT evolution are affecting trade and more generally our day-to-day lives in unprecedented ways. It has rendered interactions possible between humans between humans and machines and between machines in ways that could not be imagined even a few years ago. The digital era is a new reality and it is driving economic growth and development. It poses both challenges and opportunities on all levels. It offers an opportunity for developing countries to better participate in international trade e.g. through global value chains (GVCs) but there is no prescription how to do that.
The digital creative economy and trade: strategic options for developing countries
The creative sector is an important source of growth in the global economy and digital creative trade has increased sharply in recent years and particularly in the context of COVID-19. Digital content is replacing physical goods in the sector for example in music books and gaming. Digital aggregators like Amazon Apple Netflix Spotify TikTok and YouTube have fuelled rapid growth and diversified earnings towards streaming ad-supported income and data monetization. Copyright revenues are also rising and the share of digital collections is the fastest growth segment. Participation in the sector by developing countries appears to be increasing although data availability is poor. To reap the potential benefits of the digital creative economy developing countries should support a shift from the typical low value-added stand-alone practitioner industry model to a strategic collaborative approach that facilitates higher levels of creative and digital entrepreneurship. This will require a stronger legal and institutional framework to improve leverage and monetize copyright financial support for the commercialization of creative activities government involvement in business support services (e.g. training incubators innovation labs market incubators cluster development and market development programmes) the creation of enabling institutions to represent the interests of creative workers and firms and the harmonization of government policies towards the sector.
Introduction
Digital innovations are transforming the global economy. The decline in search and information costs rapid growth of new products and markets and emergence of new players ushered in by digital technologies have the promise of boosting global trade flows including exports from developing countries. At the same time digital technologies are also threatening privacy and security worldwide while developing countries that lack the tools to compete in the new digital environment are in danger of being left even further behind. This book from the World Trade Organization (WTO) Chairs members of the Advisory Board and WTO Secretariat staff examines what the rapid adoption of digital technologies will mean for trade and development and the role that domestic policies and international cooperation can play in creating a more prosperous and inclusive future.
Convergence on e-commerce: the case of Argentina, Brazil and MERCOSUR
E-commerce is growing rapidly in Argentina and Brazil and in both countries the share of the population participating in e-commerce transactions exceeds the Latin American average. Both countries have established a legal framework for data protection regulation of the internet consumer protection taxation of e-commerce and contracts and e-signatures. Argentina and Brazil also have submitted proposals for negotiations over the treatment of e-commerce transactions in WTO Agreements and included e-commerce provisions in free trade agreements (FTAs). However different approaches to internal regulation of e-commerce and differences in positions in international negotiations indicate diverging regulatory approaches that will increase legal uncertainty and thus constrain investments and market expansion in the sector. An exception is the regulation of data protection where both countries are following principles laid out in the European Union’s General Data Protection Regulation (GDPR). Further negotiations between the two countries over regulatory convergence for e-commerce could best be undertaken through the Southern Common Market (MERCOSUR).
Global value chains in the age of internet: what opportunities for Africa?
This chapter analyses the impact of the internet on global value chains (GVCs) in Africa. We investigate the effect of internet adoption on forward participation and backward participation of African countries in GVCs. We conduct the estimations using country-level data from the United Nations Conference on Trade and Development (UNCTAD) Eora GVC database and firm-level data from the World Bank’s Enterprise Survey. We test whether internet adoption facilitates the participation of Africa in GVCs at the country level and the firm level. We find that internet use and internet infrastructure are more important for African firms and African countries in terms of forward GVC participation. To conclude empirical results show that the internet increases GVC participation in Africa. African countries and firms need to improve internet infrastructure in order to make the best of integration into GVCs.
Converging thoughts on digital trade in preparing for the future
There is a growing convergence on the view that the factor having had the most significant impact on trade in recent years is the introduction of new and innovative technologies. The speed and intensity of the IT evolution are affecting trade and more generally our day-to-day lives in unprecedented ways. It has rendered interactions possible between humans between humans and machines and between machines in ways that could not be imagined even a few years ago. The digital era is a new reality and it is driving economic growth and development. It poses both challenges and opportunities on all levels. It offers an opportunity for developing countries to better participate in international trade e.g. through global value chains (GVCs) but there is no prescription how to do that.