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WTO/WCO Study Report on Disruptive Technologies
So-called disruptive technologies such as blockchain the Internet of Things artificial intelligence and machine learning have the potential to transform border management and the conduct of international trade. This publication explores how these advanced technologies can be used to improve the efficiency of Customs processes and to ease the flow of goods across borders.
Holistic use of technologies for Smart Customs of the future
2021 has highlighted the critical role that Customs play in enabling global trade. To make the global supply chains of the future more efficient Smart Customs have to minimize Customs clearance time and costs while intelligently managing inbound and outbound goods and vehicles. Disruptive technologies such as IoT devices are enabling autonomous equipment to drive effective monitoring of cargo and tracking of journeys.
Foreword by the WTO Director General
We live in a time of rapid technological change that has the possibility of profoundly altering the conduct of international trade. For many people keeping up to date with the latest technology and fully understanding its implications can be daunting. This report will help illuminate the so-called “disruptive technologies” that are most relevant to border management as well as assist governments to better understand the challenges and benefits of their use by Customs.
Recommendations
This section provides a set of recommendations regarding the introduction and scaling up of technologies by Customs. These recommendations were provided by Customs the private sector and academia in discussions held on different occasions in the last four years including at the October 2017 Permanent Technical Committee the annual dialogue held between the Private Sector Consultative Group and the Policy Commission in June 2018 the WCO technology conferences and regional workshops on disruptive technologies held in 2021 and 2022 the WTO 2018 research workshop and the 2019 and 2021 Global Trade and Blockchain Forums.
Acknowledgements
The updated Study Report on Disruptive Technologies (2022) is the result of the collective effort of the World Customs Organization (WCO) and the World Trade Organization (WTO) Secretariats working closely with the Member Customs administrations private sector representatives and other stakeholders. The Report was prepared by Milena Budimirovic Özlem Soysanlı Vyara Filipova and Lesego Mmolai from the WCO and Emmanuelle Ganne and Sheri Rosenow from the WTO. Research assistance was provided by Zakaria Imessaoudene from the WTO.
Background
Based on the proposal submitted by the WCO Permanent Technical Committee (PTC) delegates the Future of Customs topic was launched at the 207th/208th Sessions of the PTC in March 2015. This came as a result of discussions on the role of the PTC where it was agreed that the Committee would take a more active role in discussing strategic matters and future-oriented topics.
Introduction: “disruptive…” or (just) “emerging” technologies?
When we talk about “disruptive technologies” what exactly do we mean? According to the Cambridge Dictionary a disruptive technology is a new technology that completely changes the way things are done. Even though we cannot be certain which technologies will accomplish this in the future the public has over the past years broadly accepted “disruptive technologies” as a term which refers to blockchain the Internet of Things artificial intelligence virtual reality drones 3D printing and other cutting-edge technologies which are the subject of this Study Report.
Conclusion
The findings from the Study Report and the case studies provided in the Annex reflect a high level of Customs interest and activity in the testing and implementation of three groups of technologies in particular. Over half of the Members that responded to the WCO’s 2021 ACS are already using IoT AI and ML while only two respondents are currently deploying blockchain technology. Information on numerous pilot projects and PoCs shared by the Customs administrations and other stakeholders show the interest in expanding the use of these technologies as well as the confidence in the benefits they will bring to Customs in achieving its objectives and supporting cross-border trade.
Foreword by the WCO Secretary General
Understanding the need to keep abreast of developments in the field of disruptive technologies and to seek to understand the challenges and opportunities they bring to Customs and border management we are presenting an updated version of the Study Report on Disruptive Technologies. In the three years since it was first published it has served as an important source of information. However considering the numerous pilot projects and progress that has been achieved in the meantime we believe the time is right to provide an update to ensure that Members the trading community and other stakeholders are well informed about the latest developments on the ground that can further support implementation of WCO standards such as the Revised Kyoto Convention.
Cross-border Paperless Trade Toolkit
Using electronic documents and transactions can speed up and increase trade. Electronic messages can eliminate the need to enter data into a computer manually at each supply chain checkpoint and can provide opportunities for the potential reuse of data. This toolkit aims at raising awareness of the technical and legal tools to be called upon to adopt cross-border paperless trade systems and national single windows.
How to use this toolkit
This toolkit aims at raising awareness of the technical and legal tools to be called upon to adopt cross-border paperless trade systems and national single windows (NSWs).
Introduction
Using electronic documents and transactions can speed up and increase trade. Electronic messages can eliminate the need to enter data into a computer manually at each supply chain checkpoint and can provide opportunities for the potential reuse of data.
Foreword
Technology has always propelled trade. From the invention of the steam engine and steamship in the 1700s the popularization of the standard shipping container in the 1950s and the rise of the internet in the 1990s technology has over the centuries profoundly changed the way we trade. Today emerging technologies and digitalization are changing trade at a speed much faster than before – leading to both opportunities and challenges.
The promise of TradeTech
TradeTech – the set of technologies that enables global trade to become more efficient inclusive and sustainable – is multifaceted from trade facilitation to efficiency gains and reduced costs to greater transparency and resilience of supply chains. Although technological innovation exists the major challenge to the global adoption of TradeTech will be building international policy coordination. Trade agreements can play a key role. Despite ongoing efforts to introduce digital trade provisions in trade agreements many unseized opportunities and unexplored policies remain. This joint World Economic Forum and WTO publication explores how trade agreements could be leveraged to advance the adoption of digital technologies and trade digitalization.
Global interoperability of data models for trade documents and platforms
In a digital environment for parties to seamlessly exchange data and documents all information needs to be clearly defined and unambiguous (World Economic Forum/UNECE 2017). Reaching agreement on both the semantic content (i.e. data definitions such as whether the ‘port of unlading’ is the same as the ‘port of discharge’) and the syntax of data (i.e. data structure or format) is critical to ensure trading partners wanting to exchange information understand it in the same way.
Conclusion
In the Fourth Industrial Revolution technological development and adoption is growing exponentially. The recent COVID-19 pandemic has accelerated the societal adoption and acceptance of digital technologies and has made one thing clear – the future of trade is digital and the 5 Gs of TradeTech are the engines.
Executive summary
The promise of TradeTech – the set of technologies that enables global trade to become more efficient inclusive and sustainable – is multifaceted from trade facilitation to efficiency gains and reduced costs to greater transparency and resilience of supply chains. Of particular interest for this publication is the potential of artificial intelligence (AI) blockchain and distributed ledger technology (DLT) and the internet of things (IoT) to shape the global trade ecosystem.
Global legal recognition of electronic transactions and documents
On average a cross-border transaction requires the exchange of 36 documents and 240 copies (Fletcher 2019). A shipment of roses from Kenya to Rotterdam can generate a pile of paper 25 cm high and the cost of handling it can be higher than the cost of moving the containers (Allison 2016).
Global digital identity
Identity and trust lie at the core of each trade interaction. As global value chains become increasingly digital organizations need to ensure that they can trust the digital identity of legal and physical persons1 or products they deal with and can efficiently link that digital identity with a real organization specific product or device (see Box 17).
Global trade rules access and computational law
Businesses operate in an environment of increasing legal complexity. At a global level trade compliance is particularly time consuming and costly as enterprises need to be aware of and comply with rules under different international agreements as well as meet their contractual obligations.
Blockchaining international trade: a way forward for women’s economic empowerment?
Blockchain technology holds considerable promise to boost women’s participation in international trade. Blockchain’s anonymity and efficiency could enable many women who otherwise would be constrained by law custom or high costs to engage in financial and business transactions. Blockchain can be used to enable women who lack identification documents to undertake transactions that otherwise would require official identification and to prove their ownership of assets without interventions from male family members. Blockchain can help micro small and medium-sized enterprises (MSMEs) more than 30 per cent of which are owned by women to overcome costs associated with exporting and importing and interact easily with consumers other businesses engaged in the supply chain customs officers and regulatory bodies. Blockchain also can increase women farmers’ access to information on crops and market conditions thus improving their bargaining position. However if not regulated properly the expanded use of blockchain also could increase the relative return to sophisticated technology skills that men are more likely to have and increase the digital divide between men and women. The World Trade Organization (WTO) could play a key role in developing guidelines for the use of blockchain in international trade to support the efficient and inclusive adoption of blockchain technology.
Opportunities and challenges of e-commerce in Mauritius
This study explores the status challenges and opportunities of e-commerce in Mauritius. The share of the population making online purchases was 14 per cent in 2017 the secondhighest level (after Libya) in Africa largely due to increases in internet use and penetration coupled with increased credit card usage and the development of secure online payment systems. And Mauritius topped the United Nations Conference on Trade and Development (UNCTAD) B2C E-commerce Index (e-readiness) for Africa. A survey of customers revealed high levels of satisfaction with online shopping due to wider choices the ability to save time accessibility and the relative ease of searching for products online. Major concerns included uneasiness over disclosure of personal information and limited ability to contact vendors. Respondents who have not shopped online cited concerns over navigating online payment security and high costs. Online sellers expressed considerable optimism over future market growth but also were concerned over a local bias towards international websites technical limitations of internet service and the small market size. Interviews with policymakers cited the strong legal and regulatory framework supporting electronic payments but described a need for stronger regulatory cooperation with other countries on e-commerce and more work to collect statistics. Technical assistance would be useful in these efforts.
The new rules on digital trade in Latin America: regional trade agreements
While recent technological advances have supported an increase in digital trade this growth has occurred with a lack of clear and defined rules. This deficiency has become an issue for Latin American countries. With the multilateral trade regime impasse more complex regional and bilateral agreements have emerged. The formulation of digital trade regulation raises many questions. In this chapter we deal with the new rules on digital trade in regional trade agreements (RTAs) recently negotiated by Latin American economies. In this work special emphasis is given to comparing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the United States-Mexico-Canada Agreement (USMCA) the most advanced RTAs regarding these issues.
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.
Adapting to the Digital Trade Era
Adapting to the digital trade era: challenges and opportunities looks at how the rapid adoption of digital technologies could help developing countries increase their participation in world trade. It also reviews the role that domestic policies and international co-operation can play in creating a more prosperous and inclusive future for these countries. This publication marks the conclusion of the second phase of the WTO Chairs Programme (WCP). It brings together contributions from the WCP Chairholders of Phases I and II Advisory Board members the WCP team at the WTO and other WTO Secretariat staff. The WCP is an important part of the WTO's efforts to build trade capacity and to work jointly with academic institutions in developing countries.
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 cross-section 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.
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.
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.
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.
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.
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 has done Jordan and Oman will succeed through trade prosperity driven by the global digital economy.
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.
Opportunities and challenges of e-commerce in Mauritius
This study explores the status challenges and opportunities of e-commerce in Mauritius. The share of the population making online purchases was 14 per cent in 2017 the secondhighest level (after Libya) in Africa largely due to increases in internet use and penetration coupled with increased credit card usage and the development of secure online payment systems. And Mauritius topped the United Nations Conference on Trade and Development (UNCTAD) B2C E-commerce Index (e-readiness) for Africa. A survey of customers revealed high levels of satisfaction with online shopping due to wider choices the ability to save time accessibility and the relative ease of searching for products online. Major concerns included uneasiness over disclosure of personal information and limited ability to contact vendors. Respondents who have not shopped online cited concerns over navigating online payment security and high costs. Online sellers expressed considerable optimism over future market growth but also were concerned over a local bias towards international websites technical limitations of internet service and the small market size. Interviews with policymakers cited the strong legal and regulatory framework supporting electronic payments but described a need for stronger regulatory cooperation with other countries on e-commerce and more work to collect statistics. Technical assistance would be useful in these efforts.
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.
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.
Blockchaining international trade: a way forward for women’s economic empowerment
Blockchain technology holds considerable promise to boost women’s participation in international trade. Blockchain’s anonymity and efficiency could enable many women who otherwise would be constrained by law custom or high costs to engage in financial and business transactions. Blockchain can be used to enable women who lack identification documents to undertake transactions that otherwise would require official identification and to prove their ownership of assets without interventions from male family members. Blockchain can help micro small and medium-sized enterprises (MSMEs) more than 30 per cent of which are owned by women to overcome costs associated with exporting and importing and interact easily with consumers other businesses engaged in the supply chain customs officers and regulatory bodies. Blockchain also can increase women farmers’ access to information on crops and market conditions thus improving their bargaining position. However if not regulated properly the expanded use of blockchain also could increase the relative return to sophisticated technology skills that men are more likely to have and increase the digital divide between men and women. The World Trade Organization (WTO) could play a key role in developing guidelines for the use of blockchain in international trade to support the efficient and inclusive adoption of blockchain technology.
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.
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.
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.
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.
The new rules on digital trade in Latin America: regional trade agreements
While recent technological advances have supported an increase in digital trade this growth has occurred with a lack of clear and defined rules. This deficiency has become an issue for Latin American countries. With the multilateral trade regime impasse more complex regional and bilateral agreements have emerged. The formulation of digital trade regulation raises many questions. In this chapter we deal with the new rules on digital trade in regional trade agreements (RTAs) recently negotiated by Latin American economies. In this work special emphasis is given to comparing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the United States-Mexico-Canada Agreement (USMCA) the most advanced RTAs regarding these issues.
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.
E-commerce, Trade and the COVID-19 Pandemic
The WTO Secretariat has published a new information note looking at how the COVID-19 pandemic has affected e-commerce including the implications for cross-border trade. It notes the increased use of e-commerce as consumers adapt to lockdowns and social distancing measures and draws attention to several challenges such as the need to bridge the digital divide within and across countries.
Defining innovation-oriented government policies and their evolution in the digital age
Since the 2008-09 financial crisis industrial employment in some economies has seen accelerated decline and international competition in mature industrial sectors has tightened; the evolution of productivity and wages has slowed; and a new economy enabled by digital technologies has emerged. In this context industrial and innovation policies have undergone renewal and these “new industrial policies” are reflecting a duality inherent to all government policy phases as they aim to address the difficult modernization of traditional industries while also aiming to bring about an adaptation of economies to digitalization.
Innovation policy, trade and the digital challenge
This section focuses on innovation policy and discusses its economic rationales and impact on innovation. For innovation to take place new knowledge has to be created through investment in research and it then diffuses through the education system or publications patents and interchange of ideas. When firms or governments instigate technological progress by using this knowledge or its embodiments via inventions to change processes behaviours or technologies economic growth may be affected depending on a number of variables. Within any country the diffusion of new technology depends on institutions the level of economic openness and investment in education and research.
International cooperation on innovation policies in the digital age
National innovation policies like other government policies serve domestic policy objectives. As discussed in Section C they can generate both positive and negative international spill-over effects and some of the mechanisms through which they generate spillovers involve trade. This section focuses on cooperation aimed at addressing the trade-related international spill-overs from innovation policies. Such cooperation could help to ensure that governments have the policy space to pursue innovation policies and could help to maximize the positive international spill-overs of such policies while minimizing their negative effects on trading partners.
Foreword
In the digital age a growing number of governments have adopted policies aimed at boosting growth through innovation and technological upgrading. The domestic economic fallout linked to the COVID-19 pandemic is leading countries to strengthen these policies. This report looks at these trends and at how trade and the WTO fit in. It shows that there is a significant role for international cooperation to make countries’ pursuit of such goals more effective while minimizing negative spill-overs from national policies.
Technical notes
WTO members are frequently referred to as “countries” although some members are not countries in the usual sense of the word but are officially “customs territories”. The definition of geographical and other groupings in this report does not imply an expression of opinion by the WTO Secretariat concerning the status of any country or territory the delimitation of its frontiers nor the rights and obligations of any WTO member in respect of WTO agreements. The colours boundaries denominations and classifications in the maps of the publication do not imply on the part of the WTO any judgement on the legal or other status of any territory or any endorsement or acceptance of any boundary.
Introduction
All over the world governments are actively and openly intervening in economies to boost innovation generate new technologies and foster cutting-edge industries. These interventions can have positive or negative impacts especially in today’s hyper-connected global economy. On the one hand they can expand knowledge enhance productivity and spread the essential tools of global growth and development. But on the other hand they can also distort trade divert investment and benefit one economy at the expense of others. International cooperation and rules are needed more than ever to ensure that governments’ new focus on innovation and technology policies maximizes positive spill-overs and minimizes negative ones – and to ensure that a race for technological leadership does not morph into a struggle for technological dominance. The 2020 World Trade Report looks at the role of innovation and technology policies in an increasingly digitalized world economy and explains the role of the WTO in this changing context.
Executive summary
In the digital age a growing number of governments have adopted policies aimed at boosting growth through innovation and technological upgrading. The domestic economic fallout linked to the COVID-19 pandemic is leading countries to strengthen these policies. This report looks at those trends and at how trade and the WTO fit into them. It shows that international cooperation could play a significant role in making countries’ pursuit of such goals more effective while minimizing the negative spill-overs from national policies.
World Trade Report 2020
In the digital age a growing number of governments have adopted policies aimed at boosting growth through innovation and technological upgrading. The World Trade Report 2020 looks at these trends and at how trade and the WTO fit with them. A defining feature of government policies adopted in recent years has been their support of the transition towards a digital economy. Trade and trade policies have historically been important engines for innovation. In particular the multilateral trading system has contributed significantly to the global diffusion of innovation and technology by fostering predictable global market conditions and by underpinning the development of global value chains. As data become an essential input in the digital economy firms rely more on intangible assets than on physical ones and digital firms are able to reach global markets faster without the amount of physical investment previously necessary in other sectors. Success in the digital economy will depend on openness access to information and communication technology (ICT) goods and services collaboration on research projects and the diffusion of knowledge and new technology. The World Trade Report 2020 shows that there is a significant role for international cooperation to make the pursuit of digital development and technological innovation more effective while minimizing negative spill-overs from national policies. The WTO agreements reached a quarter of a century ago have proved to be remarkably forwardlooking in providing a framework that has favoured the development of ICT-enabled economies across all levels of development. Further international cooperation at the WTO and elsewhere would enable continued innovation and reduce trade tensions to help international markets function more predictably.
Acknowledgements and Disclaimer
The World Trade Report 2020 was prepared under the general responsibility of Xiaozhun Yi WTO Deputy Director-General and Robert Koopman Director of the Economic Research and Statistics Division. The report was coordinated by Marc Auboin and Ankai Xu. The authors of the report are Marc Auboin Marc Bacchetta Cosimo Beverelli Eddy Bekkers Kian Cassehgari Posada Emmanuelle Ganne John Hancock Kathryn Lundquist Gabrielle Marceau José-Antonio Monteiro Roberta Piermartini Stela Rubínová Victor Stolzenburg Ankai Xu and Qing Ye (Economic Research and Statistics Division).
Tariff Negotiations and Renegotiations under the GATT and the WTO
Over the past seven decades since the General Agreement on Tariffs and Trade (GATT) was established in 1947 there has been a phenomenal increase in international trade in goods largely due to sustained efforts by the world’s main trading nations to reduce and eliminate tariff barriers in a multilaterally orchestrated manner. This publication reviews how the procedures and practices relating to tariff negotiations and renegotiations have evolved over this time. In particular this new edition recounts how negotiations to expand the duty-free coverage of the Information Technology Agreement were concluded and provides an account of tariff renegotiations regarding successive enlargements of the European Union. It also covers tariff negotiations for the accession of a number of new members to the WTO such as China and Russia. This book will be of particular interest to negotiators members of government trade ministries economists and academics specialized in trade policy.
A world of opportunities and challenges
Research published by the European Parliament in 2017 claimed that Blockchain could “change our lives” (Boucher 2017). What the various blockchain applications that are being developed in areas as diverse as trade finance trade facilitation trade in services intellectual property and government procurement show is that Blockchain has the potential to impact both the traders and the government agencies involved in international trade significantly. Opportunities are multifaceted but will only be realized if several key challenges are addressed.
Conclusion
Research published by the European Parliament in 2017 claimed that Blockchain could “change our lives” (Boucher 2017). What the various blockchain applications that are being developed in areas as diverse as trade finance trade facilitation trade in services intellectual property and government procurement show is that Blockchain has the potential to impact both the traders and the government agencies involved in international trade significantly. Opportunities are multifaceted but will only be realized if several key challenges are addressed.
Introduction
The world is continually changing driven by technological innovations that affect the way we live and do business. The history of the world economy is intimately linked to technological progress. The invention of the steam engine mechanized production the discovery of electricity enabled mass production and the rise of the internet made it possible to coordinate various production stages at a distance leading to a fragmentation of production that gave rise to global value chains.
Acknowledgements
My sincere thanks go to my colleague Ms Kenza Le Mentec for her precious guidance. Kenza introduced me to the subject and provided invaluable inputs in particular for the technical sections describing the technology and the section on trade facilitation. This publication would not have been possible without her support.