E-commerce and Digital Trade

The digital economy was made possible by two parallel developments: the accelerated speed of digitisation (the conversion of data from analogue to digital form) and the digitalisation of processes (i.e. trade and public services) known as the ‘digital transformation’ of societies. The concomitant increase in the processing power of computers allows more correlations to be seen and more information to be extracted from data than ever before. Data is the raw material from which new services, business models, and value are created.

Volume of data/information created, captured, copied, and consumed worldwide from 2010 to 2025. Source: Statista, 2022

Digitisation leads to the dematerialisation of products previously commercialised as physical objects (such as books, films, games, and recorded music). Datal flows also underpin and facilitate every other kind of traditional cross-border flow: even when ships carry physical products, customers increasingly order and pay online. Data flows have also transformed the composition of world trade. Services such as education and healthcare, that were once almost impossible to provide across borders, are now considered tradable.

In parallel, there is growing servicification of global trade, which can be understood as the increasing integration of services with goods. Manufacturing companies increasingly buy, produce, and sell services to complement their wares; services are increasingly embedded in manufactured goods. Examples of servicification include services that are sold to the consumer as a bundle with goods, such as applications that accompany fitness equipment and health trackers.

China is currently the world’s biggest e-commerce market by sales, followed by the United States, the United Kingdom and Japan.

The biggest e-commerce markets by sales. Source: Hinrich Foundation, 2024. 

For detailed information on WTO’s Joint Initiative on e-commerce, visit the dedicated page on the Digital Watch Observatory.

As the primary policy player in modern global trade, the World Trade Organization (WTO) established a system of agreements that regulate international trade. The principal treaties are the General Agreement on Tariffs and Trade (GATT), dealing with trade in goods; the General Agreement on Trade in Services (GATS); and the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS). Other agreements developed at the WTO which are of relevance to e-commerce include the Information Technology Agreement (ITA) of 1996, with an impact on the price of hardware and connectivity; the ITA-II of 2015; the Trade Facilitation Agreement (TFA); and the agreements and reference documents that guided the global opening of telecommunications services such as the GATS Annex on Telecommunications, the Fourth Protocol on Basic Telecommunications, and the WTO Reference Paper on Basic Telecommunications.

At the WTO, specific discussions on e-commerce are taking place in two parallel tracks. The first is known as the multilateral track, which was launched in 1998, following the Ministerial Declaration on Global Electronic Commerce. The second involves a subset of WTO members, which are currently part of the WTO Joint Initiative  on e-commerce.

The 1998 Ministerial Declaration on e-commerce launched the Work Programme on Electronic Commerce (WPEC) and put in place a moratorium on customs duties on electronic transmissions by stating that members would ‘continue their current practice of not imposing customs duties on electronic transmissions’. The moratorium has been renewed roughly every two years at the WTO Ministerial Conference. The last renewal took place in 2022 by means of a Ministerial Decision on the E-commerce Moratorium and Work Programme taken at the 12th WTO Ministerial Conference, in Geneva.

In recent years, there have been questions raised on the scope of the moratorium and on its impact on the revenue of developing countries. While some countries hope to make the moratorium permanent, others are increasingly putting its renewal into question.

The WPEC was mainly designed to build understanding around the trade-related aspects of e-commerce without a pre-set objective to negotiate new rules. Its main goals are (1) to examine all trade-related aspects of e-commerce, (2) to examine the relationship between e-commerce and WTO agreements, (3) to consider the economic, financial, and development needs of developing countries.

Due to the increasingly important role that e-commerce plays in the digital economy, some members argued that the WTO should more strongly incorporate e-commerce in its agenda. Accordingly, the first Joint Statement on Electronic Commerce was released at the 11th Ministerial Conference in Buenos Aires on 13 December 2017. The 71 signatories announced their goal to ‘initiate exploratory work together toward future WTO negotiations on trade-related aspects of electronic commerce.

During the 2019 World Economic Forum Annual Meeting in Davos, 76 members announced a Second Joint Statement expressing the participating members’ intention to begin negotiation at the WTO on ‘trade-related aspects of electronic commerce (…) that builds on existing WTO agreements and frameworks with the participation of as many WTO Members as possible. The co-facilitators of the JI on e-commerce are Australia, Japan and Singapore. The agenda of the JI on e-commerce initially included not only traditional issues, such as trade facilitation and market access, but also a wide range of digital policy issues, such as data flows, localisation, data protection, cybersecurity and spam.  

Recording of the Geneva Internet Platform’s Trade and Finance Tour, which discussed trade negotiations in Geneva.

For the past years, reports published by several organisations, such as The World Bank, the Internet Society, the World Economic Forum, and UNCTAD have argued that most of the benefits and wealth stemming from the digital economy were being accrued by few countries and players. In particular, the 2021 UNCTAD Digital Economy Report mentions that datasets and data processing infrastructure are highly concentrated in the United States and China, and that inequality in the data economy is expected to grow if no policy measures are taken to revert it. Promoting inclusiveness in the digital economy is not only a concern for developing countries, but an important goal for developed countries, whose digital economies also largely depend on SMEs.

The asymmetry of digital development across countries means that the ability of developing countries and Least Developed Countries (LDCs) to foster data-driven sectors for their economic growth is considerably limited compared to more digitally advanced countries. The difficulty to put in place catch-up measures became even more significant with the COVID-19 pandemic. The crisis reversed previous gains in poverty reduction, particularly affecting women and people living in large cities, engaged in manufacturing, service and commerce. It also led to a slow-down in investment in telecommunications infrastructure in developing regions, and to a decrease of foreign direct investment which is endangering the achievement of the Sustainable Development Goals (SDGs). The widening gap in SDG investment in developing countries has increased from USD 2.5 trillion to approximately USD 4 trillion per year leading up to 2030.

Digital trade has the potential to play a role in reducing global inequality, promoting economic inclusion, and lifting the living standards in developing and least developed regions. From this perspective, development-oriented considerations should be included in digital trade discussions from the outset of the negotiating processes. They should be seen as an integral part of strategies to mitigate post-pandemic effects, promote SDGs, and infuse notions of distributive justice in the digital economy. As noted by the ‘Friends of e-commerce for Development (FED), there should be a focus on the role of e-commerce “as a tool to drive growth, narrow the digital divide, and generate development solutions for developing and least-developed countries”. Although China and the US remain the largest e-commerce markets, the most significant growth of e-commerce is happening in developing countries. 

Top 10 e-commerce markets by sales growth year-on-year. Source: Hinrich Foundation, 2024. 

The services sector accounts for an increasingly larger part of global trade. In spite of that, physical goods still correspond to over 97% of cross-border e-commerce expenditure in 2023. For developing countries, the importance of physically delivered products to the total of e-commerce transactions is even more significant. This means that enabling issues and trade facilitation issues – such as fostering readiness among border agencies to tackle e-commerce, improving national infrastructure in the fields of logistics, postal services and Internet connectivity, and promoting a thorough implementation of the Trade Facilitating Agreement (TFA) – are important topics in the negotiating agenda from a development perspective.

Some provisions in FTAs could have a positive impact on reducing digital inequality. They include concrete measures to promote digital inclusion, support micro, small and medium-sized enterprises (MSMEs), support the adoption of digital identities, provide special and differential treatment (SDTs) to developing countries, capacity development, and technical assistance.