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Pandemic highlighting the importance of digital trade, could spur WTO talks

May 8, 2020

As the pandemic pushes the world online in an effort to slow the virus’ spread, countries -- and companies -- are reinforcing their commitment to digital trade, and that’s spurred those in Geneva and those watching from the outside to weigh the chances of post-pandemic momentum in the plurilateral talks on electronic commerce at the World Trade Organization.

How global trade will be different in a post-COVID world can’t be fully known today, analysts told Inside U.S. Trade, but they added that the pandemic has accelerated a digitization trend -- and firmly established digital trade as a defining issue.

Sources in Geneva also say they are optimistic that the demonstrated need for e-commerce during the pandemic will translate to momentum -- and perhaps even additions -- to the WTO negotiations. One source said some “preliminary indications” suggested this was happening.

About 80 countries -- including the U.S., European Union, China, Japan and Brazil -- are participating in the e-commerce talks. Issues like data localization, cross-border data flows and privacy remain sticking points.

A WTO report issued earlier this week concluded that what the pandemic is revealing about digital trade will be “relevant” and important for WTO members to discuss.

“The pandemic has highlighted the importance of digital technologies in general, but also several vulnerabilities across the world,” it says. “The resulting experiences and lessons are relevant to various discussions in the WTO, including those on electronic commerce, which could benefit from looking at greater international cooperation to facilitate the cross-border movement of goods and services, narrow the digital divide, and level the playing field for micro, small and medium-sized enterprises.”

“Certainly, our hope is that this creates a very, very clear-cut case as to why they’re so important,” Christine Bliss, president of the Coalition of Services Industries, said of the WTO talks. “It just seems like the case in the rest of the world is now even stronger that this e-commerce route is more and more important.”

This should make countries even more interested in determining global rules or standards, Cato Institute’s Simon Lester said during a Heritage Foundation webinar this week. However, he added the remaining differences won’t be easy to overcome.

Some evidence suggests countries are seeing an uptick in e-commerce. Despite overall economic difficulties, March and April saw a growth in e-commerce in the U.S. of 70 to 100 percent year-over-year, according to COVID-19 Commerce Insight, a project from Emarsys and GoodData -- marketing and big-data platforms, respectively. Bliss also said that, anecdotally, CSI members that sell to consumers are reporting significant increases in online sales.

Companies are increasingly looking to digitization and e-commerce during the pandemic, Inside U.S. Trade has previously reported, with some experiencing a “business boom” even as of early April.

The Chinese Ministry of Commerce said last month that online sales of staples like food and medicine increased 20 percent in the first quarter of 2020. Even amid larger economic challenges -- MOFCOM noted that retail sales of consumer goods fell 15.8 percent in March -- online consumption increased, accounting for nearly a quarter of total retail sales in the January-March time frame, the ministry said. It also cited a 5.9 percent increase in online sales of physical goods, year over year, as well as 10 percent growth in online sales of some for the large e-commerce platforms.

These countrywide trends are reinforced by the WTO report, which says the pandemic “has resulted in spikes in business-to-consumers (B2C) sales and an increase in business-to-business (B2B) e-commerce. The increase in B2C sales is particularly evident in online sales of medical supplies, household essentials and food products.”

The pandemic has “sped up, increased, enhanced the need for digitization,” Bliss said. And this, in turn, has “underscored the importance” of cross-border data flows, Joseph Whitlock, director of policy for BSA | The Software Alliance, told Inside U.S. Trade this week.

Digital trade barriers remain

Despite these trends, analysts -- and the WTO -- warned that barriers to digital trade remain, and trade-restrictive measures imposed by countries in response to the pandemic will curtail e-commerce and services trade as well as trade in physical goods.

“E-commerce for goods and services trade has been adversely impacted by the same factors that have caused disruption in supply and demand overall,” the WTO report says. “Such disruptions have resulted in delivery delays or outright cancellation of orders.”

Bliss said some countries defined essential services too narrowly in their lockdown or stay-at-home orders, preventing, for instance, some financial transactions from taking place. She also pointed to international scientific collaboration -- happening now on a large scale -- as an example of how data localization and limits to cross-border data flow can restrict innovation and research efforts.

Supply chains are also important in digital trade, Whitlock said. Information and communication technology supply chains must be operational so that countries can source the equipment needed for remote work, online shopping and securing digital infrastructure.

This was echoed by the WTO report, which argued that the pandemic has highlighted the need for “efficient and affordable” ICT services and equipment.

International cooperation will be key during and after the pandemic, Bliss said, in facilitating trade and removing barriers. The WTO report concluded there is reason to believe the pandemic could spur these kinds of discussions.

“The global nature of COVID-19 and its impact on e-commerce may encourage strengthened international cooperation and the further development of policies for online purchases and supply,” it says, adding that e-commerce can make economies “more competitive [and] be an economic driver for both domestic growth and international trade.” -- Hannah Monicken (hmonicken@iwpnews.com)

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