Digital Trade

for Development
Disclaimer

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the Organisation for Economic Co-operation and
Development, the United Nations, The World Bank
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WTO ISBN 978-92-870-7544-4 (print)

WTO ISBN 978-92-870-7543-7 (PDF)
Contents
Executive summary 3

A. Introduction 5
B. Unleashing the potential of digital technologies: growth, trade and development opportunities 7
1. Digitalization changes the way economies grow 8
2. Trade is increasingly digital, but some developing economies are struggling to be part of
this transformation 10
3. Digital trade provides opportunities to launch new products 14
4. Digital trade can contribute to making trade more inclusive 17
(a) Digital trade can create new opportunities for developing economies, including LDCs 17
(b) Digital trade can open up opportunities for greater participation of MSMEs,
women and young people in international trade 19

C. Role of domestic policies and international cooperation in supporting digital trade 21

1. Improving digital connectivity, ICT infrastructure and digital skills is essential to promote
digital trade 22
(a) Investment in infrastructure along with policies to ensure reliable and affordable
internet access is key  22
(b) Policies to support the development of digital skills of consumers and firms are crucial
to facilitate digital trade 24
(c) International cooperation can help bridge the digital gap by enhancing digital connectivity
and skills 25
2. An enabling legal and regulatory environment coupled with proactive trade policies are essential
components of the ecosystem for digital trade 26
(a) A robust domestic regulatory framework is crucial for fostering digital trade 26
(b) While digital trade is increasingly being disciplined in bilateral and regional trade
agreements, the participation of developing economies in such agreements remains limited 26
(c) WTO rules already cover digital trade, but some of these rules may need to be updated to
adequately address the evolving nature of digital trade 28
(d) The WTO moratorium on customs duties on electronic transmissions will be a key issue
at the upcoming WTO 13th Ministerial Conference (MC13) to be held in February 2024 31
(e) Digitally ordered goods trade can benefit from the full implementation of the WTO Trade
Facilitation Agreement (TFA) 33
3. Some regulatory issues in the realm of digital trade could benefit from deeper international
cooperation36
(a) Cross-border data flows are pivotal to the expansion and efficiency of digital trade 36
(b) Competition policy is essential to maintain open and dynamic digital markets 38
(c) Enhanced online consumer protection helps build trust in digital markets 39

D. Conclusions 43
Annex A: Literature review on studies analysing the customs revenue implications of the WTO
moratorium on customs duties on electronic transmissions 45
References47
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 D I G ITAL T RAD E F OR D EVE LOP M E N T

Acknowledgment

This report was approved by Kenneth Kang (Deputy Director, Ruta (IMF); Andrea Andrenelli, Javier Lopez-Gonzalez and Julia
Strategy, Policy and Review Department, IMF), Marion Jansen Nielson (OECD); Torbjörn Fredriksson, Arnau Izaguerri Vila,
(Director, Trade and Agriculture Directorate, OECD), Shamika Daniel Ker, Teresa Moreira, Miho Shirotori, and Akari Yamamoto
Sirimanne (Director, Division on Technology and Logistics, (UNCTAD); Martín Molinuevo and Javier Suarez (The World
UNCTAD), Mona Haddad (Global Director, Trade, Investment Bank); and Marc Bacchetta, Antonia Carzaniga, Barbara
and Competitiveness, The World Bank), Ralph Ossa (Director, D’Andrea, José-Antonio Monteiro and Roberta Piermartini
Economic Research and Statistics Division, WTO). Its (WTO). Useful comments were received from IMF Departments;
preparation was coordinated by Adam Jakubik and Michele Ruta, Carolina Abate, Francesca Casalini, Audrey Plonk and Silvia
under the guidance of Martin Sommer (IMF); Julia Nielson and Sorescu (OECD); Poul Hansen and Dong Wu (UNCTAD);
Javier Lopez-Gonzalez (OECD); Shamika Sirimanne, Torbjörn Yuki Araki, Jieun Choi, Tuan Minh Le, Pierre Sauvé, Alexandrea
Fredriksson, Miho Shirotori, and Teresa Moreira (UNCTAD); Schwind and Gaute Solheim (The World Bank); Emmanuelle
Sebastien Dessus (The World Bank); Marc Bacchetta, José- Ganne and Zainab Mchumo (WTO). Research assistance was
Antonio Monteiro and Roberta Piermartini (WTO). The authors provided by Tinotenda Mataire (WTO). Serge Marin-Pache and
of the report are Tibor Hanappi, Adam Jakubik and Michele Anthony Martin (WTO) managed the production of the report.

2
 EXECUTIVE SUMMARY

Executive summary Some economies are more prepared to seize

opportunities and take on challenges associated with
digital trade, highlighting the importance of digital
infrastructure and skills. In general, to engage in and benefit
from digital trade, consumers and businesses must have access
to fast, affordable and reliable digital infrastructure as well as the
This report explores the opportunities and challenges for
skills and capabilities to use digital technologies for productive
developing economies arising from digital trade and discusses activities. Today, an estimated 5.4 billion people, or 67 per cent
the role of international cooperation in tackling these of the world’s population, are able to connect to the internet,
opportunities and challenges. The report considers policy doubling the number of people connected only 10 years ago.
actions in the areas of digital infrastructure, skills, international Yet, 2.6 billion people, or one-third of the global population
support for capacity development, and the regulatory and remains offline, most of them in low- and lower-middle income
policy environment. Specific policy issues include the WTO economies. High tariffs on imports of information and
e-commerce moratorium, regulation of cross-border data communication technology (ICT) equipment, restrictions on
flows, competition policies and consumer protection. imports of enabling services and limited competition in
telecommunications services can reduce affordability and slow
down the adoption of these technologies.
The digital transformation is having profound effects.
Digitalization of the economy is radically transforming the way
Governments need to put in place a regulatory and
we communicate, produce, govern and trade with one another.
policy environment that not only facilitates trade in a
Digital technologies are engines of growth, increase productivity digital world but also generates inclusive and
by reducing production costs, foster economies of scale and sustainable outcomes. Policies and regulations should
more efficient financing, promote innovation by fostering enable remote transactions, enhance trust in digital markets,
exchange of ideas and expand and diversify export baskets by promote affordable access and support cross-border deliveries.
reducing international trade costs. Digitalization can also A predictable and interoperable environment that provides
promote resilience to shocks, a wider services-led growth appropriate safeguards related to online transactions (such as
model and more inclusive growth. At the same time, by data privacy, consumer protection and cybersecurity) is essential
transforming existing processes and business models, for the digital trade ecosystem to thrive. Laws and regulations that
digitalization creates opportunities and risks, with winners and ensure easy entry and exit of firms, effective competition and an
losers both across and within economies. open trade regime promote healthy competition. Estimates
suggest that improved digital connectivity is twice as effective at
lowering trade costs in middle- and low-income economies with
Cross-border digitally delivered services are the fastest
an enabling regulatory environment for digitally delivered services.
growing segment of international trade, with new
players emerging. Digital trade refers to all international trade Bridging the digital divide and strengthening the
digitally ordered and/or digitally delivered. According to WTO readiness of developing economies to benefit from
estimates, digitally delivered services have recorded an almost digital trade requires both domestic and international
fourfold increase in value since 2005, rising 8.1 per cent on mobilization. More international financial and technical support
average per year over the period 2005-22, outpacing goods is needed to build the capacity of developing economies to
(5.6 per cent) and other services exports (4.2 per cent) to improve connectivity and skills and to regulate in areas relevant
account for 54 per cent of total services exports. With new to digital trade. Initiatives like the WTO-led Aid for Trade, the
ways of obtaining comparative advantage, opportunities arise UNCTAD-led eTrade for all and the World Bank-led Digital
for new players to engage in global markets, including for Advisory and Trade Assistance (DATA) Fund can help. Digital
farmers to connect to markets and for small business to trade connectivity is one of the three priority areas in the WTO Aid for
Trade work programme for 2023-24, and recent Aid for Trade
via parcels. While developed economies are responsible for the
commitments to the ICT sector stand at US$ 2.16 billion in
majority of digitally delivered services exports, they have also
2021-22.
grown in most developing economies, including in Africa,
where Ghana, Morocco and South Africa have seen the largest International cooperation increasingly covers rules on
growth. That said, growth in least developed countries (LDCs) digital trade. To date, progress on governance of digital
continues to lag behind and Africa contributed less than 1 per trade-related issues has largely taken place in the context of
cent of digitally delivered services exports globally in 2022. bilateral and regional trade agreements (RTAs). By the end of
During the COVID-19 pandemic, the gap between the most 2022, there were 116 agreements with digital trade provisions,
and the least advanced economies in terms of exports of such representing 33 per cent of all existing RTAs. Overall, since
services widened further. 2001, 44 per cent of agreements signed contain at least one
3
 D I G ITAL T RAD E F OR D EVE LOP M E N T

digital trade or e-commerce provision. However, only few LDCs the potential revenue that could be collected using tariffs on
are party to RTAs with provisions on digital trade. The African electronic transmissions vary between 0.01 per cent and 0.33
Continental Free Trade Area (AfCFTA) is, for many countries, per cent of overall government revenue on average for
the first experience negotiating provisions on digital trade. developing economies, with higher losses for a handful of
economies. While tariffs and VAT are not mutually exclusive,
Since 1998, the WTO Work Programme on E-commerce recent evidence shows that for most economies, VAT could
has considered how WTO rules apply to e-commerce. generate higher revenue from taxing electronic transmissions
E-commerce is widely seen as within the scope of existing WTO with appropriate investment in the capacity of tax administrations.
agreements. At the same time, a majority of WTO members Tariffs on electronic transmissions might also impact
consider that, to respond to the changing nature of trade and to competitiveness and participation of firms in trade, especially
facilitate e-commerce related activities, existing WTO rules MSMEs and women owned traders.
related to digital trade need to be updated and complemented
by new ones. Under the Joint Statement Initiative (JSI) on Beyond trade rules, other regulatory issues also require
E-commerce, 90 WTO members, including many developing global solutions: cross-border data flows, competition
economies and five LDCs, are negotiating specific rules on and consumer protection.
digital-trade-related issues. • 
A growing number of measures condition the cross-
border data flows that underpin digital trade. But
The WTO moratorium on the imposition of customs deeper and inclusive international cooperation is needed
duties on electronic transmissions is attracting attention for a balanced approach to global data governance, which
in the run-up to the WTO's 13th Ministerial Conference ensures data can flow across borders as freely as possible
(MC13). It is the only WTO provision that applies explicitly to while addressing public policy concerns.
e-commerce and has been in place since 1998. Additional
commitments not to impose customs duties on electronic • 
The features of digital markets, including network
transmissions have also been included in 88 RTAs involving a effects, economies of scale and scope, give rise to
total of 87 economies, of which 33 are developing economies. concerns about market power and anti-competitive
In June 2022 at MC12 members agreed to further extend the behaviours. Governments around the world are seeking
moratorium "until the 13th Ministerial Conference or 31 March ways to effectively regulate such behaviours by adapting
2024, whichever is earlier". At this meeting, members also their legislative frameworks and strengthening enforcement
agreed to “intensify discussions [...] including on the “scope, against anticompetitive practices. Efforts should continue
definition and impact” of the moratorium". to encourage exchange of information and knowledge,
collective responses when feasible, as well as innovative
WTO members' views about the renewal of the moratorium approaches and consensus-building to promote
on customs duties differ. Proponents of the moratorium competition in digital markets.
emphasise that the commitment has supported a stable and • 
The lack of appropriate policies and regulations on
predictable environment for digital trade to thrive. However, other consumer protection and resources for effective
WTO members have expressed concerns about the lack of clarity enforcement hinder trust in the digital economy.
regarding the scope of the moratorium and the definition of Enacting adequate legal frameworks, enforcing regulations
electronic transmissions as well as the opportunity costs of the and addressing cross-border disputes are essential to
moratorium. These include the potential foregone customs create a safer and more inclusive digital environment for
revenue and the desire to maintain policy space in light of the consumers. Key challenges include insufficient information
uncertainty associated with rapid technological change. They and education of online consumers, misleading advertising,
have also expressed concerns about the impact of the moratorium unsafe products and payments systems, unauthorized
on their ability to use customs duties for industrial policy purposes. collection and use of customers' personal data, and
inadequate dispute resolution and redress mechanisms.
The impact of the moratorium on government revenue is
estimated to be below 0.33 percent of overall government International cooperation is critical to ensure inclusive
revenue on average. Value added tax (VAT) represents benefits of digital trade. Global cooperation is needed to
another way to collect revenue from digital trade that ensure that small businesses, women and young entrepreneurs
does not discriminate between domestically supplied and consumers in all economies can reap the benefits of digital
and imported products, is more uniform across different trade. This is particularly challenging as the issues involved fall
products, and does not impose a tax burden on within the purview of multiple government ministries, which calls
intermediate inputs used by domestic producers. The for a whole-of-government approach. International organizations
moratorium can impact the amount of customs revenue collected can support these efforts by strengthening their cooperation
by governments. Uncertainties exist about its scope and the with governments, stakeholders, and each other, and this joint
definition of electronic transmissions, but existing estimates of report is a step in this direction.
4
A
Introduction
 D I G ITAL T RAD E F OR D EVE LOP M E N T

Trade has played an important role in fostering economic The realm of digital innovations continues to experience rapid
growth, promoting income convergence among economies growth and transformation (WIPO, 2022). As a consequence,
and lifting hundreds of millions of people out of poverty (World the digitalization of international trade is expected to expand
Bank and WTO, 2015). The expansion of global value chains further. With the rise of remote working, an increasing number of
(GVCs) (ADB, 2021) has been a driving factor behind this firms, especially those in high-income economies, are expected
growth. Some people, firms and economies have, however, to rely on imported intermediate services for tasks, such as
missed out and not fully benefited from trade opportunities. accounting, graphic design and software engineering (WTO,
2019). In specific sectors, such as health services and
Following the great financial crisis, the growth of GVCs has information and communications technology (ICT), the potential
stagnated. The rise of automation and the backlash against for growth in digital trade is particularly noteworthy. This growth
globalization have further fuelled uncertainties regarding the is in part driven by the demands of ageing populations in high-
future viability of this GVC-led model of industrialization. income economies for digital services, including health and
According to WTO projections, the volume of world wellness, as well as the expanding workforce in geographically
merchandise trade is expected to grow by 0.8 per cent in 2023, remote areas that can work online (ILO, 2021; ITU, 2021b).
marking a decline from the 3 per cent growth estimated for
2022 (WTO, 2023b). With subdued trade growth and weak As the digital economy continues to evolve, policymakers,
economic growth, advances in living standards and prospects businesses and consumers are grappling with the opportunities
for individuals worldwide could be hampered. and challenges it presents. Harnessing the potential of digital
trade and ensuring its inclusivity and sustainability are key
Digital trade, statistically defined as “all international trade
considerations as the world navigates the complexities of the
transactions that are digitally ordered and/or digitally delivered”
fast-changing economic landscape.
(WTO, OECD, IMF, and UNCTAD, 2023),1 has emerged as a
dynamic and fast-growing area of the global economy. The In an effort to deepen the understanding on a pivotal topic that
value of global exports of digitally delivered services reached is becoming increasingly central to trade and the global trading
US$ 3.82 trillion in 2022, capturing an estimated 54 per cent
system in the 21st century, the International Monetary Fund, the
share of total global services exports and accounting for 12 per
United Nations Conference on Trade and Development, the
cent of total goods and services exports. Between 2005 and
Organisation for Cooperation and Development, the World
2022, the estimated average annual growth rate of digitally
Bank and the World Trade Organization have joined forces to
delivered services reached 8.1 per cent, outpacing those of
conduct this study on the role of digital trade for development.
goods exports (5.6 per cent) and other services exports (4.2
The joint report is intended to provide a factual and balanced
per cent) (WTO, 2023b).
assessment of current developments. It consists of two main
Alongside trade in digitally delivered services, digitally ordered sections. Section B discusses the growth potential of the digital
trade is also an important component of digital trade. Digital economy, explores the impact of digital technologies on trade
ordering is an increasingly vital way for producers to reach and patterns and looks at the implications for development. Section
take orders from customers both in the same economy and C discusses the challenges faced by developing economies in
abroad. Although statistics on digitally ordered trade are limited, harnessing the opportunities of digital trade and the role of
its share in exports appears to be growing rapidly, including in domestic policies and international cooperation in overcoming
several developing economies. The share increased from 5 to these challenges and fostering a more inclusive digital trade. The
8 per cent of all exports in Malaysia between 2015 and 2019 study includes a focus on the possible implications of the WTO
and has more than doubled in Thailand from 2 per cent in 2015 moratorium on customs duties on electronic transmission, given
to 5 per cent in 2021. In the same year, digitally ordered exports that the moratorium is one of the issues attracting particular
reached 11 per cent in Canada, up more than one-third since attention in the run-up to the WTO’s 13th Ministerial Conference
2019 (UNCTAD, 2023a). (MC13) to be held in February 2024.

This rapid growth in digital trade highlights the increasing

importance and influence of digital technologies in the global
economy in facilitating and expanding international trade,
enabling businesses to provide goods and services across Endnotes
borders in a more seamless and cost-effective manner. In the
wake of the COVID-19 pandemic, digital trade has also 1. 
The Handbook on Measuring Digital Trade defines all
become an important tool for supporting and enhancing digitally delivered trade as services trade (IMF, OECD,
resilience by maintaining business operations and delivering UNCTAD and WTO, 2023). It should be noted, however,
goods and services amidst physical restrictions but also that WTO members hold different views as to whether
diversifying supply chains and opening up new markets digitizable goods are goods or services once digitized and
(IMF, 2022; OECD, 2020b; World Bank and WTO, 2021). digitally delivered.
6
B
Unleashing the potential of digital
technologies: growth, trade
and development opportunities

Increased use of digital technologies is transforming the This section looks at the opportunities from
way workers, firms and consumers interact. The digital digitalization. Like any technological change, digitalization
revolution has seen the transition from mechanical and analogue brings with it challenges and opportunities. While this section
technologies to the widespread adoption of computers and the focuses on the potential benefits of digitalization and how
exchange of machine-readable information (i.e. digital data). digitalization impacts trade, Section C discusses the
While new digital technologies will continue to emerge, current challenges and the necessary policy options. Whether digital
technologies include artificial intelligence (AI), 3D printing, cloud technologies are used in production to order or deliver services
computing and blockchain (OECD, 2019a; UNCTAD, 2021b; or order goods online domestically or internationally (like in the
WTO, 2018).1 Digitalization is transforming processes of case of digital trade), digitalization provides new opportunities
production, consumption and trade and ultimately impacting on for growth and development and changes what we trade and
economic growth in multifaceted ways. who trades.
 D I G ITAL T RAD E F OR D EVE LOP M E N T

1. Digitalization changes 2017). Digitalization can also lower production costs in the
agricultural sector (FAO, 2022). ICT services can provide
the way economies grow farmers with access to better and more timely information on
soil properties, temperature and weather conditions, crop
growth, livestock feed levels and market conditions, thereby
reducing information and coordination costs. Equipment
monitoring can automate the operation of a range of equipment,
such as irrigation pumps, or can be used to track the movement
Digitalization promotes wider services-led growth.
of equipment and animals. The contribution of services to
The services sector has been significantly impacted by the
agricultural production and exports is increasingly linked to
advent of new digital technologies, potentially more so than
digital services that are making agriculture “smarter” (i.e. more
the agriculture and manufacturing sectors (Matthess and
productive and sustainable) (World Bank and WTO, 2023b).
Kunkel, 2020). ICTs have played a crucial role in overcoming
the traditional need for physical proximity in many services
activities. This has resulted in increasing tradability of many Digitalization can also increase productivity by helping
services across borders as well as a surge in “trade in tasks” producers to expand market access or improve input-
within global value chains and the outsourcing of services, sourcing strategies and by facilitating lending. By
both domestically and internationally (UNCTAD, 2022a; WTO, reducing the time, effort and resources required for searching
2019). Services, such as ICT, finance, and business and for, accessing, retrieving and communicating information,
professional services, whose suppliers can leverage digital digital technologies - for example, data analytics- can enable a
technologies to upscale by reaching remote markets and to more efficient and cost-effective access to relevant data. As a
innovate by processing more information, can also bring result, firms with relevant capabilities can make data-driven
positive spillovers to other sectors. They are therefore well decisions and potentially expand their market access. For
positioned to increase productivity and foster economic instance, internet access was found to help smallholder
growth (Hallward-Driemeier and Nayyar, 2017). farmers improve their market participation and volume
decisions regarding their output by providing valuable
information on prices, marketing strategies and potential
Digital technologies, whether used in production, buyers and brokers (Fan and Salas Garcia, 2018). Digital
online purchasing and delivery of goods or services, technologies have also the potential to reduce input-sourcing
domestically or internationally, can act as engines of costs by facilitating the search for suppliers, offering more
growth by increasing productivity, fostering innovation competitive prices (Kandilov et al., 2017). For example, Fintech
and boosting trade. Digital technologies can increase (an application of digital tech to finance) has been found to
productivity by reducing production costs and fostering facilitate increased lending to households and small business
economies of scale. They can increase the incentive to (Cornelli et al., 2020).
innovate and foster the exchange of ideas. Digital technologies
can also help to expand and diversify exports of both goods
and services by reducing trade costs. Conclusive evidence on Second, digitalization facilitates exchange of ideas
the impact of digitalization on growth is limited, but there is and fosters innovation. The exchange of ideas made
some evidence that certain forms of digitalization affect possible through digital technologies can spark creativity,
positively selected factors of growth (Cardona, Kretschmer bring diverse perspectives, enable sharing of knowledge,
and Strobel, 2013; Goldfarb and Tucker, 2019; Hjort and Tian, facilitate feedback and refinement of thinking, foster
2023; Stanley, Doucouliagos and Steel, 2018). collaboration, and expand the knowledge base (WIPO, 2022).
Firms often act as the primary drivers of technological adoption
and implementation thanks to their resources, expertise and
First, digitalization can lower production costs. By market presence that enable them to adopt and integrate more
leveraging digital technologies, companies can reduce labour sophisticated technologies into their operations (Cirera,
costs, streamline operations, optimize resource use and Comin and Cruz, 2022). For instance, adopting cloud services
reduce maintenance and downtime costs. For instance, cloud has been found to not only enhance productivity and boost
services and high-speed broadband have been found to revenue, but also allow teams to collaborate effectively
improve productivity by enabling young firms, particularly those regardless of their geographic locations (Jin, 2022). The
in the manufacturing sector, to expand without increasing their adoption and utilization of digital technologies can also have a
geographic footprint and by allowing established firms to positive spillover effect, benefiting other firms and industries
reorganize operations, reduce costs and extend their reach by creating demand and driving further technological advances.
(DeStefano, Kneller and Timmis, 2020; Jin and McElheran, For instance, internet use by industries in developing
8
 B. U N LEASH I NG TH E POTE NTIAL OF DIG ITAL TECH NOLOG I ES: G ROWTH, TRADE AN D DEVE LOPM E NT OPPORTU N ITI ES

economies has been found to have led to knowledge spillovers Digitalization strengthens resilience against
that have boosted the productivity and innovation of other increasingly frequent and more intense events of an
firms, in particular the most productive ones (Paunov and unpredictable nature. Economic resilience refers to the
Rollo, 2016). ability to prevent and prepare for, cope with and recover from
unpredictable events, with a view to reducing business
interruptions and economic losses caused by them (WTO,
Third, improving digital connectivity lowers 2021). Digital technologies can be essential tools to implement
international trade costs, thus boosting trade across risk prevention, reduction and preparedness strategies,
all sectors. Digital technologies enable real-time including identifying priorities, developing contingency plans
communication, simplify cross-border transactions and expand and reviewing insurance coverage. Digital technologies can
market access by allowing for greater efficiency, transparency also enable business operations to continue once an
and customization. Digital technologies can reduce trade unpredictable event strikes by making the production
costs (such as transportation, information verification and processes more flexible. Digital technologies have been
tracking costs), thus improving supply chain efficiency through instrumental in coping with and recovering from the COVID-19
shorter delivery times, better transport, logistics and distribution pandemic (Jaumotte et al., 2023). Exports in sectors with more
services and enhanced traceability along the supply chain digitally enabled remote work suffered less from COVID-19-
(Kang, 2016; Ma, Shi and Kang, 2023). WTO research related local supply disruptions (Espitia et al., 2021). Greater
digitalization also helped insulate economies from negative
suggests that a 10 per cent increase in mobile broadband
spillovers from COVID-19-related lockdown measures
subscription per capita is associated with around 1 per cent
adopted in other economies (IMF, 2022). Limited connectivity
lower trade costs both in goods and services. The effect is
and ICT adoption as well as liquidity shortages and persistent
especially strong for trade in digitally deliverable services,
cash-based and payment-on-delivery cultures hampered the
such as business and professional services (Bellucci, Rubínová
diffusion of digital solutions in developing economies during
and Piermartini, 2023). The impact of digital technologies on the COVID-19 pandemic (UNCTAD, 2020).
reducing trade costs has increased over time. OECD research
shows that by 2018, the impact of an increased share of
individuals using the internet on international trade costs was The growth and resilience potential stemming from
three times higher than it was in 1995 (López González, digital technologies, including through digital trade,
Sorescu and Kaynak, 2023). Although estimated trade effects ultimately depends on the capacity to adopt and use
of improved digital connectivity vary depending on the specific these technologies. Open trade can help businesses
measure of connectivity used and methodology, they are acquire digital technologies, but addressing barriers to using
significant and positive for all sectors and different levels of these technologies, including for trading goods and services,
is also crucial (see Section C). While barriers to digital
development.
technology adoption and use vary depending on the specific
context, some common obstacles include insufficient or
Digital trade can be an engine for growth. Similar to inadequate physical infrastructure (such as unreliable
other forms of trade, digital trade fosters growth by improving electricity supply, poor internet connectivity and limited
resource allocation, allowing economies to take advantage of telecommunications networks), restricted access to affordable
economies of scale, and fostering innovation, technological devices and internet services, and a lack of digital skills and
diffusion and access to education. While existing empirical literacy needed to effectively use these technologies.
evidence primarily highlights the positive impact of trade in Inadequate regulatory frameworks and policies, such as the
lack of consumer protection, data protection and privacy
goods on growth, a growing body of evidence shows that
regulations, unnecessary obstacles to data collection, transfer
services and services trade (which are increasingly delivered
and sharing, or high levels of market concentration and failure
digitally) are key drivers of productivity, competitiveness and
to prevent anti-competitive behaviour, can also hinder digital
rising living standards (World Bank and WTO, 2023b). In
technology adoption and use. Duties and charges on
2022, cross-border digital payments for online courses
electronic transactions would also represent an obstacle to
through platforms, e-books and audiobooks, reached US$ 1.2 digital trade.
million in Namibia, suggesting the importance of digital
technologies in providing learning opportunities (Bank of
Namibia, 2023). The use of digital technologies to supply or
access innovative services (even if not exclusively cross
border) is central to the realization of economic development
strategies.
9
 D I G ITAL T RAD E F OR D EVE LOP M E N T

2. Trade is increasingly in the United Kingdom (see Figure B.2) (UNCTAD, 2023a).
On-going technological advances, uptake and changes in
digital, but some business practices suggest that the share of trade that is
digitally ordered is likely to continue to increase.
developing economies
are struggling to be part Digitally delivered services have become an
increasingly important component of trade and are
of this transformation likely to continue to increase. Digital technologies have
facilitated the direct cross-border trade of certain services,
such as consulting, education and financial services. Global
exports of digitally delivered services reached US$ 3.82 trillion
in 2022, marking an almost fourfold increase in value since
2005 and accounting for 54 per cent of total global services
Digitalization impacts how international trade is exports. Between 2005 and 2022, these exports grew by an
conducted. Digital technologies enable buyers and sellers to average of 8.1 per cent annually, outpacing goods (5.6 per
place and receive orders on a global scale, eliminating the cent) and other services exports (4.2 per cent) (WTO, 2023b).2
need for in-person interactions. In addition, digital delivery The ability to digitally deliver services played an important role
facilitates the remote provision of products from one territory in trade resilience during the COVID-19 pandemic. While
to another via computer networks. The terms digital trade and tourism and other services requiring cross-border mobility
e-commerce are often used interchangeably (see Box B.1.). declined, digitally delivered services exports, including IT
For this report, digital trade covers products that are digitally consulting, continued to rise (see Figure B.3). Driven by digital
ordered and/or digitally delivered. “Digitizable goods” refers to technological advances and changing business practices, the
goods before digitization (e.g., a printed book), while “digitized share of services trade that can be delivered remotely over
products” applies after digitization (e.g., an e-book), as the computer networks is likely to continue to increase (UNCTAD,
word “product” can refer to both goods and services. 2015; 2023c; WTO, 2023b).

Improved data collection is needed to address the Exports of digitally delivered services are dominated
limited availability of official statistics on digital trade. by high-income economies and a few emerging
Few national statistical agencies – especially in developing economies. In 2022, high-income economies were
economies – publish comprehensive figures on digital sales, responsible for over 82 per cent of global exports of digitally
and even fewer provide a breakdown of domestic and delivered services (see Figure B.4). Among these economies,
international digital trade transactions (UNCTAD, 2023a). The the European Union holds the largest share at 37 per cent,
lack of information on the economic value of digitally ordered followed by the United States at 16 per cent, and the United
exports and imports makes it difficult to assess how digital Kingdom at 9 per cent. Meanwhile, 17 per cent of digitally
methods compare to traditional ones in stimulating economic delivered services exports originated from middle-income
activity. It also makes it challenging to gauge the effects of economies, with China and India accounting for 6 per cent and
online orders on replacing local purchases with foreign 5 per cent, respectively. Notably, regions such as Africa, and
options, and how factors like firm size, sector, payment Latin America and the Caribbean have a relatively restrained
techniques and openness to trade affect these results. market presence in digitally delivered services of 1 per cent
and 2 per cent, respectively. The participation of LDCs is
particularly limited, accounting for a mere 0.2 per cent of
Available evidence suggests that the contribution of
global exports of digitally delivered services, a market share
digital trade to total exports can differ significantly
that has fallen.
across economies. The COVID-19 pandemic accelerated a
long-term trend toward digital ordering, be it domestically or
internationally, that has transformed both business-to-business Despite overall growth in the export of digitally
and business-to-consumer sales, including by driving a delivered services, Africa and Latin America have
significant increase in online retail sales and the expansion of continued to experience slower progress. Between 2015
digital marketplaces (OECD, 2023a; UNCTAD, 2022c). and 2022, exports of digitally delivered services grew faster in
Available statistics, however, suggest that the share of digitally middle-income economies (10 per cent on average per year)
ordered exports varies significantly across economies, from 5 than in high-income economies (7 per cent). In contrast,
per cent in Thailand and 8 per cent in Malaysia to 18 per cent exports of digitally delivered services in LDCs expanded by
10
 B. U N LEASH I NG TH E POTE NTIAL OF DIG ITAL TECH NOLOG I ES: G ROWTH, TRADE AN D DEVE LOPM E NT OPPORTU N ITI ES

Box B.1
Digital trade and e-commerce – fundamental concepts and statistical definitions

Over the years, different concepts and definitions relating to music and video streaming, and remote learning platforms. All
e-commerce and digital trade have been developed in economic actors, such as businesses, households and
international institutions. The IMF-OECD-UNCTAD-WTO governments, can engage as buyers and sellers.
Handbook on Measuring Digital Trade clarifies the linkages
between these concepts by providing a statistical definition of The definition of digital trade in the Handbook is fully
digital trade (IMF, OECD, UNCTAD and WTO, 2023). This compatible with the WTO definition of electronic commerce
definition has gained widespread acceptance by governments, agreed under the Work Programme on Electronic Commerce,
following extensive consultations with statistical compilers which refers to the “production, distribution, marketing, sale or
and policymakers. purchase of goods and services by electronic means” (see
Section C.2.c). In fact, from a measurement perspective, the
The Handbook defines digital trade as “all international trade value of products traded digitally intrinsically incorporates
that is digitally ordered and/or digitally delivered”. It comprises the cost of their production, distribution, marketing or delivery.
both digitally ordered trade and digitally delivered trade The two statistical criteria of digital ordering and digital
through computer networks, largely through the internet. delivery are encompassed by the WTO definition of electronic
Digitally ordered trade covers transactions in both goods and commerce. In addition to cross-border e-commerce, the WTO
services. Ordering a T-shirt from abroad through the retailer's definition also covers the domestic e-commerce activities of
website or booking a hotel room in another country through a foreign-owned or foreign-controlled service suppliers.
digital intermediation platform are examples. Digital delivery Figure B.1 illustrates the relationships between the WTO
may take place in the form of emails, voice, and video calls, via definition of e-commerce and of digital trade and their
apps and intermediation platforms such as online gaming, components.

Figure B.1: Digital trade and e-commerce – fundamental concepts and statistical definitions

WTO Work Programme on Electronic Commerce

definition (1998)
“The production, distribution, marketing, sale or delivery of goods and services by electronic means”

E-commerce Digital Trade

Definition for measurement purposes (OECD, 2009) Handbook on Measuring Digital Trade
“The sale or purchase of a good or service, conducted IMF, OECD, UNCTAD and WTO, 2023
over computer networks by methods specifically “All international trade that is digitally ordered
designed for the purpose of receiving or placing orders” and/or digitally delivered”

Digitally ordered trade

Domestic e-commerce = Digitally delivered trade
“The domestic sale or purchase International e-commerce “All international trade
of a good or service, conducted “The international sale or purchase transactions that are delivered
over computer networks by methods of a good or service, conducted remotely over computer
specifically designed for the purpose over computer networks by methods networks”
of receiving or placing orders” specifically designed for the purpose
of receiving or placing orders”

International transactions that are both

digitally ordered and digitally delivered

Source: IMF, OECD, UNCTAD and WTO (2023).

11
 D I G ITAL T RAD E F OR D EVE LOP M E N T

Figure B.2: Few economies have published statistics on the value of cross-border business
e-commerce sales

1000
18%

800

12%
E-commerce sales (US$ billions)

600 11%

8%

400

5%

200

0
United Kingdom Spain Canada Malaysia Thailand
(2019) (2021) (2021) (2019) (2021)

Domestic Cross-border Cross-border share (% of exports)

Source: UNCTAD (2023a).

Note: The figure reports the sales by businesses only, including both Electronic Data Interchange (EDI) sale and web sales. This figure
assumes that the statistics for business e-commerce exports and total exports can be treated as mutually compatible, despite being based
on different data sources.

only 4 per cent. Some of these LDCs, such as Uganda and the highest increase in recent years, accounting for 43 per cent
Zambia, and several other economies, including Barbados and of the region's total trade of these services in 2021, while the
Bolivia, experienced a contraction of their exports of digitally share of intra-regional trade in digitally delivered services
delivered services. Overall, exports of digitally delivered remained stable in South and Central America and the
services grew by an average of 6 and 8 per cent annually in Caribbean. In contrast, intra-Africa trade in digitally delivered
Latin America and Africa, respectively, while Asia experienced services declined to 3 per cent in 2021, representing the
a higher annual growth rate of 10 per cent (see Figure B.5). lowest share of intra-regional trade in these services.
Intra-Asia trade in digitally delivered services trade experienced

12
B. U N LEASH I NG TH E POTE NTIAL OF DIG ITAL TECH NOLOG I ES: G ROWTH, TRADE AN D DEVE LOPM E NT OPPORTU N ITI ES

Figure B.3: Global exports of digitally delivered services have grown faster than exports of
goods and other services

400
Export growth rate index (2005=100)

350

300

250

200

150

100
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Goods Digitally delivered services Other services

Source: WTO (2023b).

Note: The figure displays the growth rate of exports of goods, digitally delivered services and other services. The base year of the growth rates
is 2005 (2005=100).

Figure B.4: Digitally delivered service exports are dominated by high-income economies
and a small number of middle-income economies

Low-income, 0.2%
Middle-income, (-27%)
17.1%
(+24%)

High-income, 82.7%
(-4%)

Source: WTO (2023b).

Note: The figure displays the share of exports of digitally delivered services in 2022 by income group. The numbers in parenthesis represent
the growth rate of market share between 2015 and 2022.

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 D I G ITAL T RAD E F OR D EVE LOP M E N T

Figure B.5: The growth of digitally delivered services exports of low- and middle-income
economies differs by region

250

230
Export growth rate of digitally delivered

210
services (2015=100)

190

170

150

130

110

90
2015 2016 2017 2018 2019 2020 2021 2022

Africa and Middle East Asia and Oceania World

Europe and CIS Latin America and the Caribbean

Source: WTO (2023b).

Note: The figure displays the changes in exports of digitally delivered services from middle- and low-income economies by region. The base
year of the export index is 2015 (2015=100). High-income economies are excluded from regional groupings but included in the world
average.3 CIS corresponds to the Commonwealth of Independent States including certain associate and former member states.

3. Digital trade provides Digital delivery is increasingly common, with impacts

on goods trade, predominantly in developed economies.
opportunities to launch Demand in physical formats of music, movies, books and
software, which once dominated the market, have plateaued as
new products digital equivalents have become more accessible and
convenient.4 The proliferation of online streaming platforms,
e-books and downloadable software has also made it easier for
consumers to access these products. These developments
Digital technologies have provided new opportunities make it significantly easier and less costly to deliver a wide
to trade a broad range of services. In the last decade, range of products across borders. As a result, international
computer services were the most dynamic services sector. In trade in digitizable goods has stagnated as digital distribution
2022, digitally delivered services exports were dominated by channels offer cost savings, immediate delivery and a broader
business, professional and technical services, which accounted reach. However, this is largely a high-income economy
for approximately 40 per cent, followed by computer services phenomenon as digitizable goods imports continued to grow in
(20 per cent), financial services (16 per cent) and intellectual many middle and low-income economies (see Figure B.6)
property-related services (12 per cent) (WTO, 2023b). (Andrenelli and López González, 2023).
14
B. U N LEASH I NG TH E POTE NTIAL OF DIG ITAL TECH NOLOG I ES: G ROWTH, TRADE AN D DEVE LOPM E NT OPPORTU N ITI ES

Figure B.6: International trade in goods that can be digitized has plateaued

a. Evolution of imports of digitizable goods

140
Imports of digitizable goods (US$ billions)

120

100

80

60

40

20

0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
High income Upper middle income Lower middle income Low income

b. Import growth of digitizable goods

200%

150%
Average yearly change in physical imports of digitizable goods

100%
in 2008-19

50%

0%

-50%

Low income Lower middle income Upper middle income High income Income group average

Source: Andrenelli and López González (2023).

Note: The calculations are based on UN Comtrade data and cover 196 economies (panel a) and on the BACI database for 206 economies
(panel b). The scope of digitizable goods covers photographic material, printed matter, storage devices and video games.

15
 D I G ITAL T RAD E F OR D EVE LOP M E N T

Trade in goods that underpin the use of digital of ICT goods in total merchandise trade remains limited due in
technologies has seen an increase too. The rising part to differences in technological development and industrial
demand for innovative digital products and solutions, coupled focus as well as higher tariffs. These economies further
with the growing reliance on digital infrastructure and tools, experienced a strong decline in the value of both imports and
are making certain goods, such as ICT equipment, essential exports of ICT goods as the COVID-19 pandemic took hold
for achieving optimal functionality and performance in the (see Figure B.7) (UNCTAD, 2021).
digital economy. As a result, the demand for these goods has
led to an increase in their international trade. From 2012 to While some digital technologies might reduce trade in
2021, global ICT goods exports grew by nearly 50 per cent to goods, others could potentially bolster it. For instance,
US$ 2.7 trillion. The share of trade in ICT goods in total the introduction of 3D printing tends to be associated with an
merchandise trade varies across regions. While Asia continues increase, rather than a decrease, in international trade in
to lead in terms of trade in ICT goods, other regions have goods, such as hearing aids equipment, orthopaedic
demonstrated comparatively lower levels of engagement in appliances, aircraft parts, medication and machine parts
this sector. In particular, in LDCs and several developing (Andrenelli and López González, 2021; Freund, Mulabdic and
regions, including Northern and Sub-Saharan Africa, the share Ruta, 2022).

Figure B.7: Imports of ICT goods in LDCs remain constrained

20
ICT good import share in total merchandise trade (%)

15

10

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

World Africa Asia and Latin America and Developed Developing LDCs
Pacific the Caribbean economies economies

Source: UNCTAD.

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 B. U N LEASH I NG TH E POTE NTIAL OF DIG ITAL TECH NOLOG I ES: G ROWTH, TRADE AN D DEVE LOPM E NT OPPORTU N ITI ES

4. Digital trade can trade development of developing economies (Hoque and

Boateng, 2017).
contribute to making trade
more inclusive Export opportunities for digitally delivered products
could be better harnessed by economies traditionally at
the margins of global trade. Although distance remains a
significant factor in overall trade costs (López González,
Sorescu and Kaynak, 2023; WTO, 2021), digital technologies
reduce the relative importance of some factors of comparative
Digital trade can create new opportunities for
advantage, such as geographical distance from markets and
economies, firms and consumers and integrate more
the quality of transport infrastructure. Trade in digitally delivered
sectors of society into global trade. The adoption of digital
products, such as e-books, music and computer software, can
technologies can help developing economies reduce barriers
thrive with improved internet access, an enabling regulatory
to market entry and provide direct access to global markets,
environment and digital payment infrastructure. Several
often bypassing traditional intermediaries, such as wholesalers,
developing economies have been making significant strides in
retailers and traditional media publishers. These technologies
exporting digitally delivered services (World Bank and WTO,
also offer cost-effective platforms for micro-, small- and
medium-sized enterprises (MSMEs) to showcase their goods 2023b). For instance, over the past few years, Bangladesh has
and services, enhance productivity and compete more shown promising growth in its IT sector, especially in software
effectively. Additionally, digital platforms can empower women development and IT-enabled services, with computer service
entrepreneurs by offering flexible business models, enabling exports rising by an average of 31 per cent from 2019 to 2022.
them to overcome socio-cultural barriers and actively participate
in international trade. For these opportunities to materialize, it is Certain traditional factors of comparative advantage in
essential to address economic, technical and social barriers
trade may become less significant in the digital realm.
that prevent marginalized communities from engaging in digital
While capital investments and labour costs remain relevant for
trade and from reaping the economic benefits (see Section C).
digital trade, their importance (at least for certain types of skills)
As noted above, so far LDCs and some developing economies
is somewhat diminished compared to offline trade. This is in
continue to play a marginal role in digital trade. Also, MSMEs in
part due to the ability of technologies, such as AI, advanced
these developing economies are often constrained from
robotics and 3D printing, to take the place of some tasks,
accessing digital platforms by lack of internet connectivity,
reducing the prominence of these factors (WTO, 2018).
undeveloped digital infrastructure, lack of resources for the
necessary internet equipment, and lack of policies that help
MSMEs access digital markets (UNCTAD, 2022b). Digital trade brings forth new sources of comparative
advantage. New factors of comparative advantage for
conducting business in the digital economy include quality
(a) Digital trade can create new digital infrastructure, research and development investment
opportunities for developing economies, and relevant digital skills. Regulation on cross-border data
including LDCs flows, data privacy and security, competition policy, consumer
protection, rules on electronic payment, and intellectual
property rights are also important factors affecting digital trade
Digital technologies have the potential to enhance (see Section C) (Anderson et al., 2018). Data are an essential
e-commerce in LDCs by connecting remote economies input in the digital economy by enabling firms to analyse
to global markets. To enable more inclusive outcomes from consumer preferences, forecast demand and conclude financial
digitalization, it is important to enable economies trailing behind transactions. In that context, market size becomes an important
in terms of digital readiness to catch up. By addressing factor when cross-border data flows are constrained, as firms
challenges in transport and connectivity infrastructure, in larger economies have access to more data.
enhancing digital skills and strengthening regulatory
frameworks, LDCs would become better positioned to tap into
the vast network of e-commerce, expanding their market reach While digital trade remains limited in many low- and
and increasing economic growth. For instance, a study of middle-income economies, some developing
Bangladesh shows that the adoption of e-commerce, in economies have made significant progress. Together
particular business-to-business (B2B) e-commerce in the with other factors, high trade costs have significantly hindered
ready-made garments industry, presents an opportunity for the the participation of LDCs in trade, including digitally ordered
17
 D I G ITAL T RAD E F OR D EVE LOP M E N T

and digitally delivered trade. These costs are primarily attributed 2023a). In a simulation using the WTO Global Trade Model, an
to poor transport infrastructure and inefficient border crossing enhanced use of digital technologies in Africa could lead to a
procedures.5 In this context, certain African economies have potential increase of over US$ 70 billion in digital services
been performing well in digitally delivered services (see Figure exports between 2023 and 2040, assuming regions with lower
B.8). Ghana, Morocco and South Africa accounted for over half broadband connectivity can reduce trade costs in face-to-face
of the region’s exports of digitally delivered services in 2022. intensive sectors more than regions with better broadband
The growth of these services exports in some economies, such connectivity, where trade costs are already lower on average
as Egypt, Ghana and Madagascar, has outperformed the rest (World Bank and WTO, 2023a). Other developing economies,
of the world for several years, driven by the Business Processing such as the Philippines, have also experienced growth in call
Outsourcing (BPO) and IT industries (World Bank and WTO, centres, finance and healthcare services.

Figure B.8: Digitally delivered services in some African economies have expanded significantly
in recent years

Madagascar
(1.1%)
Ethiopia
(1.1%)
Senegal
(1.2%)
Equatorial Guinea
(1.5%)
Seychelles
(1.6%)
Tunisia
(1.8%)
Mauritius
(2.5%)
Nigeria
(3.7%)
Kenya
(5.6%)
Algeria
(6.3%)
Egypt
(10%)
Morocco
(14%)
South Africa
(18%)
Ghana
(19%)
0 1,000 2,000 3,000 4,000 5,000 6,000

Digitally delivered services exports (US$ millions)

2015 2019 2022

Source: WTO estimates.

Note: The numbers in parenthesis correspond to each country’s share in Africa’s exports of digitally delivered services.

18
 B. U N LEASH I NG TH E POTE NTIAL OF DIG ITAL TECH NOLOG I ES: G ROWTH, TRADE AN D DEVE LOPM E NT OPPORTU N ITI ES

(b) Digital trade can open up order, which inherently involves frequent small parcel deliveries.
opportunities for greater participation Similarly, a just-in-time production approach, which some
MSMEs may have adopted to produce goods based on
of MSMEs, women and young people demand, leads to more frequent but smaller shipments. The
in international trade surge in small parcels fuelled by digital trade raises logistics
challenges for customs administrations in both developed and
Digital technologies not only benefit large firms but can developing economies (see Section C.2.e) (WTO, 2018).
also allow newcomers, in particular MSMEs, to
participate in global trade. MSMEs in developing economies Digital trade can offer new opportunities for women
have been found to account for a relatively larger share in total and young people to access international markets.
exports as internet access improves (Sun, 2021). There are, Digital trade can provide women with increased access to
however, important differences across regions, with MSMEs in global markets and flexible work opportunities, often removing
Africa, Asia and the Middle East reporting relatively lower levels traditional barriers of entry, including time and mobility
of digital platform usage compared to other regions. At the constraints. By embracing e-commerce and online business
same time, businesses participating in international trade tend platforms, women can achieve greater financial independence
to report a higher rate of using digital platforms, especially and economic empowerment (World Bank and WTO, 2020).
among micro-sized firms (WTO, 2023a). According to the World Bank’s Global Findex Database, in
2021, men and women across income groups showed relatively
Data on European firms show that the disparity between small minor differences in using mobile phones or the internet for
and large firms in export participation is much smaller for sales online purchases, with a gap more pronounced in lower-middle
over digital networks than overall trade (WTO, 2018). In income economies where the shares were 12 per cent for men
addition, as firm size increases, the reliance on e-commerce and 9 per cent for women.
marketplaces decreases, while the use of the firm’s own
website or app increases. Many of the services offered by
Women tend to be relatively more present in online
online platforms have traditionally been supplied by large
marketplaces than offline, although the COVID-19
wholesalers and retailers, which act as export intermediaries
pandemic partially disrupted this trend. Despite specific
and facilitate indirect exports for smaller firms. Access to digital
statistics regarding women-owned business participation in
marketplaces have empowered many MSMEs by reducing
digital platforms varying depending on the platform, region and
trade costs associated with intermediaries (Lendle et al., 2013).
context, there are examples showing that women are relatively
For example, platforms like Soko in Kenya and Etsy in the
more present online than offline. More than half of Shopify’s
United States have enabled artisans and MSMEs to reach a
global entrepreneurs are women (Jungle Scout, 2023; Shopify,
global customer base with handmade crafts and unique
2023). Similarly, more than 80 per cent of Etsy sellers are
products (WTO, 2018).
female and twice as likely to be young adults (Etsy, 2022). In
2019, 97 per cent of US women-owned eBay businesses
Strong growth in small parcel shipments reflects in part exported to an average of 16 economies, outpacing traditional
the increasing participation of MSMEs in e-commerce. businesses not using online tools (eBay, 2021). In Upwork, an
While the number of cross-border online business-to-consumer online marketplace through which freelancers provide services,
(B2C) transactions is increasing, their average value is 44 per cent of the workers are women, compared to an average
decreasing, generating more frequent international flows of of 25 per cent of the non-agricultural economy globally (World
lighter and cheaper parcels (López González and Sorescu, Bank, 2016).
2021). For instance, in 2017, 84 per cent of cross-border
goods purchased online weighed 2 kilos or less, and almost 60
In recent years, women’s participation in digital trade has been
per cent of them cost less than EUR 50 (IPC, 2018).
hampered by the COVID-19 pandemic. In the Philippines,
while the share of women-owned businesses on the Lazada
The rise of e-commerce platforms has enabled MSMEs to sell e-commerce platform increased from 60 to 66 per cent during
their goods globally, contributing to the uptick in small parcel the pandemic, their overall sales declined by 27 per cent.
shipments. Direct-to-consumer sales through e-commerce Meanwhile, in Côte d’Ivoire, Kenya and Nigeria, the pandemic
also mean MSMEs are shipping individual items more often caused, on average, a 7 per cent drop in sales for women-
than bulk deliveries to retailers. Some MSMEs use the drop- owned businesses on the Jumia e-commerce platform, whereas
shipping model, where they do not keep goods in stock but men-owned businesses experienced a 7 per cent sales
rather purchase them from a third party once they have an increase (IFC, 2021).
19
 D I G ITAL T RAD E F OR D EVE LOP M E N T

Social media can enable individuals, including young Elshahawy and Fakhreldin, 2022). Technology-enabled
people and women, and MSMEs to connect with wider crowdfunding platforms can further offer women and young
audiences and collaborate globally. Online education people an alternative means to address their financial
platforms provide individuals with opportunities to learn and constraints by providing a finance mechanism that bypasses
acquire skills from any location. Instant digital translation the traditional barriers often faced when seeking to access
technology also provides a solution for overcoming language capital. As discussed in Section C, small firms, women and
barriers and communication issues. Social media can help young people need to be able to access and productively use
empower women and young entrepreneurs by providing the internet. Digital skills are essential in this context to adapt to
platforms for visibility, networking and business growth (Miniesy, the changing requirements of labour markets.

Endnotes
1. 
Artificial intelligence refers to the simulation of human Polynesia; Germany; Greece; Guyana; Hong Kong, China;
intelligence in machines (e.g., machine learning and deep Hungary; Iceland; Ireland; Israel; Italy; Japan; Republic of
learning). 3D printing, also known as additive manufacturing, Korea;, State of Kuwait; Latvia; Lithuania; Luxembourg;
refers to the process of making three-dimensional solid Macao, China; Malta; Nauru; Netherlands; Netherlands
objects from digital files. Cloud computing is the on- Antilles; New Caledonia; New Zealand; Norway; Oman;
demand online availability of computing resources, such as Panama; Poland; Portugal; Qatar; Romania; Saint Kitts and
infrastructure platforms and software. Blockchain refers to Nevis; Kingdom of Saudi Arabia; Seychelles; Singapore;
a shared, immutable ledger that facilitates the process of
Sint Maarten; Slovak Republic; Slovenia; Spain; Sweden;
recording transactions and tracking assets in a network.
Switzerland; Chinese Taipei; Trinidad and Tobago; United
2. These estimates are based on the assumption that what was Arab Emirates; United Kingdom; United States and
digitally deliverable in 2015 was also digitally deliverable in Uruguay.
2005.
4. Despite the increased availability of e-books, their usage
3. 
The following high-income economies, based on the continues to significantly trail behind that of printed books
World Bank classification, have been excluded from the worldwide (Richter, 2022).
geographical groupings: Anguilla; Antigua and Barbuda;
Aruba; Australia; Austria; Bahamas; Kingdom of Bahrain; 5. For instance, a doubling of the distance between buyers
Barbados; Belgium; Bermuda; Brunei Darussalam; and sellers in Ethiopia and Nigeria has been found to result
Canada; Cayman Islands; Chile; Croatia; Curaçao; Cyprus; in transportation costs that are four to five times higher than
Czech Republic; Denmark; Estonia; Finland; France; French in the United States (Atkin and Donaldson, 2015).
20
C
Role of domestic policies
and international cooperation
in supporting digital trade

Governments around the world are increasingly economies, in particular LDCs, to engage in digital trade is
recognizing the potential of digital trade to contribute necessary to help them increase their global trade share, as
to economic growth and enhance global envisaged in Target 17.11 of the 2030 Agenda for Sustainable
competitiveness. A growing number of economies are Development (UNCTAD, 2022f). Promoting digital trade
adopting domestic policies aimed at fostering a conducive requires improving connectivity, ICT infrastructure and digital
environment that allows businesses and consumers to leverage skills, establishing a predictable and transparent legal and
digital technologies and platforms for cross-border digital regulatory environment, and addressing the risks associated
transactions. At the same time, they are grappling with the with digitalization, including cybercrime, consumer protection,
complexities of regulating the rapidly evolving landscape of privacy and upheaval in the labour market.
digital trade.

International cooperation plays an important role in

Despite the new opportunities presented by digital supporting developing economies in participating in
trade, many developing economies still face significant digital trade. While domestic policies are essential to address
barriers hindering their ability to fully engage in it. Some digital trade barriers and challenges, international cooperation
of the most common and critical barriers faced by these can yield benefits by maximizing positive cross-border spillovers
economies, especially LDCs, include inadequate digital
and minimizing negative ones through the exchange of
infrastructure, limited digital skills, a deficient regulatory
knowledge, expertise and resources. Given its cross-cutting
environment and an inefficient payment system (UNCTAD,
nature, the development of digital trade spans multiple policy
2023e). Financing problems, including increasing external debt
areas, including ICT infrastructure and services, digital skills
burdens and inadequate budgets for public investments, have
development, the legal and regulatory frameworks, trade
exacerbated some of these barriers.
facilitation and logistics, payment solutions, and access to
financing. Greater international cooperation could further
Addressing the barriers that hinder the participation create synergies to promote digital trade and address the
of developing economies in digital trade can contribute challenges that LDCs and other developing economies face
to development. Improving the ability of developing with regard to digital trade.
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 D I G ITAL T RAD E F OR D EVE LOP M E N T

1. Improving digital lack the necessary bandwidth for full engagement in the
global digital economy, as data-intensive services, such as AI,
connectivity, ICT the internet-of-things (i.e. devices that connect and exchange
data with other devices) and big data analytics, continue to
infrastructure and digital expand.

skills is essential to Limited access to digital connectivity remains a

promote digital trade significant hurdle for expanding digital trade in
developing economies. Despite progress in digital network
expansion, approximatively 2.6 billion people, or one-third of
the global population, do not have access to the internet, with
the majority residing in low- and lower-middle income
The growth of digital trade relies on reliable and economies (see Figure C.1). This poses a significant challenge
affordable internet access and relevant digital skills. To to achieving the UN Sustainable Development Goal of
engage in and reap the benefits of digital trade requires access “universal and meaningful connectivity” by 2030. Rural areas
to fast and reliable internet infrastructure and affordable worldwide have particularly low digital connectivity rates, with
electronic devices, connectivity subscriptions and electricity less than half of the rural population having access to the
infrastructure (to power digital devices). According to IMF internet compared to over 80 per cent in urban areas.
staff estimates, US$ 418 billion in (public and private)
investment is necessary to bring connectivity to unconnected Although access to the internet is gradually increasing,
households globally (Oughton, Amaglobeli and Moszoro, the high cost of internet services continues to hinder
2023). Governments can facilitate this by intervening both on internet use, and thereby digital trade, in many
the supply side (investing in infrastructure) and on the demand developing economies. Access to the internet does not
side (increase internet affordability) (Amaglobeli et al., 2023). automatically translate into greater internet use. While 67 per
Moving low-income developing and emerging market cent of the world population uses the internet, the share in
economies to the levels of digital adoption in emerging and LDCs stands at 35 per cent. Similarly, international bandwidth
advanced economies, respectively, would require annual usage per internet user is six times lower in LDCs compared to
expenditures of 1.8 and 0.05 per cent of GDP (Kumar, the global average (ITU, 2022b, 2023). The price of 1.5
Amaglobeli and Moszoro, 2023).Widespread digital literacy gigabytes (GB) of mobile broadband often exceeds 5 per cent
and proficiency in using digital devices are also essential to of the monthly Gross National Income (GNI) per capita in many
bridge the digital divide (i.e. the gap between those who use developing economies and, in some cases, even surpasses 20
the internet and those who do not). Equally important is per cent, resulting in internet use being unaffordable for low-
promoting awareness of the opportunities presented by digital income households and financially constrained firms (see
trade. International cooperation plays an important role in Figure C.2). Internet access remains expensive in many
addressing the digital divide and facilitating equal access to developing economies due to a combination of limited
digital trade opportunities. infrastructure, regulatory barriers and lack of competition in the
telecommunications sector (OECD, 2020a).

(a) Investment in infrastructure along

with policies to ensure reliable and Investment plays a pivotal role in expanding and
affordable internet access is key enhancing digital infrastructure, ensuring widespread
and reliable digital connectivity. Investment and trade
policies with clear, consistent and straightforward rules can
Modern and reliable digital connectivity and ICT attract domestic and foreign capital flows into crucial digital
infrastructure, such as fibre-optic networks and projects, from broadband networks to data centres. Well-
advanced wireless mobile telecommunication structured investment and trade policies can also foster
technologies, have become essential to expand digital competition, leading to innovation and cost reductions that
trade. These networks, including international submarine make digital services more affordable for end-users. Policies
cables, enable extremely fast and reliable transmission of can further target underserved areas, promoting more
information with minimal data loss, allowing users to share equitable access and bridging digital divides. Developing
large amounts of data in real time. However, these technologies economies, in particular LDCs, however, often face budgetary
are not universally accessible, and communication networks constraints and competing priorities, which can limit the
22
 C. ROLE OF DOM ESTIC POLICI ES AN D I NTE R NATIONAL COOPE RATION I N SU PPORTI NG DIG ITAL TRADE

Figure C.1: The digital divide remains high

100

90
Individuals using the internet (per 100 people)

80

70

60

50

40

30

20

10

0
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

World Low-income Lower-middle-income

Upper-middle-income High-income

Source: ITU’s World Telecommunication/ICT Indicators Database.

Figure C.2: Digital connectivity remains very expensive in many developing economies

104 Data-only mobile broadband 67 Fixed broadband

4 1

22
52 45
Number of economies

Number of economies

3
48
11 24
20 21
44 38 4
48 20 7
37 12 18
14 20
10 4 13
6 2 4 4 3
0-2% 2-5% 5-10% 10-20% > 20% 0-2% 2-5% 5-10% 10-20% > 20%

Basket price as a percentage of Basket price as a percentage of

GNI per capita GNI per capita

Developed economies Developing economies (non-LDCs) LDCs

Source: ITU (2021a).

Note: The figure shows the number of economies with digital connectivity, broken down by the price of the broadband basket as a percentage
of GNI per capita in 2021.

23
 D I G ITAL T RAD E F OR D EVE LOP M E N T

allocation of funds to digital infrastructure projects. In that (b) Policies to support the development
context, foreign investment policy, while applicable to all
of digital skills of consumers and firms
economic sectors, is particularly relevant for creating an
enabling environment for such investments (OECD and WTO,
are crucial to facilitate digital trade
2017).
Achieving a high level of internet usage does not
guarantee a robust engagement of consumers and
Comprehensive, supportive policies, beyond investment
firms in digital trade. Digital trade remains limited in many
in digital connectivity, are essential to foster the use of
developing economies, including those with a high level of
digital networks. Introducing competition in monopolized
internet use. For instance, ITU statistics show that while about
segments of the telecommunications market can also promote
80 per cent of individuals in certain developing economies use
digital connectivity. This often requires adding domestic
the internet, only a fraction of them, ranging from 4 to 14 per
policies on anti-competitive practices, interconnection rules,
cent, actually engage in online shopping. While various factors
universal service obligations and the structure and functions of
contribute to a low participation in digital trade, the lack of
an independent regulator.1 Incentives to enable operators to
digital skills is an important barrier that prevents consumers
provide digital services at reduced costs to end-users and in
and firms from making the best use of opportunities in digital
previously unviable areas can also contribute to improving the
trade (UNCTAD, 2023d).
affordability of digital connectivity (Begazo, Blimpo and Dutz,
2023). For instance, regulators can require telecom operators
to serve rural areas as a condition for obtaining a licence in Developing digital skills and integrating training into all
lucrative urban areas, ensuring broader access to affordable education levels are essential to support participation
digital networks. Universal service funds, sourced from telecom in digital trade. Digital skills are multifaceted and range from
revenues, can also be used to finance digital connectivity in basic skills, including digital literacy skills required to be able to
commercially challenging areas or for specific groups. Policies go online, make informed choices and perform digital
on technology innovation can further encourage research and transactions, to specialist skills required for researching,
development in digital technologies, ensuring businesses developing, producing and servicing ICT software and systems,
remain competitive and at the forefront of emerging such as applications and websites. In addition, digital
technologies. entrepreneurship skills are needed to develop new business
models and drive innovation in products, markets and processes
(World Bank, 2019b). Integrating ICT training into all education
Trade policy can promote affordable digital connectivity
levels, collaborating with industries on curricula development
worldwide by reducing trade barriers and fostering
and promoting problem-solving skills can help prepare young
competition in the telecommunication services sector.
people for the workplace and enable adults to integrate digital
International trade enables economies to access advanced
technologies into their work (UNCTAD, 2022f).
communication equipment, infrastructure components and
cutting-edge technologies that they may not produce
domestically, accelerating the development and deployment of Addressing the digital skills divide is crucial to make
digital networks, broadband services and other connectivity digital trade more inclusive. The lack of digital skills is
tools. High tariffs on imports of ICT equipment needed to build, greater among vulnerable groups, such as the elderly, the
maintain and access networks contribute to the digital divide. economically disadvantaged, those with disabilities, rural
For example, tariffs on the products covered by the expanded inhabitants and certain ethnic or minority groups. Integrating
Information Technology Agreement are, on average, 9.6 per ICT training throughout education, collaborating with industry
cent for low-income economies compared to 4.5 and 2.1 per and fostering skills like problem-solving are vital (UNCTAD,
cent for upper-middle- and high-income economies.2 Lowering 2022f). MSMEs, especially in developing economies, tend
trade barriers in the telecommunication services sectors can also to face greater challenges to engage in digital trade
foster competition and improve access to higher-quality digital compared to large companies (UNCTAD, 2022c). The Future
services at lower prices for both consumers and firms. It is of Business survey, carried out through Meta’s “Data for
important that market opening is accompanied by regulation to Good” initiative in collaboration with the World Bank and the
ensure competition and universal service; however this may OECD reveals that some of the main obstacles identified by
pose challenges for low-income economies. MSMEs include acquiring relevant technical skills and
knowledge and paying fees for accessing digital platforms
(WTO, 2023a). Providing customized digital skills training can
play a significant role in assisting MSMEs in navigating and
benefiting from digital trade.
24
 C. ROLE OF DOM ESTIC POLICI ES AN D I NTE R NATIONAL COOPE RATION I N SU PPORTI NG DIG ITAL TRADE

Digital skills have become essential for workers to Aid for Trade contributes to bolstering digital
navigate the evolving demands of the labour market. connectivity by fostering physical and digital
The integration of digital technologies in production processes infrastructure. The Aid for Trade initiative, a WTO-led multi-
can render some jobs obsolete, threatening job security for stakeholder programme launched in 2005, supports developing
certain roles (UNCTAD, 2017b). Labour market policies can economies, in particular LDCs, in building the necessary
support workers in adapting to technological advances and economic infrastructure and productive capacity to benefit
mitigate potential loss of jobs by providing retraining from global trade opportunities. Although current Aid for Trade
programmes to upskill workers for digital jobs, promoting metrics do not provide a precise assessment of its support for
lifelong learning, addressing time and financial constraints to digital connectivity, the analysis of ICT-related flows suggests a
training participation, tackling unequal access to digital growing focus on digitalization (OECD and WTO, 2022). ICT-
technologies based on employment status, and encouraging related commitments increased from US$ 1.5 billion in 2019 to
firms to train groups at risk of losing their jobs (OECD, 2019b). US$ 2.2 billion in 2021, representing 4.1 per cent of total Aid
Employment protection and compensation schemes can also for Trade commitments (UNCTAD, 2023b).
help to alleviate labour market disruptions arising from
digitalization. Reducing the costs incurred by workers who are
Improving foreign investment policies and trade-related
obliged to change jobs can also lower public resistance to
service sector policies are key for attracting the private
digital technological change (WTO, 2017).
investment needed to develop digital connectivity.
Private investment in public telecommunication infrastructure,
including land-based and submarine cables, far surpasses
(c) International cooperation can
official development assistance (OECD and WTO, 2017).
help bridge the digital gap by enhancing Creating an open and enabling regulatory environment to
digital connectivity and skills promote greater competition in the ICT sector can help to
stimulate private investment in digital infrastructure and
increase ICT access and use. Telecommunications services are
Financing digital connectivity is crucial to broaden
covered by the WTO’s General Agreement on Trade in Services
its reach, enhance its stability and make it more
(GATS) and its Annex on Telecommunications.3 A majority of
affordable for all users. The United Nations’ 2030 Agenda
WTO members have made legally binding market-opening
for Sustainable Development emphasizes the importance of
commitments on telecommunications services under the GATS,
digital inclusion by aiming for universal and affordable internet and most of them have also inscribed in their schedules of
access for everyone. By pooling resources and expertise commitments the pro-competitive regulatory principles for the
across borders, economies can jointly fund large-scale sector contained in the Reference Paper on Basic
telecommunication infrastructure projects, such as undersea Telecommunications. Alongside these commitments negotiated
fibre optic cables or satellite networks, which individual in the WTO, an increasing number of economies, including
economies might find challenging to finance on their own. many developing economies but only a handful
Collaborative financial efforts, facilitated by international of LDCs, have negotiated specific provisions on
organizations, development banks or direct donor funding, can telecommunications services in their RTAs. While some of
contribute to extending digital connectivity to underserved or these provisions replicate existing WTO rules, many other
unserved regions, thereby bridging the digital divide and provisions add clarifications or expand some of the disciplines
promoting global digital inclusion. set out in the GATS (Monteiro, Posada and Tuthill, 2021).

Digital connectivity is addressed in international trade International cooperation is intensifying efforts to

cooperation. The WTO’s Information Technology Agreement foster investment in digital skills and bridge knowledge
(ITA) and its subsequent expansion contributes to digital gaps. Several international organizations have developed
connectivity by eliminating tariffs on IT products covered by the programmes to help developing economies build the skills
agreements. Many of these products are critical components of needed for consumers and businesses to maximize the benefits
the electronic commerce physical infrastructure. In parallel, a of digital trade. These organizations include the International
limited but increasing number of regional trade agreements Labour Organization (ILO), the International Trade Centre (ITC),
(RTAs), namely 64 agreements, include cooperation provisions the International Telecommunication Union (ITU), the United
to promote ICT infrastructure development and diffusion and to Nations Commission on International Trade Law (UNCITRAL),
address technical regulations, standards and conformity UNCTAD, the Universal Postal Union (UPU) and the World
assessment procedures related to ICT equipment (Monteiro, Bank as well as UN regional commissions. For instance,
2021; Monteiro, Posada and Tuthill, 2021). UNCTAD’s eTrade For All initiative, launched in 2016, is a
25
 D I G ITAL T RAD E F OR D EVE LOP M E N T

collaborative effort among 35 members (including the World particular digitally delivered services. Estimates from the
Bank and the WTO) to enhance transparency in capacity- WTO’s Trade Cost Index suggest that improving mobile
building for “eTrade Readiness Assessment”. It serves as a broadband connectivity to levels seen in economies like Austria,
central platform for developing economies to identify potential Indonesia, South Africa or Uruguay could reduce average trade
sources of assistance and connect with potential partners in costs by 4 per cent in high-income economies and by 10 per
various areas, including infrastructural support and skills- cent in low-income economies.4 They also suggest that the
building (UNCTAD, 2022d). reduction in trade costs generated by improved digital
connectivity more than doubles in middle- and low-income
economies with an enabling regulatory environment for digitally
delivered services. The trade cost-reducing impact of digital

2. An enabling legal and connectivity is even stronger for digitally delivered services
(Bellucci, Rubínová and Piermartini, 2023).
regulatory environment
coupled with proactive The domestic regulatory environment that supports
digital trade is becoming more restrictive in many
trade policies are essential cases. Evidence from the OECD’s Digital Services Trade
Restrictiveness Index (DSTRI) suggests that domestic
components of the regulation affecting digital trade has become increasingly tight,
especially on issues relevant to bridge the digital divide, such
ecosystem for digital trade as infrastructure and connectivity, including restrictions on data
flows and data localisation measures, as discussed below (see
Figure C.3). The DSTRI ranges between zero and one, one
being the most restrictive. Restrictiveness is assessed against
(a) A robust domestic regulatory a benchmark across different areas in the DSTRI. In some
framework is crucial for fostering digital areas, this means that the lack of regulation is considered to be
trade restrictive. The 2022 DSTRI database also reveals significant
regional variations. The average level of restrictiveness is lower
in OECD economies, and the Americas have lower average
A well-designed and effective domestic regulatory levels of restrictiveness compared to African and Asian
framework provides a stable and secure environment economies. However, the DSTRI also highlights notable
for digital trade, fostering trust and confidence among progress in Africa in lowering barriers to digital trade. As
businesses and consumers. The domestic regulatory discussed below, eliminating relevant barriers enhances digital
framework sets the rules that govern various aspects of digital trade, facilitates the integration of new digital technologies
trade, including electronic authentication and signature, across the world, and promotes a more inclusive participation
consumer protection, privacy, intellectual property, electronic in digital trade.
payments, and cybersecurity (Nemoto and López González,
2021). The domestic regulatory framework for digital trade
remains highly dynamic, adapting rapidly to technological (b) While digital trade is increasingly
advances and changing market conditions. For instance, being disciplined in bilateral and
ensuring new digital technologies, such as automated or AI-
based decisions, operate fairly, without bias, and uphold human
regional trade agreements, the
values is crucial. Domestic policies and regulatory frameworks participation of developing economies
are also increasingly addressing other key issues, such as in such agreements remains limited
cross-border data flows, competition in the digital environment
and online consumer protection, as discussed below.
International cooperation on digital trade-related
Addressing the regulatory issues associated with digital trade
disciplines has primarily occurred within the framework
remains, however, a challenge for many developing economies,
of RTAs. The number of RTAs with digital trade provisions
in particular LDCs. The digital trade legislation in many
has been growing since the early 2000s (Monteiro and Teh,
developing economies still lags behind (UNCTAD, 2018).
2017). By the end of 2022, 116 RTAs incorporated provisions
related to digital trade, representing 33 per cent of all existing
An open regulatory environment magnifies the benefits RTAs (López González, Sorescu and Kaynak, 2023) (see
of digital connectivity for international trade, in Figure C.4).5 Beyond the increasing number of RTAs with
26
 C. ROLE OF DOM ESTIC POLICI ES AN D I NTE R NATIONAL COOPE RATION I N SU PPORTI NG DIG ITAL TRADE

Figure C.3: Digital trade barriers, in particular regarding infrastructure and connectivity,
are intensifying

a. Evolution of Digital Services Trade b. Digital Services Trade Restrictiveness

Restrictiveness Index Index by policy area (2021)

Other digital trade barriers

15%
0.25

Electronic transactions
0.2 14%
DSTRI

Barriers related
to IP rights
0.15
3%
Payment systems
Barriers to infrastructure
0.1
4%
and connectivity
(incl. data flows)
Africa Asia-Pacific
64%
Latin America and Caribbean
OECD Average DSTRI

Source: OECD Digital Services Trade Restrictiveness Index, 2022.

Note: The DSTRI ranges between zero and one, one being the most restrictive. Panel (a) displays the evolution of the DSTRI. The average
DSTRI corresponds to the simple average DSTRI for the 100 economies covered, including 22 African economies, 21 Asian economies,
38 OECD members and 13 South American economies.

digital trade provisions, the number of these provisions and Digital trade provisions in RTAs cover a wide array of
the level of detail they contain have also increased significantly digital trade issues. While digital trade provisions in RTAs
over the years. Most detailed provisions on digital trade are vary greatly in terms of language, many of them tend to
found in dedicated chapters on digital trade, which are address similar issues (Monteiro and Teh, 2017; WTO, 2018).
included in 74 RTAs. Although the number of RTAs with digital The most common digital trade provisions in RTAs address
trade provisions continues to increase, the choice to include privacy and data protection, consumer protection, unsolicited
detailed provisions on digital trade tends to remain limited to commercial electronic messages, electronic authentication,
RTAs negotiated by high-income and some middle-, mostly paperless trading, cross-border data flow and cybersecurity.
upper middle-, income economies. Only a few LDCs have An increasing number of RTAs, 100 as of June 2022, replicate
negotiated an RTA with digital trade provisions. Besides the WTO commitment to refrain from imposing customs
developing new regulatory disciplines or updating and duties on electronic transmission (the so-called “e-commerce
clarifying existing ones, most RTAs also provide greater moratorium”) (see Box C.2 and Section C.2.d). Other issues,
market access through deeper services commitments and such as source code, non-discrimination treatment of digital
lower tariffs in relevant sectors. Alongside RTAs, some products, and data localization (i.e. the practice of storing and
economies are also expanding their cooperation on digital processing data within a specific geographic location) are
trade by entering into so-called digital economy agreements addressed in a more limited number of agreements (see
(DEAs) (see Box C.1). Figure C.5).
27
 D I G ITAL T RAD E F OR D EVE LOP M E N T

Figure C.4: A growing number of RTAs have digital trade provisions

350

300

250
Number of RTAs

200

150
34% 34% 35% 36% 33% 33%
28% 30% 32% 33%
100 24% 26%
21% 23%
16% 18% 18%
50 13%
9%
5%
0% 1% 3%
0
00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22
20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20
Share of RTA digital trade provisions All RTAs RTAs with digital trade provisions RTAs with digital trade chapters

Source: López-Gonzalez, Sorescu and Kaynak (2023).

Note: The analysis only considers agreements notified to the WTO and currently in force. RTAs with digital trade provisions are defined as
agreements with at least one e-commerce/digital trade provision. Digital provisions are identified from the Trade Agreements Provisions on
Electronic-commerce and Data (TAPED) database (accessed August 2022) (Burri, Vasquez Callo-Müller and Kugler, 2022).

(c) WTO rules already cover digital (MFN) treatment9 and transparency apply to all services
trade, but some of these rules may need covered by the Agreement whether or not liberalisation
commitments have been undertaken. Market access and
to be updated to adequately address the
national treatment disciplines, instead, apply only in sectors
evolving nature of digital trade. where a member has scheduled a specific commitment, and
only to the extent of the liberalisation undertaken.10 As a result,
Digital trade falls within the scope of existing WTO the most advantageous and stable conditions for digital trade
agreements. As mandated by the 1998 WTO Work in services are achieved when commitments exist and when
Programme on Electronic Commerce, most discussions on those are as open as possible. The predictability of conditions
how WTO rules apply to e-commerce, defined as “the for digital trade in services might, however, be limited by the
production, distribution, marketing, sale or delivery of goods fact that many GATS commitments relevant for digital trade are
and services by electronic means” for the purposes of the Work nearly 30 years old and do not necessarily reflect the actual
Programme, have concluded that existing WTO agreements services market conditions (WTO, 2019).
cover e-commerce, even without specific references to it
(WTO, 2017).6 While the applicability of the WTO agreements
to digital trade is widely accepted,7 there is still uncertainty Trade in digitally ordered goods is subject to the
regarding whether digitized products are goods or services, existing WTO rules on trade in goods. The GATT and
and therefore whether the General Agreement on Tariffs and various other relevant WTO agreements11 do not distinguish
Trade (GATT) or the GATS applies. between the manner in which goods are traded and apply to
goods purchased online and delivered physically.12 Trade in
The GATS covers digital trade in services. The GATS digitally ordered goods is therefore subject to the principles of
makes no distinctions regarding different technological means non-discrimination (MFN and national treatment) and
through which a service may be supplied, including electronic transparency, among other things. In addition, several WTO
means. Measures affecting trade in services through electronic agreements are particularly relevant to trade in digitally ordered
means are generally recognised as subject to GATS obligations goods, including the Customs Valuation Agreement and the
and commitments.8 Obligations such as most-favoured-nation Trade Facilitation Agreement (TFA) (see Section C.2.e).
28
 C. ROLE OF DOM ESTIC POLICI ES AN D I NTE R NATIONAL COOPE RATION I N SU PPORTI NG DIG ITAL TRADE

The WTO Agreement on Trade-Related Aspects of been made on several sets of disciplines, including electronic
Intellectual Property Rights (TRIPS) covers trade in signature, online consumer protection and paperless trade.
intangible digital products. The ownership and transfer of Technical discussions continue on several other issues, such
use-rights to digital products like music, software and films as customs duties on electronic transmissions. The need for
largely determine the commercial transaction, making the special and differential treatment for developing and LDC
underlying IP licence crucial in defining the nature of the digital members is also being considered. Negotiators have also
transaction. While the TRIPS Agreement does not expressly started to address data-related issues as well as questions
address digital trade, it is essentially technology-neutral and about the legal status of these talks. The negotiations of the
extends to products traded online and online commercial E-Commerce JSI are expected to conclude by the end of 2023.
activity more generally. TRIPS disciplines on the non-
discriminatory availability of IP rights, such as undisclosed
New international trade cooperation initiatives have
information, copyright (including for software), patents and
been launched to support the participation of developing
trademarks, balanced enforcement mechanisms, and the scope
economies, in particular LDCs, in digital trade
for competition safeguards, are particularly relevant to digital
negotiations. The “E-commerce Capacity Building Framework”
trade.13
launched by Australia, Japan, Singapore and Switzerland in
early 2023 aims to bolster the participation of developing and
A majority of WTO members consider that the existing LDC members in the E-Commerce JSI and help them tap into
WTO rules on digital trade need to be updated and digital trade opportunities by bringing together a wide range of
complemented to respond to the changing nature of technical assistance, training and capacity building efforts. One
trade and to facilitate digital trade. Under the so-called of these capacity-building initiatives is the Digital Advisory and
Joint Statement Initiative (JSI) on E-Commerce14, 90 WTO Trade Assistance Fund (DATA Fund), a pilot programme hosted
members, including many developing economies and a few by the World Bank, aimed at fostering trust in digital markets,
LDCs, as of October 2023, are negotiating rules on trade- streamlining online business processes and offering specialized
related aspects of e-commerce.15 Significant progress has training for policymakers.

Figure C.5: A wide range of digital trade issues are covered in trade agreements

Interactive computer services 4

Cryptography 5
Open government data 7
E-transaction framework (ref. to UNECC) 15
Location of computing facilities 19
E-transaction frameworks (ref. to UNCITRAL MLEC) 22
National or MFN treatment (digital products) 35
Source code 42
Access to the internet 46
E-transaction / tech neutrality 50
Cybersecurity 66
E-transaction framework (avoid unnecessary barriers) 72
Cross-border transfer of information / data flow 72
Paperless trading 78
Privacy (ref. to international standards) 78
E-authentication and e-signatures 87
No customs duties on electronic transmissions 90
Unsolicited commercial electronic messages 91
Consumer protection 98
Privacy (data protection) 103

Number of economies
Source: Nemoto and López-González (2021).
Note: The figure identifies the number of economies having negotiated specific types of digital trade provisions in their RTAs. Digital provisions
are identified from the Trade Agreements Provisions on Electronic-commerce and Data (TAPED) database (accessed June 2020) (Burri,
Vasquez Callo-Müller and Kugler, 2022). UNCITRAL MLEC refers to the United Nations Commission on International Trade Law Model Law
on Electronic Commerce. UNECC refers to the United Nations Convention on the Use of Electronic Communications in International Contracts.

29
 D I G ITAL T RAD E F OR D EVE LOP M E N T

Box C.1
Broader digital economy agreements are emerging

In parallel to RTAs, some economies have negotiated digital include cooperation on artificial intelligence, digital identity
economy agreements (DEAs). These include the Digital and open government data. Provisions in DEAs tend to be “best
Economy Partnership Agreement (DEPA) between Chile, New endeavours” clauses that seek to promote shared values,
Zealand and Singapore and the Digital Economy Agreement continued dialogue and cooperation. Moreover, these
between Australia and Singapore. As of 2023, five DEAs are in agreements are often referred to as “living agreements” that
force, while an additional three are signed but not yet in force aim to deepen mutual understanding of the digital economy
(López González, Sorescu and Kaynak, 2023). and help participants adapt to emerging technologies,
business models and regulatory challenges (Honey, 2022).
These agreements cover many of the same digital trade issues
addressed in RTAs, but they also go beyond these issues to

Box C.2
Disciplines on the non-imposition of customs duties on electronic transmissions
are frequently included in RTAs

Provisions on the non-imposition of customs duties on 4. No agreement clarifies that the non-imposition of customs
electronic transmissions (NICDET provisions) are some of the duties applies exclusively to the ‘carrier’ element of
most common elements in e-commerce chapters. There are electronic transmissions, while an increasing number of
nearly as many NICDET provisions as there are e-commerce agreements clarify that NICDET commitments include the
chapters, signed by a total of 102 economies. 87 of these signed content of electronic transmissions.
at least one provision that does not tie the commitment to the
outcome of the E-commerce Work Programme at the WTO. 5. T
here are different understandings of what electronic
transmissions refer to. Some agreements refer to ‘the
Six key observations emerge from the analysis of these importation or exportation of digital products by electronic
commitments (Andrenelli and López González, 2023): means’, and often to the non-discriminatory treatment of those
digital products, with accompanying definitions of what these
1. 
The majority of agreements (88 out of 100) do not tie ‘digital products’ are (i.e. computer programs, text, video,
NICDET provisions to the outcome of the WTO E-commerce images, sound recordings and other products that are
Work Programme. Most agreements do not specify that the digitally encoded). Other agreements stipulate that
lapse of the multilateral practice would lead to the review of ‘deliveries by electronic means shall be considered as the
their NICDET provision. The opposite is true for only 12 provision of services […] which cannot be subject to
agreements which explicitly tie commitments to the WTO customs duties.’
e-commerce Work Programme.
6. 
A growing number of provisions further clarify the
2. I nternal taxation is deemed to be outside the scope of NICDET preferential nature of NICDET commitments. An increasing
provisions. The most widespread addition is the exclusion of number of agreements specify that the NICDET provision
internal taxation from the scope of the NICDET provision only applies with respect to the Parties, i.e. ‘between a
(provided that these are imposed in a manner consistent with person of one Party and a person of the other Party’, or
the trade agreement or the GATT). ‘between the parties’ (41 out of 100 agreements).

3. Most agreements also specify, in the broader digital trade

chapter, that measures related to the electronic delivery of
services fall within the scope of the obligations contained
in other chapters of the agreement, typically the services or
investment chapters, subject to any relevant exceptions
and reservations or limitations therein.

30
 C. ROLE OF DOM ESTIC POLICI ES AN D I NTE R NATIONAL COOPE RATION I N SU PPORTI NG DIG ITAL TRADE

(d) The WTO moratorium on customs medium, namely the transmission or the binary digits (bits) that
carry the information. Likewise, there is disagreement among
duties on electronic transmissions will
WTO members as to whether the moratorium applies to digitally
be a key issue at the upcoming WTO delivered services. Discussions on the potential costs and
13th Ministerial Conference (MC13) to be benefits of the moratorium have, to date, been framed mostly in
held in February 2024 terms of (i) customs revenue implications; (ii) alternative
methods to raise revenue on electronic transmissions; (iii) the
opportunity costs associated with the introduction of customs
Since 1998, WTO members have periodically agreed to duties; and (iv) the impact of new technologies like 3D
extend the moratorium on the imposition of customs printing.17
duties on electronic transmissions. In June 2022, at the
WTO’s 12th Ministerial Conference (MC12), members agreed
to further extend the moratorium “until the 13th Ministerial or 31 The extent of the potential loss of customs revenue
March 2024, whichever is earlier”. At MC12, members also resulting from the WTO moratorium has been estimated
agreed to “intensify discussions [...] including on scope, to be below 0.33 per cent of overall government revenue
definition and impact” of the moratorium, which are key issues on average. Uncertainties about its scope and the definition
in assessing the implications of extending it. of electronic transmissions, which ultimately determine the tax
base for the eventual customs duties, make it difficult to
precisely determine its impact. Nevertheless, existing estimates
WTO members have expressed varied views about the of the potential average revenue that developing economies
renewal of the moratorium on customs duties. could collect using tariffs on electronic transmissions vary
Proponents of the moratorium emphasise that the standstill on between 0.01 per cent and 0.33 per cent of overall government
customs duties has supported a stable and predictable revenue on average, with higher estimates for a handful of
environment for digital trade, allowing it to thrive. They argue economies (Andrenelli and López González, 2019, 2023;
that the moratorium offers flexibility and adaptability to address Banga, 2017, 2019, 2022; Hanappi, Jakubik and Ruta, 2023;
the evolving nature of digital trade, promotes innovation and Schuknecht and Pérez-Esteve, 1999; Teltscher, 2001; WTO,
accommodates diverse forms of electronic transmissions.16 2016).18 These estimates do not take into account administrative
They also contend that the moratorium delivers benefits by and technical costs related to the collection of this revenue,
reducing trade costs for digitalized products subject to duties which would reduce the net revenue collected.
if traded offline, increasing consumer welfare, and extending
access to foreign digital inputs that are key for export
competitiveness. It contributes to giving confidence to business Assessments of the fiscal implications of the
to invest and create jobs by signalling that WTO members moratorium need to consider existing commitments in
intend to maintain the status quo regarding the application of trade agreements regarding the ability of economies to
customs duties to electronic transmissions. However, other impose tariffs. Commitments include provisions in RTAs
WTO members have expressed concerns about the lack of restricting the ability of parties to impose customs duties on
clarity on the scope of the moratorium and the definition of electronic transmissions (even in the absence of the WTO
electronic transmissions and the opportunity costs of the moratorium). Such commitments have been incorporated in 88
moratorium. The latter include the potential foregone customs RTAs signed by 87 economies, including 33 developing
revenue and the desire to maintain policy space in light of the economies.19 These commitments are not tied to the WTO
uncertainty associated with rapid technological change. As the moratorium discussions.20 In addition, preferential treatment
digital revolution is still unfolding, they have pointed to the granted in RTAs, customs valuation practices and other trade
uncertainty about what will enter their economies as “electronic commitments, such as the WTO’s ITA, further limit tariff revenue
transmissions”. They have also expressed concerns about the on digitizable goods that can be considered as foregone
impact of the moratorium on their ability to use customs duties because of the e-commerce moratorium. As a result, high-
for industrial policy purposes. income economies would, on average, only be able to levy
tariffs on 55 per cent of their imported digitizable goods, while
upper-middle-income economies could do so for 61 per cent,
A proper assessment of the impact of the moratorium lower-middle-income for 76 per cent, and low-income
needs to consider the potential losses and benefits economies for 88 per cent, with significant variations among
involved. The definition and scope of “electronic transmissions” economies (Andrenelli and López González, 2023).21 Overall
are both points of contention among WTO members. For most estimates of potential customs revenue implications of the
members, electronic transmissions include the content being moratorium taking trade commitments into account are reported
transmitted, while for other members, it only covers the carrier in table C.1. Note however that these impacts could be more
31
 D I G ITAL T RAD E F OR D EVE LOP M E N T

pronounced for specific economies (Andrenelli and López seek to make digital platforms liable for tax on sales made by
González, 2023). online traders that they facilitate, data sharing and cooperation
tax authorities (OECD, 2019c).

Contrary to tariffs on goods, there is less understanding

on how to apply custom duties on electronic The moratorium does not affect governments’ capacity
transmissions. While raising tariffs generally comes with low to generate revenue through non-discriminatory
administrative costs, it is unclear whether this is also the case consumption taxes, such as VAT/GST. The adoption of
for collecting tariffs on electronic transmissions given the VAT/GST systems has grown significantly in the last 30 years,
limited available information regarding setting up a system for and as of 2022, 174 economies had implemented such taxes,
raising these tariffs, and the accompanying administrative and and more than 120 jurisdictions are either in the process of
compliance costs. adapting or considering adapting their VAT administration to
address the challenges posed by digitalization (OECD, 2022b).
At the same time, the share of trade taxes in total government
Domestic taxes represent another way to collect revenue has continued to decrease in most economies
revenue from digital trade that does not discriminate (Aizenman and Jinjarak, 2009; Kowalski, 2006). Taxes on
between domestically supplied and imported products, domestic consumption have the advantage of being broader-
is more uniform across different products, and does not based, resulting in fewer distortions to production and
impose a tax burden on intermediate inputs used by consumption decisions, lower revenue instability, and potentially
domestic producers. Value added taxes (VATs) and goods greater gains in revenue generation if investment is directed at
and services taxes (GSTs) typically apply uniformly and are improving their administrative efficiency (Aizenman and Jinjarak,
based on consumption location. VAT/GST can raise revenue 2009; De Mooij and Swistak, 2022; Kowalski, 2006). While
from both domestic and foreign firms and apply to broad tariffs and VAT/GST are not mutually exclusive, recent evidence
categories of products. Although a growing number of shows that for most economies VAT/GST could generate
developing economies are successfully adapting their VAT higher revenue from taxing electronic transmissions compared
systems for digital trade, low-income economies continue to to hypothetical tariffs, given current rate structures. In both
face challenges with VAT administration and compliance, developed and developing economies, standard VAT rates on
including with collecting VAT from non-resident sellers. To digitizable goods are, on average, higher than the average
close this gap and improve revenue mobilization, further tariffs, while the average effective VAT rates in developing
investment and technical assistance for modernizing their tax economies are lower. Ultimately collected revenue is based on
and customs infrastructure is required by the global the individual rates associated with the mix of imported products
community.22 Learning from good practices, economies may comprising the tax base. IMF staff estimates that, globally,

Table C.1: Potential customs revenue implications of the moratorium

Average MFN tariff Average share of Sum of potential Average share of Average share of
imports that are foregone revenue foregone revenue foregone revenue
dutiable (US$ million ) in potential in total government
customs revenue revenue (based on
(%) 131 economies)
(%)

Low-income 10.3% 87% 60 1.64% 0.33%

Lower-middle-income 9.0% 72% 738 1.09% 0.20%

Upper-middle-income 5.7% 60% 256 0.40% 0.06%

High-income 1.9% 53% 205 0.22% 0.01%

All economies 5.9% 64% 1,265 0.68% 0.10%

Source: Andrenelli and López González (2023).

Note: The analysis is based on 171 economies unless otherwise indicated for 2021 or latest available year.
32
 C. ROLE OF DOM ESTIC POLICI ES AN D I NTE R NATIONAL COOPE RATION I N SU PPORTI NG DIG ITAL TRADE

Figure C.6: IMF upper-bound estimates of revenue from VAT/GST on electronic transmissions vs.
hypothetical revenue from tariffs on electronic transmissions

10.2
electronic transmissions (US$ billions)

9.0
Revenue potential from taxing

7.4
6.2
5.0 5.2
4.0 4.1
3.7
3.1
2.8 2.6
2.2 2.0 2.2
1.7
1.3 1.0 1.3
0.6 0.7
0.2

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Tariffs VAT

Source: Hanappi, Jakubik and Ruta (2023).

Note: See the main text for a description of the methodology used.

potential revenue from VAT is approximately 150 per cent (e) Digitally ordered goods trade can
higher than potential revenue from customs duties on electronic benefit from the full implementation of
transmissions in 2021 (see Figure C.6) (Hanappi, Jakubik and
Ruta, 2023).23 Another study, in addition, finds that for most
the WTO Trade Facilitation Agreement
economies, namely 77 out of 106 economies, VAT/GST on (TFA)
computer, audio-visual and information services imports (that
were not previously imported through a physical carrier The speed and cost at which digitally ordered goods are
medium) in 2021 (or latest available year) would completely traded and delivered are influenced by the efficiency of
offset potential reductions in customs revenue that could be customs and logistical procedures. Delays in the clearance
attributed to the moratorium24 (see Figure C.7) (Andrenelli and of goods, including those ordered digitally, can slow down their
López González, 2023). cross-border movement and cause logistics difficulties that can
lead to significant increases in trade costs. Time delays in
connection with customs have been found to increase by 5 to
Imposing customs duties on electronic transmissions
6 per cent the average trade costs (WTO, 2018). The surge in
would reduce relevant digital trade and thereby lower
digital trade and the associated increase in small parcel
its benefits. Unlike VAT/GST which applies to final
shipments present new challenges for customs and logistics,
consumption, tariffs raise the cost of inputs for production, with
necessitating further efficiencies in border clearance
implications for business competitiveness. Customs duties on
procedures.
electronic transmissions would likely negatively affect those
who can benefit the most from digital delivery or from the use of
digital tools to trade, namely MSMEs and women owned Trade facilitation tools, enabled by digital technologies,
traders.25 It is also worth bearing in mind that the trade and can lower trade costs and boost digitally ordered goods
competitiveness impact of potential customs duties on transactions. Trade facilitation tools, such as Electronic Data
electronic transmissions would depend on the structure of Interchange (EDI) and Single Window Systems (SWS),
trade and tariffs and on commitments including in RTAs that improve cross-border clearance procedures. EDI enables the
affect the ability of economies to levy such customs duties. electronic transfer of documents, while SWS create a
33
 34
Share
Share
of foregone
of foregone
customs
customs
revenue
revenue
fromfrom
electronic
electronic
transmissions
transmissions Share
Share
of foregone
of foregone
customs
customs
revenue
revenue
fromfrom
electronic
electronic
transmissions
transmissions
in total
in total
government
government
revenue
revenue
(%) (%) in total
in total
government
government
revenue
revenue
(%) (%)

-2.0
-2.0
-1.5
-1.5
-1.0
-1.0
-0.5
-0.5
0.0
0.0
0.5
0.5

-4.0
-4.0
-3.5
-3.5
-3.0
-3.0
-2.5
-2.5
-2.0
-2.0
-1.5
-1.5
-1.0
-1.0
-0.5
-0.5
0.0
0.0
0.5
0.5
1.0
1.0
Mongolia
Mongolia
Senegal
Senegal Malawi
Malawi
Kenya
Kenya
Cambodia
Cambodia
Angola
Angola
Mali Mali
Tunisia
Tunisia
Pakistan
Pakistan
Lebanon
Lebanon
Rwanda
Rwanda
D I G ITAL T RAD E F OR D EVE LOP M E N T

CôteCôte
d’Ivoire
d’Ivoire

Without VAT/GST
Without VAT/GST
Without VAT/GST
Without VAT/GST
Kyrgyz
Kyrgyz
Republic
Republic
Nigeria
Nigeria
Lesotho
Lesotho Ethiopia
Ethiopia
Nicaragua
Nicaragua
customs revenue from electronic transmissions

Bangladesh
Bangladesh
Honduras
Honduras Guinea-Bissau
Guinea-Bissau
Uzbekistan
Uzbekistan
Low-income
Low-income

Vietnam
Vietnam
Tanzania
Tanzania

Lower-middle-income
Lower-middle-income

Upper-middle-income
Uganda
Uganda
El Salvador
El Salvador
Ukraine
Ukraine
Bolivia
Bolivia
Vanuatu
Vanuatu Burkina
Burkina
FasoFaso
Philippines
Philippines
Indonesia
Indonesia
CaboCabo
Verde
Verde Mozambique
Mozambique
Morocco
Morocco

Net with offsetting VAT/GST from imported digital services

Net with offsetting VAT/GST from imported digital services
Net with offsetting VAT/GST from imported digital services
Net with offsetting VAT/GST from imported digital services

Eswatini
Eswatini
nia
Ghana
Ghana
Figure C.7: OECD estimates of revenue generated from VAT/GST on growing computer,

Madagascar
Madagascar
audio-visual and information services imports offset in most cases hypothetical foregone

IndiaIndia
 Share of foregone
Share ofcustoms
foregonerevenue
customs from
revenue
electronic
fromtransmissions
electronic transmissions Share of foregone
Share ofcustoms
foregonerevenue
customs from
revenue
electronic
fromtransmissions
electronic transmissions Share of foregone
Share
in total government
in total government
revenue (%)revenue (%) in total government
in total government
revenue (%)revenue (%) in

-1.0
-0.5
0.0
-1.0
0.5
-0.5
1.0
0.0
1.5
0.5
2.0
1.0
2.5
1.5
3.0
2.0
3.5
2.5
3.0
3.5
-1.0
-0.8
-1.0
-0.6
-0.8
-0.4
-0.6
-0.2
-0.4
0.0
-0.2
0.2
0.0
0.4
0.2
0.4
-4.0
-3.5
-3.0
-4.0

Bahamas, The Bahamas, The Paraguay Paraguay Mo

Panama Panama Azerbaijan Azerbaijan
C.

Czech RepublicCzech Republic

Fiji Fiji
Slovak Republic
Slovak Republic
Greece Greece Jamaica Jamaica
Latvia Latvia Ecuador Ecuador
Australia Australia Guatemala Guatemala
Chile Chile
Mexico Mexico
Italy Italy
KazakhstanKazakhstan

never traded through physical carrier media.

United KingdomUnited Kingdom
Costa RicaCosta Rica

Source: Andrenelli and López González (2023).

Canada Canada

Without VAT/GST
Without VAT/GST
Without VAT/GST
Without VAT/GST
Without VAT/GST
Without VAT/GST

Japan Japan Albania Albania

Israel Israel South Africa
South Africa
Korea, Rep.Korea, Rep. Bosnia andBosnia and
Slovenia Slovenia HerzegovinaHerzegovina
Poland Poland Moldova Moldova
Hungary Hungary Peru Peru
Portugal Portugal Namibia Namibia
Croatia Croatia Russian Federation
Russian Federation
Germany Germany
Brazil Brazil
Spain Spain

High-income
High-income
Norway Norway Armenia Armenia
Upper-middle-income
Upper-middle-income

Romania Romania Dominican Dominican

Republic Republic
Denmark Denmark Colombia Colombia
Austria Austria
Malaysia Malaysia
France France
Sweden Sweden Georgia Georgia
Iceland Iceland Belize Belize
LuxembourgLuxembourg Türkiye Türkiye
Uruguay Uruguay Botswana Botswana
Lithuania Lithuania
Bulgaria Bulgaria
Belgium Belgium
Finland Finland Serbia Serbia

Net with offsetting VAT/GST from imported digital services

Net with offsetting VAT/GST from imported digital services
Net with offsetting VAT/GST from imported digital services
Net with offsetting VAT/GST from imported digital services
Net with offsetting VAT/GST from imported digital services
Net with offsetting VAT/GST from imported digital services

NetherlandsNetherlands Argentina Argentina

Ireland Ireland North Macedonia
North Macedonia
Cyprus Cyprus
Belarus Belarus
Estonia Estonia
Mauritius Mauritius

Note: See the main text for a description of the methodology used. The income group classification is based on the World Bank’s 2022-2023
classification. Trade statistics on computer, audio-visual and information services cover trade previously traded physically as well as trade that was
ROLE OF DOM ESTIC POLICI ES AN D I NTE R NATIONAL COOPE RATION I N SU PPORTI NG DIG ITAL TRADE

35
 D I G ITAL T RAD E F OR D EVE LOP M E N T

centralized platform for customs procedures, accelerating

trade-related information processing and border clearance.
3. Some regulatory
Improvements in different mechanisms of collaboration, from issues in the realm of
risk management systems and coordinated inspections to
authorized trader programmes, can also improve border agency digital trade could benefit
co-operation.
from deeper international
While the implementation of the WTO TFA has promoted cooperation
digitalization in border processes worldwide, it has
been slower in low-income economies. The TFA aims to
expedite the cross-border movement of goods by enhancing The rise of digital trade has brought forth a host of new
transparency and simplifying administrative procedures at the regulatory challenges for governments worldwide. As
governments grapple with the complexities of regulating digital
border. The TFA Facility helps developing and LDC members
trade, they seek to strike a balance between facilitating the
assess their trade facilitation needs and identify development
growth of the digital economy and addressing new regulatory
partners to address them through capacity building and
challenges. These issues involve areas such as cross-border
technical assistance. According to the UN Global Survey on data flows, competition and online consumer protection. While
Digital and Sustainable Trade Facilitation, the implementation some of these issues are specifically related to digital trade,
rate of trade facilitation measures has increased in recent others have broader implications for the whole digital economy.
years. Overall, since the TFA was concluded, trade facilitation
reforms, which include automation of border processes, are
estimated to have reduced trade costs by 4.5 per cent, boosting (a) Cross-border data flows are
global trade by up to 16 per cent in specific regions and pivotal to the expansion and efficiency
particularly benefiting developing economies. Yet, in spite of of digital trade
many positive developments, the automation and streamlining
of border procedures in lower-income economies remain very
The surge in digitalization has been marked by an
much work in progress (OECD, 2023b). Continued reforms
increase in digital data flows within and across
could further decrease trade costs by up to additional 12
economies. Data flow proxies show significant growth. In
percentage points in developing economies and facilitate
2022, international bandwidth usage, which serves as a
digitally ordered goods trade (Sorescu, forthcoming). measure of data flows, reached 1,200 Tbit/s worldwide, a
sixfold increase from 2016 (ITU, 2022a). These data flows
International trade cooperation, including Aid for Trade, originate from various sources, including personal, social and
business activities and play an increasing role in socio-
plays an important role in improving cross-border trade
economic interactions, including trade, global supply chain
through trade facilitation. Trade facilitation ranks high on
management and resilience. Access to comprehensive data in
the Aid for Trade priorities of both developing economies and
this digital age is rapidly becoming a significant source of
development partners, encompassing not just customs and comparative advantage. Tracking cross-border data flows is,
other border procedures but also physical and digital however, challenging (ITU, 2022a).
connectivity (see Section C.1). This aid has shown positive
outcomes in tackling border bottlenecks and addressing border
issues (WTO, 2022). For instance, UNCTAD provides Cross-border data flows raise various policy concerns,
assistance in the implementation of trade facilitation reforms, increasingly prompting economies to either condition
data movement or mandate domestic data storage. The
supporting economies through capacity building and technical
growth of data flows raises issues, including privacy, consumer
assistance with digital technologies for trade facilitation, such
protection, competition, cybersecurity and national security.
as trade and customs digitalization through the Automated
This may explain the adoption of measures affecting such flows
System for Customs Data (ASYCUDA) programme, with by conditioning the movement of data across international
technologies supporting transparency, such as trade portals, borders or mandating domestic storage of data has increased
and with coordination capacity for national trade facilitation significantly over the years (see Figure C.8) (Casalini and
committees, including the Reform Tracker platform - a web- López González, 2019). These data regulations apply to
based project management and monitoring tool for trade different types of data and sectors and pursue various
facilitation reforms. objectives, including personal data protection, national security
36
 C. ROLE OF DOM ESTIC POLICI ES AN D I NTE R NATIONAL COOPE RATION I N SU PPORTI NG DIG ITAL TRADE

Figure C.8: Measures affecting cross-border data flows have increased significantly

250 25
Cumulative number of data regulations

200 20

Number of modifications
to data regulations
150 15
12
11 11
10 10
100 9 10
8 8 8
6 6 6
5 5 5 5
50 4 4 5
3 2 2
2 2 1 1 2
1 1 1 1 1 1 1 1 1 1
0 0
1972
1974
1978
1979
1981
1983
1985
1988
1990
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Modifications to data regulations (right axis) Data regulations (left axis)

Source: Casalini and López González (2019).

Note: The figure captures measures conditioning the movement of data across international borders or mandating that data be stored domestically.

and digital industrial policy. For instance, data localization different approaches to data governance on digitally delivered
requirements have increased in the past decade and may have services find higher volumes of trade is associated to cross-
become more trade restrictive by mandating stronger domestic border data rules found in economies with an “open transfers”
storage and/or processing of data (López González, Casalini model (encompassing the first and second type of regulations
and Porras, 2022). listed above), as well as with the privacy safeguards featured in
the “conditional transfers” (akin to “pre-authorised safeguards”)
model (Ferracane and van der Marel, 2021; World Bank,
Different approaches to regulating data flows have 2021).
been adopted worldwide, depending on the type of data
and the objectives being pursued. Four different, yet not
mutually exclusive, approaches to data flow regulation have The global fragmentation of data flow regulations
emerged over the years (Casalini and López González, 2019). hinders data protection and digital trade, underscoring
The first approach involves the absence of regulation on cross- the need for increased international cooperation. While
border data flows usually due to the lack of data protection there are legitimate reasons for diversity in regulation, the
legislation. It does not involve any restrictions on the movement regulatory landscape that underpins cross-border data flows is
of data, but it can hinder digital trade due to trust issues and becoming increasingly complex and fragmented. The emerging
reluctance to share data (see Section C.2.a). The second type patchwork of approaches risks undermining the policy
of approach involves the use of “open safeguards” regulations, objectives they were intended to serve in the first place.
which grant entities some discretion in protecting transferred Evolving, overlapping or sometimes conflicting requirements
data, sometimes following government guidelines, while for entities involved in data processing can not only have trade
holding them accountable for any data misuse (e.g. ex-post impacts but also create operational uncertainty about which
accountability principles, contracts and private sector rules to apply to which data. This, in turn, can generate legal
adequacy). The third approach uses “pre-authorised uncertainty and administrative burden and costs. Fragmentation
safeguards”, which require government approval before data in approaches to data flows can also hamper technological
transfer (e.g. public adequacy decisions26 and public sector-led progress and reduce competition and business opportunities.
ex-ante safeguards)27. The fourth approach uses “ad-hoc There is also a risk that a fragmented and silo-oriented, data-
authorisations”, which allow data transfer on a case-by-case driven digital economy will emerge, going against the benefits
basis subject to review and approval by relevant authorities of the Internet as a free, decentralized and open network. A
(e.g. “important data”). The analysis of the impact of these balanced approach to data governance is needed to ensure
37
 D I G ITAL T RAD E F OR D EVE LOP M E N T

data can flow across borders as freely as necessary and is also essential for enabling businesses to access and leverage
possible, while ensuring transferred data are granted the digital technologies to enhance their competitiveness (World
desired oversight and protection (OECD, 2022a; UNCTAD, Bank, 2019a).
2021b). Data governance and cross-border data flows are
addressed in various trade and non-trade-related international
The emergence of new business models and products
fora (WTO, 2018). Some international instruments set out
has fuelled the growth of digital trade. At the heart of this
specific rules or recommendations for the transfer of specific
growth are digital platforms, which have transformed many
types of data, such as the Asia-Pacific Economic Cooperation
economic sectors (UNCTAD, 2019; WTO, 2018). These
(APEC) Cross-Border Privacy Rules (CBPR), the Council of
platforms offer consumers a wide range of services, including
Europe’s Convention for the Protection of Individuals with
marketplaces (e.g., Alibaba and Amazon), application stores
regard to Automatic Processing of Personal Data (Convention
(e.g., Apple App Store and Google Play), social networking
108), the OECD Guidelines on the Protection of Privacy and
sites (e.g., Facebook, LinkedIn and TikTok) and search engines
Transborder Flows of Personal Data and the OECD Declaration
(e.g., Baidu, Bing and Google). Through these platforms, many
on Government Access to Personal Data Held by Private
sellers, including many MSMEs, have also gained access to
Sector. RTAs are also gradually addressing data localization
global markets, benefitted from real-time analytics and enhanced
and cross-border data flows, with some explicitly prohibiting
their operational efficiency, even with limited resources.
data localization and unnecessary barriers to cross-border data
flows while exempting measures affecting data flows to achieve
a legitimate public policy objective. The development of While digital platforms offer multiple benefits, they
international standards on specific technologies, such as those exert significant market power in many segments of the
developed by the International Organization for Standardization digital economy. Large platforms’ market power in segments
(ISO) and the International Electrotechnical Commission (IEC), like cloud storage, distribution, mobile applications, search and
further contributes to facilitating interoperability and data social networks is amplified by network effects (i.e. the fact that
exchange between systems and regions. when more people use a product or service, its value increases),
access to large data streams and economies of scale and
scope. These platforms have further solidified and strengthened
More international cooperation is needed for developing
their ecosystems through various strategies, including strategic
economies to access shared best practices, technical
partnerships with traditional sectors, new sector expansion and
assistance and funding to overcome data-related
acquisitions (OECD, 2022c; UNCTAD, 2019). For instance,
challenges. As economies allocate more domestic resources
between 2016 and 2021, Amazon, Apple, Facebook, Google
to develop their capacities for creating and capturing data
and Microsoft dominated AI start-up acquisitions (UNCTAD,
value, developing economies, in particular LDCs, face financial
2021b). A rising share of global digital advertising revenue is
and technical challenges. Limited infrastructure in LDCs can
also captured by big tech companies.
hinder data collection and processing (see Section C.A.1). The
lack of skilled personnel trained in data analytics and science
makes it also hard to interpret and use data effectively. High market concentration in the digital economy
Additionally, financial constraints, which have been exacerbated raises challenges for market players and consumers.
by the COVID-19 pandemic, restrict the adoption of modern Market players may face barriers to entry and potential anti-
technologies and platforms. The absence of comprehensive competitive behaviour (UNCTAD, 2021a). For instance, the
data protection regulations can further stifle trust and collection and control of data by a limited number of tech
willingness to share data, further impeding the creation of data- companies can lead to market power, which can be used to
driven value in these economies. limit access for new entrants and competitors. Consumers,
despite enjoying immediate advantages, such as greater
choice, convenience and cost savings, may also suffer from
(b) Competition policy is essential to high market concentration in digital trade, such as reduced
maintain open and dynamic digital markets long-term choices, higher prices and potential data privacy
concerns.

A transparent and pro-competitive business

environment is vital for supporting and developing the As market concentration continues to grow,
digital economy. Such an environment stimulates innovation governments are seeking ways to regulate the digital
by encouraging risk-taking and fostering a culture of continuous economy by adapting their legislative frameworks to
improvement. A business-friendly regulatory framework, digital-related competition concerns and strengthening
including easy entry and exit for firms and open trade policies, enforcement against anti-competitive conduct. Certain
38
 C. ROLE OF DOM ESTIC POLICI ES AN D I NTE R NATIONAL COOPE RATION I N SU PPORTI NG DIG ITAL TRADE

developed economies have introduced or adapted their practices, technical support and financial assistance in
competition laws and promote a competitive, open and addressing digital competition hurdles. Discussions on digital
accessible digital economy (Fredriksson and Moreira, 2023; competition are taking place in different international fora, such
UNCTAD, 2021a). Moreover, a number of jurisdictions have as the G7, OECD and UNCTAD.
implemented, or proposed, new regulations for digital markets
to foster competition and regulate large platforms’ market
power (OECD, 2021). Some of these reforms foresee a (c) Enhanced online consumer
mechanism that uses predefined criteria to designate the protection helps build trust in digital
market players subject to the regulation and to enable swift and markets
targeted enforcement of the relevant provisions. Such
provisions generally take the form of a code of conduct, or,
alternatively, are set out as principles that will be tailored to The lack of consumer protection in digital trade can
specific designated companies. erode trust and hinder digital trade growth. While digital
trade brings convenience and accessibility, it also poses risks
such as fraud, misleading advertising, unfair terms and
While a few emerging economies have revised their competition conditions, unsafe products and unwanted and potentially
law to intensify the scrutiny of digital platforms, others are still harmful electronic communications (spam). Survey data reveals
in the process of adopting digital competition law. In response a prevailing sense of distrust towards the internet among
to changing acquisition trends in the tech sector, several consumers worldwide, resulting in some consumers taking
governments have also adapted their merger rules by precautions, such as reducing online purchases (CIGI, IPSOS,
introducing or clarifying thresholds and guidelines or ISOC and UNCTAD, 2019). The absence or insufficiency of
implementing automatic merger notifications. Besides legal policies and mechanisms designed to safeguard the rights and
reforms, some competition authorities have opted for a softer interests of consumers engaged in digital trade contributes to
approach by providing business with clear directives and legal this digital distrust.
certainty by establishing guidelines that define acceptable
conduct for digital platforms.
Online consumer protection policies strive to ensure
that consumers in the digital realm are afforded the
Developing economies, particularly LDCs, face same level of protection as those engaged in traditional
challenges in adopting and enforcing competition law commerce. Consumer protection policies should
for the digital economy. Resource constraints, the need for accommodate the special features of digital trade in different
technical expertise, and the challenges of the rapid evolution of ways, including regulations against online deception practices,
digital markets can disproportionately affect developing disclosure requirements about terms of sale and return policies,
economies’ competition authorities. Additionally, the global liability regimes for online intermediaries, dispute resolution
nature of digital platforms complicates jurisdictional issues, mechanisms for online transactions, and effective redress
increasing the need for international cooperation amongst mechanisms (e.g. refunds or compensation to address
authorities. grievances) (OECD, 2016; UNCTAD, 2023d; UNGA, 2015).
Data protection also contributes to consumer protection by
ensuring consumers have control over their data and are
Enhanced international cooperation between
informed about its use (see Chapter C.2.a). Similarly, secure
competition authorities is crucial to address the global
electronic payment mechanisms are fundamental to national
competition challenges posed by digitalization. Anti-
consumer protection policies (see Box C.3) (UNCTAD, 2022a).
competitive practices by digital platforms transcend borders,
requiring a holistic collaborative approach that encompasses
competition, consumer protection, data protection and Mechanisms to protect consumers from online malicious
industrial policies. Competition authorities are encouraged to activities, including phishing (i.e. obtaining sensitive information
tackle digital challenges by faster responses, including through via illegal means) and spam, also play an important role in
timely enforcement actions and the use of interim measures, upholding the safety and integrity of digital transactions.28
and to enhance international cooperation and information Likewise, guidelines that prevent deceptive digital advertising
sharing and expand international best-practice guidelines on practices and ensure the authenticity of online reviews and
digital issues (Akcigit et al., 2021). Given the nascent state and endorsements further contribute to consumer protection.
resource constraints of competition authorities in many Consumer education programmes can also empower
developing economies, leveraging more international consumers to learn about their rights, potential online threats
cooperation can also provide crucial support to access best and best practices for secure online shopping.
39
 D I G ITAL T RAD E F OR D EVE LOP M E N T

Box C.3
Electronic payments facilitate seamless digital trade transactions across borders

Electronic payments form the backbone of modern trade. They crucial for enabling faster cross-border transfers and
transfer sums between payment accounts using digital increasing consumer confidence. Aligning domestic security
devices or channels, including online bank transfers, payment standards in payment transactions with international
cards, mobile money, QR codes, digital currencies and standards can further contribute to making cross-border
electronic funds transfers. While domestic digital trade might electronic payments more efficient. The GATS provides the
accommodate electronic payment methods like cash-on- underlying framework for commitments on trade in services,
delivery and face-to-face transaction, such approaches are including electronic payment services (WEF, 2018). A limited
unsuitable for cross-border digital transactions. In some but increasing number of RTAs also address electronic
developing economies, in particular LDCs, limited ICT payments, with some focusing on cross-border supply of such
infrastructure, low financial inclusion, regulatory challenges services.
and trust issues can hinder the uptake of electronic payments.
Mobile money solutions have, however, gained popularity in Digital currencies, such as cryptocurrency, could help facilitate
some developing regions, filling the void created by a lack of digital trade by enhancing the efficiency of cross-border
conventional banking services (Suri, 2017). payments through streamlining processes and reducing
intermediaries. They enable real-time cross-border payments
Navigating through different complex regulatory systems can and can overcome challenges like high costs, slow speeds,
deter digital trade opportunities. While intermediaries help operational complexities and lack of transparency (Adrian et
with currency conversion, regulatory compliance and al., 2022). Moreover, they could also provide alternative credit
electronic transfers, conflicting regulations or non- information for trade finance and broaden access for MSMEs,
interoperable financial data can reduce transaction efficiency. especially in developing economies where information from
These challenges increase financial process costs and hinder credit bureaus is often limited or unavailable. However, to
the digital trade growth potential. realize these benefits, strong legal and institutional measures
need to be in place to mitigate the risks, and international
International cooperation can help improve the efficiency of cooperation on these issues, such as privacy, cost-effective
cross-border regulatory frameworks for electronic payments anti-money laundering measures and combating the financing
enhancing digital trade. Payment system interoperability is of terrorism (AML/CFT) is crucial (IMF, 2023).

Enforcement of online consumer protection policies is can constrain some developing economies from adopting and
essential to uphold consumers’ rights. It requires a robust implementing online consumer protection policies. The lack of
infrastructure, underpinned by relevant legal and institutional technical expertise and infrastructure in some of these
frameworks, to develop, implement and monitor consumer economies can further hinder the formulation and
protection policies. With rapid technological changes and implementation of effective consumer protection policies. In
innovative deceptive practices, the constant revaluation of addition, a constrained institutional framework, marked by
consumer protection policies ensures they remain relevant and fragmented regulatory bodies and inadequate legal
effective (OECD, 2022d; UNCTAD, 2021a). Engaging frameworks, can complicate the establishment of robust
regularly with businesses, consumer groups and experts consumer protection mechanisms.
provides insights and feedback on the evolving digital trade
landscape. Adequate human and financial resources for
The absence and ineffectiveness of online consumer
consumer protection enforcement agencies are also important
protection limit digital trade opportunities, highlighting
to ensure effective compliance and facilitate redress for
the importance of greater international cooperation.
aggrieved consumers.
As consumers increasingly make online purchases from
international vendors, international collaboration is important
Developing economies, particularly LDCs, face to ensure digital trade is safe and that malicious online
challenges in adopting and enforcing consumer practices, which can operate beyond national borders, are
protection policy. Limited financial and human resources effectively tackled. Online consumer protection is addressed
40
 C. ROLE OF DOM ESTIC POLICI ES AN D I NTE R NATIONAL COOPE RATION I N SU PPORTI NG DIG ITAL TRADE

in various trade and non-trade-related international fora. Enhanced cross-border collaboration among domestic
Some international instruments set out guidelines and best consumer protection authorities is crucial for enforcing
practices for safeguarding consumer rights and promoting fair online consumer protection and addressing violations
business practices in both traditional and online markets. across multiple jurisdictions. Yet, such international
These instruments include the United Nations Guidelines for collaboration remains limited, with only 35 per cent of consumer
Consumer Protection and the OECD Guidelines for protection agencies reporting experience in cross-border
Consumer Protection in the Context of Electronic Commerce. enforcement cooperation (Muniz Cipriano and Izaguerri Vila,
2020). Most current collaboration is among developed
RTAs are also increasingly addressing online consumer
economies and on an informal basis. Inter-agency informal
protection, with some explicitly requiring the adoption of
collaboration may be insufficient to adequately address the
online consumer protection measures (see Chapter C.2.b)
growing number of cross-border unfair commercial practices
and this is an area where multilateral discussions are taking
and to allow for satisfactory dispute resolution and redress for
place under the WTO Work Programme on E-commerce and
online consumers. In the rapidly changing digital landscape, the
plurilateral negotiations under the JSI. The most common international exchange of experiences can improve the
provision on online consumer protection in RTAs promotes capabilities of national consumer protection authorities,
cooperation, including the exchange of information and especially in developing economies. International cooperation
experiences. The exchange of knowledge and best practices at regional and multilateral levels could benefit from more
on online consumer protection is also taking place in other regular exchanges of information between international
fora, including APEC and the International Consumer institutions and networks to identify avenues for cooperation
Protection and Enforcement Network (ICPEN). and common projects, while avoiding duplication.

Endnotes
1. Anti-competitive practices can include using information 4. These countries represent examples of economies in the
from competitors for an anti-competitive advantage, 75th percentile of their income group.
withholding from other suppliers necessary technical
5. Digital trade provisions refer to the presence of a provision
information about essential facilities and commercially
that can be considered as important for digital trade as
relevant information, and applying anti-competitive cross-
identified in Burri and Polanco (2020). Digital trade chapters
subsidization practices, where a company uses profits from
refer to there being a separate chapter in the trade
one segment of its business to unfairly subsidize activities agreement.
in another segment. Another anti-competitive practice is
the resistance of incumbents to offering interconnection to 6. 
See WTO documents WT/MIN(98)/DEC/2 and
their network for the termination of calls or other services. WT/L/274 (1998). Four terms are especially relevant to the
Universal service obligations provide a safety net of services deliberations on digital trade under the WTO agreements:
for portions of the population for which there are insufficient goods, services, electronic commerce, and electronic
commercial incentives, such as those in low-income, rural transmissions. Of these, only “electronic commerce” is
and remote areas. defined in the WTO. Neither “goods” nor “services” are
defined in the GATT and the GATS, respectively. As for
2. 
The Information Technology Agreement (ITA) expansion, “electronic transmissions”, the term first appeared in the
often referred to as ITA-2 or the expanded ITA, refers to 1998 Declaration on Global Electronic Commerce, but its
an extension of the original ITA adopted in 1996 under meaning was not further defined.
the WTO. The expansion was agreed upon in 2015 and
7. An increasing number of RTAs include a provision referring
includes a range of additional tech products that were not
to the applicability of WTO rules to digital trade.
covered in the original agreement, including new-generation
semiconductors, optical lenses, medical equipment such 8. See WTO document S/L/74. WTO jurisprudence has also
as magnetic resonance imaging machines and ultrasonic consistently found in this sense.
scanning apparatus, telecommunication satellites, touch
screens, software and video game consoles, and advanced 9. 
According to the GATS most-favoured-nation (MFN)
microscopes and telescopes. obligation, a member must accord “immediately and
unconditionally to services and services suppliers of any
3. The Annex on Telecommunication establishes disciplines other member treatment no less favourable than that it
on the access to and use of public telecommunications accords to like services and services suppliers of any other
transport networks and services. country” (GATS Article II).
41
 D I G ITAL T RAD E F OR D EVE LOP M E N T

10. 
GATS market access disciplines prohibit mainly quota- Lucia; Saint Vincent and the Grenadines; Suriname; Türkiye;
type restrictions, while national treatment proscribes the Ukraine; and Viet Nam (Andrenelli and López González, 2023).
discrimination of foreign services or service suppliers.
20. 
Another 12 agreements involving 15 economies have
11. Besides GATT 1994, the Agreements on Agriculture, Anti- commitments not to impose customs duties on electronic
Dumping, Customs Valuation, Import Licensing Procedures, transmissions that are tied to the WTO moratorium.
Pre-shipment Inspection, Rules of Origin, Safeguards,
Sanitary and Phytosanitary Measures, Subsidies and 21. 
The estimates are based on an analysis covering 188
Countervailing Measures, Technical Barriers to Trade, economies.
and Trade-Related Investment Measures do not make any
22. See Hanappi, Jakubik, and Ruta (2023), Box 1 for different
distinction between the manner in which goods are traded.
collection methods for VAT on digital transactions and
12. A decision of the WTO Committee on Customs Valuation Annex 3 on specific developing economy experiences.
applies specifically to products traded by means of a Regional VAT Digital Toolkits for Latin America and the
physical support (e.g., data or software recorded in a DVD) Caribbean, Asia-Pacific and Africa cover region-specific
and provides that, in determining the customs value of implementation and operational aspects of adapting VAT/
imported carrier media bearing data or instructions, WTO GST systems to digital trade (OECD, World Bank and
members may take into account only the cost or value of the ATAF, 2023; OECD, World Bank and ADB, 2022; OECD,
carrier medium itself and not the cost or value of the data or
World Bank, CIAT and IDB, 2021).
instructions.
23. Estimated static global revenue potential is calculated for all
13. The non-discrimination principles of the TRIPS Agreement
WTO members using the current rate structure for VAT and
ensure that any additional protection that WTO members
grant in national laws and international and bilateral treaties (hypothetical) MFN tariffs, without accounting for reductions
benefit, as part of specific approaches developed on how to potential tariff revenue due to RTAs or other preferences,
to apply the TRIPS standards in the context of digital trade, and uses an upper bound estimate of trade growth in
also the nationals of all other WTO members. digitized products (Hanappi, Jakubik and Ruta, 2023).

14. 
The legal status of the JSI on e-commerce and its 24. This means that, for most economies, the growth in digitally
relationship with the multilateral trading system is still being delivered services imports is likely to have generated more
debated among WTO members. tax revenue through GST/VAT systems than the foregone
revenue from customs duties due to the digitalisation of so-
15. 
While many WTO members engaged in the JSI on
called ‘digitizable goods’ (Andrenelli and López González,
E-commerce have included digital trade provisions in some
of their RTAs, several other WTO members not involved in the 2023).
negotiations have also incorporated digital trade provisions 25. This report does not assess the potential impact on other
in their RTAs (Nemoto and López González, 2021). enterprises.
16. 
Various business associations, representing companies 26. Public adequacy decisions involve a unilateral recognition
across different sectors and economies at different levels by a designated public body certifying that the personal
of development, have repeatedly expressed support for
data protection regime of another jurisdiction meets specific
not imposing tariffs on electronic transmissions. See, for
privacy requirements, allowing for the transfer of personal
instance, Global Services Coalition (2022).
data to that jurisdiction when the level of protection is
17. See section C.2.d. deemed equivalent to domestic standards.
18. Across all reviewed studies, higher estimates of potential 27. 
Ex-ante legal safeguards serve as alternative measures
tariff revenue are reported for only a handful of developing when a public adequacy decision has not been made,
economies (see for instance Figure C.7). Note that some providing ex-ante legal guarantees for transferred data to
of these estimates include scenarios where existing tariffs ensure consistent levels of protection and enforcement in
are no longer collected on all digitizable goods (e.g., books,
the destination jurisdiction, encompassing standardised
videos, or music whether traded online or through a physical
contractual safeguards, binding corporate rules (BCR) and
carrier). A literature review on studies analysing the customs
other approved legal instruments or schemes.
revenue implications of the WTO moratorium on customs
duties on electronic transmissions can be found in the annex. 28. Phishing is a fraudulent attempt, typically carried out via email,
19. The 33 developing economies with such commitments are to steal sensitive information such as usernames, passwords
Argentina; Armenia; Belize; Brazil; Colombia; Costa Rica; and credit card details by masquerading as a trustworthy
Dominica; Dominican Republic; Ecuador; El Salvador; entity. Spam refers to unsolicited messages sent over the
Georgia; Grenada; Guatemala; Guyana; Haiti; Honduras; internet, typically to a large number of users, for various
India; Jamaica; Jordan; Malaysia; Mexico; Moldova, Republic purposes, including advertising, phishing and spreading
of; Mongolia; Morocco; Nicaragua; Paraguay; Peru; Saint malware (such as viruses, spyware and ransomware).
42
D
Conclusions
 D I G ITAL T RAD E F OR D EVE LOP M E N T

This joint report has looked into the role of digital trade in rapid technological change. They have also expressed concerns
development and how economies can work together to reap about the impact of the moratorium on their ability to use
the full benefits of digital trade for a more resilient and inclusive customs duties for industrial policy purposes.
global trading system.

This joint report notes that the exact customs revenue

The report has sought to answer two main questions: what are implications of the moratorium are difficult to assess, but
the opportunities and challenges for developing economies
available estimates suggest that average potential forgone
arising from digital trade, and how can international cooperation
revenue in developing economies ranges between 0.01 per
help developing economies exploit these opportunities and
cent and 0.33 per cent of total government revenue. The costs
address the challenges arising from digital trade?
of implementing customs duties on electronic transmissions,
including creating the necessary infrastructure, would also
The report has shown that digital technologies can enhance need to be considered. This report notes that there are other
productivity, reduce trade costs, promote more service-driven ways of raising revenue from electronic transmissions, notably
inclusive growth and strengthen resilience. Since 2005, the through VAT/GST. VAT does not discriminate between
value of digitally delivered services exports has experienced a domestically supplied and imported products, is more uniform
nearly fourfold rise, with an annual average growth of 8.1 per across different products, and does not impose a tax burden on
cent between 2005 and 2022. This growth rate has surpassed intermediate inputs used by domestic producers. Imposing
both that of goods exports at 5.6 per cent and that of other customs duties on electronic transmissions would reduce
services exports at 4.2 per cent. However, some economies, relevant digital trade and thereby lower its benefits. It might
especially in Africa and LDCs, show slower progress, reflecting also impact competitiveness and participation of firms, in
the fact that a reliable and affordable digital infrastructure, particular MSMEs and women owned traders.
along with supportive public policies, is crucial for effectively
participating in and benefiting from digital trade.
Beyond the moratorium, the joint report points at regulatory
issues that may require global solutions to harness the full
A comprehensive and multi-faceted strategy is necessary to potential of digital trade, bridge the digital divide and support
improve the adoption and effective use of digital technologies. inclusive growth. Cross-border data flows are pivotal to digital
This strategy includes investments in physical and digital trade, but the global fragmentation of data flow regulations
infrastructure, enhancing digital literacy and skills, and adopting hinders data protection and digital trade. Increased international
regulatory frameworks that are conducive for digital trade. cooperation can help achieve a balance in data governance
Efforts to bridge socioeconomic and cultural divides are also
and thereby ensure data can flow across borders as freely as
crucial. International cooperation and knowledge-sharing can
necessary and possible while ensuring transferred data are
contribute to overcoming these barriers and promoting the
granted the desired oversight and privacy protection. Rapid
adoption and effective use of digital technologies in developing
technological advances and network effects have led to
economies.
increased market concentration in the digital economy, giving
rise to concerns about market power and anti-competitive
International cooperation on digital trade-related issues has behaviour. Enhanced international cooperation between
primarily taken place in bilateral and regional trade agreements, competition authorities is crucial to address the global
with separate discussions on updating existing trade rules and competition challenges posed by digitalization. The lack of
creating new ones taking place in the WTO. With the WTO’s online consumer protection regulation and enforcement and
MC13 on the horizon, this joint report addresses a pressing disparities in regulatory systems for digital payments can erode
WTO issue: the renewal of the moratorium on customs duties trust and hinder digital trade growth. Enhanced cross-border
on electronic transmissions. WTO members have expressed collaboration among domestic consumer protection authorities
different views about the renewal of the moratorium. Proponents is crucial for enforcing online consumer protection and
of the moratorium emphasise that the commitment has addressing violations across multiple jurisdictions.
supported a stable and predictable environment for digital
trade to thrive. However, other WTO members have expressed
concerns about the lack of clarity regarding the scope of the In summary, while digital trade holds significant promises for
moratorium and the definition of electronic transmissions as consumers and businesses globally, including in LDCs, it is
well as the opportunity costs of the moratorium. These include imperative to channel its potential towards fostering economic
the potential foregone customs revenue and the desire to development and achieving inclusive growth by improving
maintain policy space in light of the uncertainty associated with developing economies’ capacity to participate in digital trade.
44
 AN N EX A

Annex A:
Literature review on studies analysing the customs
revenue implications of the WTO moratorium
on customs duties on electronic transmissions

The first attempt to estimate the foregone customs revenue of extrapolating this for the period 2011-2017. The analysis
the WTO moratorium on customs duties on electronic based on average bound tariffs suggests that potential
transmissions was undertaken by Schuknecht and Pérez- aggregate tariff revenue losses would amount to US$ 8 billion
Esteve (1999). They used a list of goods that included for developing economies and US$ 212 million for developed
cinematographic film, newspapers and videogames to provide economies in 2017. The analysis based on effectively applied
upper bound estimates of possible tariff revenue losses, based duties suggests that the foregone revenue would amount to
on the assumption that all trade that could be digitized would US$ 2.7 billion for developing economies and US$ 123 million
be digitized. The analysis suggests that the potential foregone for developed economies.
revenue effects would amount to less than 1 per cent of total
tariff revenue across most economies. The paper also
Applying the same methodology, Banga (2022) updated these
highlighted the strong potential for electronic transmissions to
estimates, highlighting that potential foregone revenue for
enhance services trade, underscoring that tariff revenue losses
developing and least developed economies in 2020 would
would need to be weighed against gains arising from growing
amount to US$ 14.3 billion when calculated using bound tariffs
trade in services (see also Mattoo and Schuknecht (2000) and
and US$ 5.5 billion when using applied duties.
Mattoo, Pérez-Esteve and Schuknecht (2001).

Andrenelli and López González (2019) and Evenett (2021)

More recently, and at the request of WTO members, the WTO
review existing estimates of the fiscal implications of the WTO
Secretariat (2016) re-examined and updated the analysis of
moratorium, and find that even the highest estimates (reported
potential tariff revenue losses arising from the WTO moratorium.
by Banga (2019)) represent, on average, 0.01-0.33 per cent of
Using a list of 30 goods at the six-digit harmonised system
overall government revenue.
(HS) and their applied tariff rates, the analysis suggests that
the estimated revenue collected from “digitizable goods”
(defined as physical goods which have the potential to be Köhler-Suzuki (2020) estimates the potential fiscal revenue
digitized and subsequently sent across borders digitally) had losses from digitized goods for Egypt and Viet Nam separately
fallen from US$ 1.2 billion in 2000 to US$ 823 million in 2014 using the same definition for digitizable goods used by Banga
– a global loss nearing US$ 400 million. Overall, the duties (2019). The analysis based on effectively applied duties
collected on digitizable goods imports amounted to 0.26 per suggests that estimated potential tariff customs revenue from
cent of total estimated customs revenue in 2014, with only four digitizable goods in Egypt grew from US$ 5 million in 1998 to
developing economies collecting more than 1.5 per cent of US$ 9 million in 2008, and then decreased to US$ 3 million in
total customs revenues from such tariffs. 2016. Similarly, the estimated potential tariff revenue for Viet
Nam grew from US$ 15 million in 2002 to US$ 27 million in
2009, but then decreased to US$ 17 million in 2018.
Banga (2019) used an updated list of 49 goods, also using the
HS classification, to estimate the revenue impact of the WTO
moratorium, focusing not only on the potential revenue loss Hanappi, Jakubik and Ruta (2023) use a list of 49 digitizable
arising from these trade flows being fully digitized, but also on goods based on WTO (2020) and the methodology of
the revenue not collected on trade flows that might have already UNCTAD (2017a) and Banga (2019, 2022) to assess the
been digitized, such as e-books. The author created a maximum fiscal revenue potential of imposing tariffs (effectively
counterfactual projection of the value of trade that might have applied rates) on flows of digitized imports. The authors find
already been digitized by taking the average growth rate of that in terms of total government revenue, the estimated
trade in digitizable goods between 1998-2010 and revenue potential of imposing tariffs ranges from 0.03 per cent
45
 D I G ITAL T RAD E F OR D EVE LOP M E N T

for high-income economies to 0.33 per cent for low-income VAT/GST taxes applied to growing computer, audio-visual and
economies on average. They argue that collecting VAT from information services imports. The results show that the potential
these flows is not only less distortionary, it can also generate foregone customs revenue that could be attributed to the WTO
higher revenue given appropriate investment in administrative moratorium would amount to US$ 1.3 billion, representing an
capacity to better capture digitized flows and increase coverage average of 0.68 per cent of potential total customs revenue or
and compliance. around 0.1 percent of overall government revenue. Moreover,
for 77 out of 106 economies for which data is available,
potential foregone revenue would be offset by rising revenue
Andrenelli and López-González (2023) calculate the potential
revenue implications of the WTO moratorium taking into from VAT/GST on digital services imports which are considered
account existing commitments that economies made that limit as ‘born digital’ and grow in proportion more than digitizable
the ability to raise tariffs independently from the WTO goods’ decline. The paper also shows that to the extent that
moratorium, such as includes commitments not to impose current tariffs on digitizable goods would be indicative of
customs duties on electronic transmissions as well as potential tariffs on electronic transmissions and that electronic
preferences granted in RTAs or commitments from the WTO transmissions are captured in digital services statistics, low
Information Technology Agreement. The analysis does not income economies would impose relatively high tariffs on
assume that all trade that can be digitized would be digitized, electronic transmissions and also face relatively high tariffs on
reflecting the fact that, for many economies, imports of such transmissions in middle-income economies, which are
digitizable goods have continued to grow in the past decade. currently their main export markets for digitally-delivered
The study also quantifies potential offsetting effects from services.

46
 R E FE R E NCES

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This report explores the opportunities and
challenges for developing economies arising from
digital trade and discusses the role of international
cooperation in tackling these opportunities and
challenges. The report considers policy actions in
the areas of digital infrastructure, skills, international
support for capacity development, and the regulatory
and policy environment. Specific policy issues
include the WTO e-commerce moratorium,
regulation of cross-border data flows, competition
policies, and consumer protection.

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