Next generation of trade: Theory and policy framework of international etrade

Event report

[Read more session reports from WTO Public Forum 2017]

The session, moderated by Mr Syed Tauqir Shah, Ambassador, Permanent Representative of Pakistan to the WTO, presented proposals for a next generation of trade, drawing on examples from China, but also discussing the work of international organisations on e-commerce. Mr Shah set the stage with a brief overview of the complexities of globalisation and digitalisation, in particular the digital divide challenges and the need to bring developing and Least Developed Countries (LDCs) who are members of the WTO in to the digital economy. Less than 2% of business-to-consumer (B2C) commerce happens in Africa and the Middle East, and more than four billion people are not online.

Ms Wenlin Chen, Chief Economist, China Center for International Economic Exchanges (CCIEE), called for the integration of offline and online trade in new ways, facing towards the next generation. Unlike the general trade organised by companies, future transactions will be on platforms, clustering consumers, producers, and sellers. Her organisation, the CCIEE, focuses on key theoretical, strategic, and development issues around the digital economy, including the ‘Belt and Road’ initiatives, China- US relations, China-EU relations, and Brazil, Russia, India, China and South Africa (BRICS) relations. In the context of economic globalisation, ‘any protectionism will go against our times’, she warned, adding that trade must be disconnected from ideology and national strategies.

China is a proponent of e-trade facing the next generation, in particular via the reconstruction of the trade system with small and medium-sized enterprises (SMEs) and e-trade in focus, the development of cross-border economic trade and a detailed framework for international eTrade with three foundations:

• Hard infrastructure – facilities support (IoT, highway network, port network, shipping network, air network, logistics zone, bonded zone)
• Service guarantee – service support (including data mining, payment settlement, online display, etc.)
• Soft infrastructure – technology support (internet, AI, next generation communication, blockchain, big data, cloud computing, etc.)

Ms Marion Jansen, Chief Economist, ITC, introduced the report on New Pathways to e-commerce. While e-trade offers new opportunities for micro, small and medium enterprises (MSMEs), they may not be automatically reaped. We need to focus on opportunities for MSMEs. Asking what challenges SMEs face when they engage in cross-border e-commerce, the report analyses answers from more than 2,200 respondents looking not only at national level, but also at the enterprise level and at the immediate business ecosystem. There are many bottlenecks across the value chain: two thirds of companies in Africa have considered doing e-commerce, but are not doing it for various reasons. In establishing online businesses, the obstacles relate to the technical capacity of the firm, cost of access to the international platforms, and misconceptions about e-commerce. International e-payment is an impediment for MSMEs from developing countries due to limited access to providers; cash on delivery is still the most common method of payment in Africa (rather than mobile payment). The cost of cross-border delivery is a further obstacle in developing countries, as the share of logistics costs over final price (26%) is nearly double that in developed countries (14%). The use of couriers or other services to deliver goods is prevalent in the developing markets; on average, 1/3 of e-commerce exports receive de minimis treatment (but handled by intermediaries). When it comes to aftersales, the lack of understanding of consumer rights and enforcement and lack of consumer feedback are mentioned as bottlenecks. While in developing countries less than 5% of products are returned, in LDCs 1 in 10 products is sent back.

E-commerce can make trade more inclusive, once we tackle the bottlenecks, concluded Jansen.  

Mr Cheng Ouyang, Director, Ali Cross-border E-commerce Research Center, Alibaba, presented the development of cross-border e-commerce in China, and the electronic world trade platform (eWTP) initiative by Jack Ma. Cross-border e-commerce was 1/4 of the whole Chinese foreign trade last year. More than 10 million merchants are accommodated on the Alibaba platform, of which 97% employ fewer than five people. Via the integrated services platform for MSMEs by Alibaba, merchants can focus on their products and aftersales. Such services are also complemented by loans offered under special conditions by entities such as MYbank, an AliBaba affiliated online bank. He also introduced a pilot project of the eWTP, Malaysia’s digital free trade zone (an eHub providing business-to-business (B2B), B2C services and one-stop foreign trade services). In his takeaway message, Ouyang called for global rules and standards to be established to promote e-commerce.

Ms Zhang Mingxing, on behalf of the Vice-president of Henan Bonded Group Company, provided another example of international e-commerce solutions from China, namely the innovative Zhengzhou mode. She noted the fast growth of international e-commerce, but also obstacles at different levels, for example, difficulty in enterprise development, in government supervision, and in consumer rights defence. The pilot project in Zhengzhou proposes a business-to-business-to-consumer (B2B2C) model, with an intermediary in the bonded zone and seven different standards. These include, among others, data verification, data supervision and risk tracing.  The Chinese model can be applied in other countries that seek to strengthen their e-commerce sector, she explained.

Mr Ricardo Meléndez-Ortiz, Chief Executive, ICTSD and Co-Chair, T20 Task Force on Trade and Investment, brought the WTO back into the discussion. Whereas the terminology may differ (e-com, digital trade, etc.), the discussions here are about the digital transformation of the whole economy. E-commerce is not new in the WTO, different aspects of it have been discussed for almost 20 years now, since the 1998 moratorium (reaffirmed every 2 years) on custom duties on electronic transactions. What deserves attention now is predictability in the application of e-commerce rules and the emergence in regional trade agreements (RTAs) of provisions on the digital economy and e-commerce. New RTAs commonly include transparency, data protection or paperless transaction provisions. There are, however, new barriers to e-commerce, such as localisation requirements for data or source code laws.

Ahead of the WTO’s Eleventh Ministerial Conference (MC11), Meléndez-Ortiz sees a two-track approach, on the one hand, managing the demands of the MC11 and the signals from the WTO regarding the long term nature of frameworks on the digital economy, and on the other hand, moving the e-commerce work programme forward to get to rule-making. ‘If the WTO is not going into this, it will be marginalised’, he speculated. There is a need for confidence building and trade facilitation in the longer run, to overcome the multiple challenges. Moreover, the development dimension (including infrastructure) needs to be addressed to ensure we will have an efficient, working global economy.
 

by Roxana Radu