Quick Win No. 6
Craft digital trade rules that are sensitive to the needs of SMEs
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.
Empowered by the internet, the opportunities for SMEs to grow and scale globally are unprecedented. On average, 97% of internet-enabled SMEs export, in contrast to between 2% and 28% for traditional SMEs in most countries.
But these opportunities are easily lost if the global trading system is not responsive to the needs of SMEs to thrive and participate in digital trade. In particular, digital regulatory fragmentation and the absence of interoperable regulatory standards greatly reduce market access opportunities and cancel out the unique benefits of digital trade for SMEs.
For example, if resource-constrained SMEs need to localize their customers’ data in 10 different markets, or navigate 10 sets of differing privacy regulations, it limits their ability to scale globally. Similarly, if SMEs are required to have a physical presence or local representative as a condition of doing business in a foreign market, it completely negates the advantage of “borderless” digital trade. In a recent study, SMEs in the survey identified the ability to do business in a market without a physical presence, and consistent data transfer rules, as the top two provisions to be included in digital trade agreements.
While digital trade rules at the WTO will bring greater certainty for all businesses, some are particularly important for facilitating SME participation:
The requirement for physical presence or a local representative as a condition of doing business in the market should be eliminated;
Consistent data rules across economies which allow for cross-border data flows and prohibit data localization need to be in place;
Common principles for the design of privacy regulation need to be agreed;
A permanent prohibition of customs duties on digital products and electronic transmissions is required.
The WTO JSI on E-commerce negotiations must prioritize and build out these digital trade rules that will enable SMEs to make the most of the digital trade opportunity in front of them.