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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.