A study by United Nations Conference on Trade and Development (UNCTAD) estimated that while developed countries account for 76% of global exports of digitizable products, the share of developing countries is only 5%, except for China's exports which account for 18%.1 The digital divide between the developed world and the developing world has reflected in their approach to e-commerce discussions at the World Trade Organization (WTO). Developed countries have been more vocal about high standards of liberalisation, while developing countries (DCs) and least-developed countries (LDCs) have been concerned about the impact of e-commerce on their economies. Consequently, issues related to development have been crucial to e-commerce discussions.
Hurdles faced by DCs and LDCs to engage in e-commerce
While DCs with bigger economies such as China, India, Brazil, South Africa are thriving in e-commerce, many of the smaller DCs and most LDCs are yet to have access to even basic information technology infrastructure. Thus, cross-border e-commerce poses a larger challenge for these countries. Some of the hurdles facing DCs and LDCs are:
- Digital and information technology divide: Access to the internet and information technology infrastructure including computers and telecommunication services is still a challenge in many DCs and LDCs. An estimated 3.6 billion people, with the majority from LDCs, still remain offline, mainly due to affordability and lack of digital skills.2
- Domestic infrastructure: Access to physical infrastructure such as airways, ports, roads and reliable electricity are also biggest barriers to e-commerce trade for small DCs and LDCs.3 In Sub-Saharan Africa, only one third of the population has access to electricity.4 Transportation costs are much higher in Africa than in any region, mainly due to administrative and customs delay.5 This hampers the competitiveness of domestic and intraregional e-commerce.
- Small and medium-sized enterprises (SMEs): SMEs from many DCs and LDCs still don't have access to infrastructure, such as internet and digital literacy, needed to sell and deliver their products online.6 More importantly, SMEs have limited access to finances to enter e-commerce trade, especially in LDCs.7 In addition, non-tariff barriers negatively impact SMEs as they find it increasingly hard to compete with foreign goods, especially from developed countries.
- Cultural and political barriers: Many African and Middle-Eastern DCs and LDCs face cultural challenges such as foreign language skills and marketing communication.8 In addition, governments and local institutions do not actively create structural support for small businesses to sustain in e-commerce.9
- Difficulties with international banking:LDCs face barriers to international banking owing to the domestic banking system lacking international connections.10 Moreover, many online and mobile payment services are not functional in various small economies due to lack of access technology and internet.
The WTO's e-commerce discussions concerning DCs and LDCs
The Work Programme on e-commerce (hereafter, Work Programme), established by the General Council in 1998,11 allocated the Committee on Trade and Development (CTD) to examine the "development implications of e-commerce, taking into account the economic, financial and development needs of developing countries."12 In addition, the General Council organized a series of dedicated discussions to examine issues of cross-cutting nature. In its first dedicated discussion on e-commerce,13 it identified seven cross-cutting issues including development-related issues which needed comprehensive examination.14 Both, the CTD as well as the General Council, broadly identified the following key challenges facing DCs and LDCs:
- Effects of e-commerce on trade and economic prospects of developing countries: The positive and negative impact of e-commerce on DCs and LDCs was an important concern. In the CTD, most developed countries were of the opinion that e-commerce has great potential for economic growth in developing countries, while a few others were vary.15 A few developing countries were suspicious of the revenue implications of e-commerce, especially if the moratorium on customs duties were to become permanent. Many small DCs and LDCs including the African Group sought more time to understand the implications of e-commerce on their countries.
- Challenges to enhancing the participation of DCs and LDCs in e-commerce: Members sought to understand ways in which the participation of developing countries in e-commerce could be improved. Many Members were of the opinion that apart from technical assistance, access to investment, market access, human resources, education and training were also needed in many DCs and LDCs.16 Ecuador, Cuba and Nicaragua argued that for effective participation, DCs and LDCs required non-discriminatory access to all information, communication technologies and free access to public internet sites; and technical assistance, among others.17
- Access to infrastructure and technology: Access to human and physical infrastructure, including telecommunications, information technology and internet facilities, was considered as an important challenge facing DCs and LDCs.18 Members considered technical assistance and technology transfer as key to improving access to infrastructure and technology.
Other issues which the CTD has been examining are the effects of e-commerce on small and medium enterprises (SMEs); financial implications of e-commerce for developing countries; use of information technology in the integration of developing countries in the multilateral trading system; and implications for developing countries of the possible impact of e-commerce on traditional commerce.19 On these issues, from 1998 to 2003 exploratory discussions were held in the CTD and the General Council. However, until 2013, work in the CTD was slow, and there was a deadlock in the General Council owing to a lack of consensus on other cross-cutting issues.20
In the lead up to the Eleventh Ministerial Conference (MC11) at Buenos Aires in 2017, many developing countries were eager to continue the exploratory work on development related issues. In a paper submitted by a group of developing countries,21 they proposed kick-starting discussions under the Work Programme in relation to DCs and LDCs by focussing on four key issues: trade facilitation; infrastructure gaps in developing countries; access to payment solutions such as secure online payment services; and online security including consumer protection.22 Meanwhile, India and South Africa voiced their concerns about the asymmetric nature of cross-border e-commerce.23 India was particularly concerned about the impact of e-commerce on SMEs, due to exploitation by bigger players from the developed countries. At MC11, developed countries and emerging economies like the US, Australia, the EU, Singapore and Canada along with a few others, pushed for initiating exploratory talks for a potential e-commerce framework.24 This was strongly opposed by DCs and LDCs including India, Bangladesh and the African Group as being pre-mature, especially in light of many unresolved issues, including development-related issues.25
Yet, 71 Members announced the initiation of exploratory work towards future negotiations on e-commerce through a Joint-Statement at MC11.26 While many DCs and most LDCs decided not to participate, 29 DCs and 3 LDCs agreed to join the talks. During the exploratory discussions, proposals were submitted by DCs such as Brazil, Colombia, Costa Rica, Singapore and Argentina, stressing on the need to address challenges facing DCs and LDCs.27 Colombia and Costa Rica stressed on the need to bridge the digital divide, especially for the interests of LDCs.28 Among the developed countries only Japan and New Zealand submitted proposals on the need to increase effective participation of DCs and LDCs.29 In 2019, 83 Members began plurilateral negotiations pursuant to the second Joint Statement at the World Economic Forum.30 Many DCs and LDCs, including India and South Africa, refused to join the negotiations. In the six meetings and consultations that were held on the future text of the e-commerce agreement, mainly DCs raised development-related issues. China's proposal called for a focus on the difficulties and challenges faced by DCs and LDCs.31 Côte d'Ivoire's proposal focussed on the technological challenges facing low-income DCs and LDCs and argued for inclusive participation of all DCs and LDCs in the e-commerce negotiations.32 Among the developed countries and emerging economies, only Ukraine highlighted the need for future texts to include appropriate and effective special and differential treatment for DCs and LDCs.33 Meanwhile in the General Council, the LDC Group called upon the Work Programme to delve deeper into examining the costs and benefits of e-commerce for LDCs.34
Overall, despite over two decades of discussions, there appears to be limited engagement and political will to address the challenges facing DCs and LDCs among the developed countries. Owing to this, there is lesser participation of DCs and almost negligent participation by LDCs in the plurilateral e-commerce negotiations. As India highlighted, the plurilateral negotiations were premature, especially since no concrete solutions had been identified to the challenges facing DCs and LDCs.
Potential solutions for bridging the digital divide
In order to bridge the digital divide, Members discussed many suggestions including technology transfer, capacity-building and technical assistance by developed countries. Apart from these, two probable suggestions favoured by developing countries were: (i) policy space to regulate domestic digital industry; and (ii) special and differential treatment (hereafter, S&D treatment) provisions in any future e-commerce framework.
Policy space to regulate domestic digital industry
Many DCs were vocal about the need for policy space to regulate their own digital industry. A more restricted digital policy space was one of the reasons many DCs and LDCs were wary about joining the plurilateral negotiations. In a panel discussion organised by the African group in July 2017 on 'Digital Industrial Policy and Development', the panel concluded that the lack of digital and technological capabilities will only widen the digital divide between the developed world and the developing world.35 Therefore, it suggested that first and foremost, DCs and LDCs required the policy space to develop their own digital industry.36 This was also voiced by India and South Africa. In fact, in relation to data localisation and privacy norms, even China's proposal at the plurilateral negotiations called for respect for Members' policy objectives on internet sovereignty, data security and privacy protection.37
Preserving S&D treatment
To bridge the digital divide between developed countries, and DCs and LDCs, Members have proposed granting S&D treatment to small DCs and LDCs. Traditional S&D treatment provision includes reduced commitments, exemptions and derogations from the core norms.38 However, the traditional S&D treatment provisions are based on a one-size-fits-all approach, treating all DCs as one uniform block.39 Therefore, it also included many self-designated DCs with levels of development equal to many developed countries.40 Instead, the Members can adopt the model applied in the recently negotiated Trade Facilitation Agreement (TFA). The TFA's S&D treatment provision has significantly improved from the traditional approach. It allows DCs and LDCs to determine when they will implement each of the independent provisions under the TFA and for which provisions they require technical assistance and capacity building support.41 For this, DCs and LDCs can categorize TFA provisions into three categories - A, B or C. Category A provisions will be implemented within one year of the TFA entering into force; Category B provisions will be implemented after a transitional period of time after TFA enters into force; and Category C provisions will be implemented after a transitional period of time and the provision of assistance and support for capacity building.42 In addition, DCs and LDCs have other flexibilities: (i) time extension if they experience difficulty in implementing any provision in Category B or C; (ii) assistance of an expert group if a Member lacks the capacity to implement any provision; (iii) flexibility to shift provisions between categories B and C; and (iv) DCs will not be subject to any dispute for a period of 2 years for Category A provisions, and LDCs will not be subject to any dispute for 6 years for Category A provisions and 8 years for Category B and C provisions.43 Thus, TFA S&D treatment provision adopts a more flexible country-by-country approach which can be mirrored in any future e-commerce framework.
However, in a recent statement, the United States already stressed for "the same obligations for all participants" in the future e-commerce framework.44 Therefore, for inclusion of a strong S&D treatment provision, it would require DCs and LDCs to participate in the plurilateral negotiations to ensure that such a provision is incorporated.
This piece has been authored by Kruthi Venkatesh, a consultant working with Ikigai Law, with inputs from Nehaa Chaudhari, Director (Public Policy), Ikigai Law.
1. UNCTAD, Growing Trade in Electronic Transmissions: Implications for the South, UNCTAD Research Paper No. 29, UNCTAD/SER.RP/2019/1/Rev.1, at 14 (Feb., 2019), available at, https://unctad.org/en/PublicationsLibrary/ser-rp-2019d1_en.pdf [hereafter, UNCTAD Report] (last accessed on 12th June, 2020).
2. See International Telecommunication Union, New ITU data reveal growing internet uptake but a widening digital gender divide, Press Release, 5th November, 2019, available at, https://www.itu.int/en/mediacentre/Pages/2019-PR19.aspx (last accessed on 12th June, 2020).
3. South Centre's Trade for Development Programme & African Trade Policy Centre, The WTO's Discussions on Electronic Commerce, Analytical Note SC/AN/TDP/2017/2, at 15 (Jan., 2017), available at, https://www.southcentre.int/wp-content/uploads/2017/01/AN_TDP_2017_2_The-WTO%E2%80%99s-Discussions-on-Electronic-Commerce_EN-1.pdf [hereafter South Centre's Analytical Note] (last accessed on 12th June, 2020).
4. Id., at 17.
5. International Trade Centre, International E-Commerce in Africa: Way Forward, at 25 (2015), available at, https://www.tralac.org/images/docs/8790/international-e-commerce-in-africa-itc-december-2015.pdf [hereafter International Trade Centre, International E-Commerce in Africa] (last accessed on 12th June, 2020).
6. Pallavi Bajaj and Krithika Selvakumar, The Emergence of Micro, Small and Medium-Sized Enterprises: Enhancing Their Role in International Trade, in Emerging Trade Issues for Small Developing Countries, at 141 (T.Y. Soobramanien & L. Worrall eds., 2017).
7. Amina J. Mohammed, Small size, big impact: MSMEs further sustainable development, in SME Competitiveness Outlook, at 6 (2019), available at, http://www.intracen.org/uploadedFiles/intracenorg/Content/Publications/SMECO2019.pdf (last accessed on 12th June, 2020).
8. South Centre's Analytical Note, supra note 3, at 16.
9. Id., at 16.
10. International Trade Centre, International E-Commerce in Africa, supra note 5, at xi.
11. World Trade Organisation, Work Programme on Electronic Commerce, WT/L/274 (30th Sep., 1998).
12. Through the declaration on global e-commerce adopted by the WTO Members in 1998, they called upon the General Council to establish a comprehensive work programme on e-commerce to examine all trade-related issues concerning e-commerce. The Work Programme allocated four WTO bodies to examine specific trade-related issues concerning e-commerce, namely the Council for Trade in Services; Council for Trade in Goods; Council for Trade-Related Aspects of Intellectual Property (TRIPS) and the Committee for Trade & Development. For more information, see our first piece in this series titled 'E-commerce Related Discourse at the WTO: Brief History and Subsequent Developments', here.
13. See World Trade Organisation, Dedicated Discussion on Electronic Commerce, General Council, WT/GC/436, 6th July, 2001, available at, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/GC/W436.pdf (last accessed on 12th June, 2020).
14. These seven 'cross-cutting' issues were: (i) classification of digital products as "goods" or "services"; (ii) issues concerning developing and least-developed countries; (iii) revenue implications of e-commerce, especially for DCs; (iv) relationship between e-commerce and traditional forms of commerce to assess short-term disadvantages for DCs; (v) impact of continued moratorium on custom duties on DCs; (vi) competition related issues including constraints on e-commerce due to concentration of market power; and (vii) jurisdictional challenges for e-commerce disputes. For more information, please see our other articles in this series, here.
15. Dedicated Discussion 2001, supra note 13 at 2.
16. Dedicated Discussion 2001, supra note 13, at 3.
17. World Trade Organisation, Effective Participation of Developing Countries in Electronic Commerce as a means to Combat Poverty, WT/GC/W/635, at para 24 (14th July, 2011).
18. Committee on Trade and Development, Contribution By The Committee On Trade And Development To The WTO Work Programme On Electronic Commerce, WT/COMTD/19, (15th Jul., 1999).
19. Work Programme on Electronic Commerce, supra note 11.
20. The deadlock was mainly due to a lack of consensus on the issue of classification of digital products as 'goods' or 'services' and the imposition of moratorium on customs duties. For more, please see our second article in the series titled 'WTO's E-Commerce Discourse: Examining Critical 'Cross-Cutting' Issues', here.- https://www.ikigailaw.com/wtos-e-commerce-discourse-examining-critical-cross-cutting-issues/
21. These were: Colombia, Costa Rica, Hong Kong, China, Israel, Malaysia, Mexico, Nigeria, Qatar and Singapore.
22. World Trade Organisation, Work Programme on Electronic Commerce, Communication from Colombia, Costa Rica, Hong Kong, China, Israel, Malaysia, Mexico, Nigeria, Qatar and Singapore, JOB/GC/101, at 2 (22nd July, 2016).
23. Catherine Saez, E-Commerce: Some Developing Countries Push Back on the Idea of New WTO Rules, Intellectual Property Watch, 29th September, 2017, available at, https://www.ip-watch.org/2017/09/29/ecommerce-developing-countries-push-back-idea-new-wto-rules/ (last accessed on 12th June, 2020).
24. Third World Network, North and its Allies in South opt for Plurilateral on E-Com and MSMEs, (15th Dec., 2017), available at, https://www.twn.my/title2/wto.info/2017/ti171232.htm (last accessed on 12th June, 2020).
26. At the Eleventh Ministerial Conference, a few developed countries spearheaded the Joint-Statement initiative. This was due to a lack of consensus on the procedural issue of changing the mandate of the Work Programme. While developing countries pressed for the continuation of the exploratory work under the Work Program, few developed countries and emerging economies wanted to establish a Working Party for initiating e-commerce negotiations. Finally, due to a lack of consensus, Members decided to continue the mandate of the Work Programme. However, they simultaneously initiated plurilateral talks for a potential e-commerce framework. For more clarity, please see our first piece in this series, here.
27. Katya Garcia-Israel and Julien Grollier, Electronic Commerce Joint Statement: Issues in the Discussion Phase, CUTS International, at 5 (Oct., 2019), available at, http://www.cuts-geneva.org/pdf/1906-Note-RRN-E-Commerce%20Joint%20Statement1.pdf (last accessed on 12th June, 2020).
28. Id., at 7.
29. Id., at 12.
30. 76 Members released another Joint Statement at the World Economic Forum in Davos in January 2019 announcing their intention to initiate e-commerce negotiations. Through the course of the year, more Members joined the plurilateral negotiations.
31. World Trade Organization, Joint Statement on Electronic Commerce, Communication from China, INF/ECOM/19 (24th Apr., 2019), available at, https://docs.wto.org/dol2fe/Pages/FE_Search/DDFDocuments/253560/q/INF/ECOM/19.pdf (last accessed on 12th June, 2020).
32. World Trade Organization, Joint Statement on Electronic Commerce, Communication from Côte d'Ivoire, INF/ECOM/49 (16th Dec., 2019), available at, https://webcache.googleusercontent.com/search?q=cache:QrDwBQIXzysJ:https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx%3Ffilename%3Dq:/INF/ECOM/49.pdf+&cd=1&hl=en&ct=clnk&gl=in (last accessed on 12th June, 2020).
33. See Katya Garcia-Israel and Julien Grollier, Electronic Commerce Joint Statement: Issues in the Negotiations Phase, CUTS International, at 16 (Oct., 2019), available at, http://www.cuts-geneva.org/pdf/1906-Note-RRN-E-Commerce%20Joint%20Statement2.pdf (last accessed on 12th June, 2020).
34. World Trade Organisation, Work Programme on Electronic Commerce, Communication from Chad on behalf of the LDC Group, WT/GC/W/787 (21st Nov., 2019).
35. World Trade
Organisation, Work Programme on Electronic Commerce,
Report Of Panel Discussion On "Digital Industrial Policy
And Development", JOB/GC/133, (21st Jul.,
2017), available at, https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=
371857150&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True (last accessed on 12th June, 2020).
37. World Trade Organization, Joint Statement on Electronic Commerce, Communication from China, INF/ECOM/19 (24th Apr., 2019), available at, https://docs.wto.org/dol2fe/Pages/FE_Search/DDFDocuments/253560/q/INF/ECOM/19.pdf (last accessed on 12th June, 2020).
38. Colette van der Ven, Special and Differential Treatment in the Context of the Digital Era, CUTS International, at 14, (2018), available at, http://www.cuts-geneva.org/pdf/KP2018-Paper-SDT_in_Digital_Era.pdf [hereinafter Colette van der Ven, Special and Differential Treatment in the Context of the Digital Era] (last accessed on 12th June, 2020).
39. Paul R. Baker, E-Commerce and DigitalTrade: A Policy Guide for Least-Developed Countries, Small States and Sub-Saharan Africa, at 42 (2017).
40. Colette van der Ven, Special and Differential Treatment in the Context of the Digital Era, supra note 37, at 14.
41. World Trade Organisation, Special and Differential Provisions for Least Developed Countries, and Special and Differential Provisions for Developed Countries, available at, https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm (last accessed on 12th June, 2020).
44. USTR, USTR Robert Lighthizer on the Joint Statement on Electronic Commerce, January 25, 2019, available at, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/january/ustr-robert-lighthizer-joint (last accessed on 12th June, 2020).
Originally published 12 June, 2020
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