Ten “Quick Wins”
for Digital Trade

The global digital trade landscape is complex and fragmented. While nearly two-thirds of Regional Trade Agreements include e-commerce or digital trade provisions, these are far from consistent and are typically limited to rules on data, privacy, and a handful of other topics. A new approach has emerged recently, however: ‘digital economy agreements’ (DEAs), negotiated by small economies in the Asia-Pacific, which seek to write a far broader set of rules, not merely for “digital trade,” but rather “trade in the digital economy,” as the Digital Economy Partnership Agreement (DEPA) notes.

During the COVID-19 crisis, many firms rapidly adopted and implemented different e-commerce strategies to ensure their survival. Customs departments also increased the use of digital technologies, promoting paperless trade to ensure the flow of essential goods, especially those related to health, food, and medicines. The United Nations Conference on Trade and Development reports that in 2020, the share of online retail sales as a percentage of total retail sales grew from 16% to 19%, and e-commerce sales rose 4% between 2018 and 2019, representing $26.7 trillion dollars, or 30% of global GDP.

The adoption of electronic payments has been accelerated by the COVID-19 pandemic. According to the latest Global Findex, two-thirds of adults worldwide now make or receive electronic payments, with the share in developing economies having grown from 35% in 2014 to 57% in 2021. While 55% of online shoppers have purchased from another country in a 12-month period, close to 40% of merchants consider accepting and processing foreign transactions an obstacle in conducting e-commerce. Ensuring affordable and efficient electronic payments is important to build an inclusive digital economy and for facilitating international trade.

The digital transformation of international trade has brought about significant changes in international trade, lowering the cost of trading across borders, and allowing smaller companies easier access to the gains from participation in global value chains. An essential component of digital trade is the ability of data to flow across borders. Yet, the number of countries imposing barriers to the free flow of data has nearly doubled over the past four years.

Trust is a key factor in the development of digital trade and the digital economy. Both consumers and businesses need to have assurances that their interests are protected when engaging in digital trade transactions. From the consumers’ side, this implies that digital trade operations should take place in a regulatory environment that safeguards online consumers from fraudulent and deceptive commercial practices and protects their privacy and personal information.

Digital trade is fundamentally inclusive trade. While international trade was previously largely limited to large, multinational companies which could set up physical stores and operations in multiple markets, this is no longer the case with internet-enabled trade. With little more than an internet connection and a webpage, a small business in a rural community can now sell to the world.

In most countries, SMEs are the backbone of the economy, driving growth and employing a significant number of the working population. With the onset of the COVID-19 crisis, businesses had a matter of weeks to expand or create their online operations and find new markets to survive the accelerated shift toward e-commerce.

The digital transformation offers new opportunities for firms across all sectors and of all sizes. Indeed, as Javier López González and Marie-Agnes Jouanjean point out, by reducing trade costs, the digital transformation facilitates the coordination of global supply chains, it helps connect business and consumers globally and enables the digital delivery of services. It is especially important that more vulnerable groups – such as women, indigenous people, and small business owners – can seize new opportunities to overcome significant pre-existing disadvantages in accessing foreign markets.

The surge in e-commerce provides a wealth of new opportunities for businesses that can adapt. But not everyone is equally prepared to make the transition. In a global context of digital divides and skills gaps, we need to ensure that e-commerce benefits us all. Fostering the inclusion of smaller firms, women and youth-led firms, especially those in developing economies, is crucial. A fundamental skills gap relates to digital entrepreneurship. One study has found that one of the greatest challenges highlighted by participating firms was accessing information on how to run an online business. Moreover, there are skill gaps among negotiators and policymakers involved in the ongoing discussions on e-commerce, and those charged with putting in place or implementing regulatory frameworks linked with e-commerce. To address these diverse gaps, facilitating equitable access to relevant and comprehensive capacity building programs is key.

The Fourth Industrial Revolution ushered in a brand new era in global trade. The emergence of digital technologies had a profound impact on production, distribution, marketing, sale and trade of traditional goods and services, and gave rise to digitized services, powered by data-intensive technologies like blockchain, artificial intelligence (AI), and the Internet of Things. These characteristics of the digital economy present intrinsic complexities that demand specialized knowledge and collaboration among governmental and non-governmental actors to effectively regulate them.