Digital Trade Opportunities Call for Stronger Regulation

Digital trade offers more opportunities than challenges to least-developed countries (LDC), SMEs and startups. Access to open-source tools and services like tax compliance software and other software-enabled products and services reduces costs, while the provision of digital services eliminates the expense of building a physical presence in foreign markets. Trade facilitation is essential to foster resilient, sustainable and inclusive development in the post-pandemic recovery. 

The first step in the transition to trade digitalization is the continued push for transparent regulatory environments and policy changes, including encouraging more countries to ratify the Model Law on Electronic Transferable Records (MLETR). However, as the transition continues, the critical priorities for industry digitalization will shift, and the industry needs to be prepared to adjust accordingly. The future of trade is both green and digital. Several trade policy tools and models for managing cooperation and competition are emerging, a trend that will likely accelerate during 2023. 

The complexity of the trade facilitation landscape also calls for greater international cooperation and capacity building, particularly for countries with economies in transition. Emerging technologies face specific digitalization opportunities to build resilience, prepare themselves and provide tools to support the implementation of trade facilitation measures, particularly on digital trade, says UNECE. 

According to the WTO, there are broadly three types of regulation of data flows in the world today: jurisdictions with open data flow regimes, those where discharges are conditional on satisfying national standards and regimes where data flows are subject to government control. International cooperation is a potential tool to support digital trade, especially if cross-border data flows are conditional on satisfying the host country’s regulatory requirements. 

Outside the WTO, groups of countries have also begun to negotiate Takeover Bids to address digital trade policies. Given their revealed preference for shallow trade agreements, such initiatives provide an alternative to trade agreements and could be important for LDCs. “The partnerships address the cross-border transfer of data, data localization and protections for source code; encourage cooperation on compatible e-invoicing and e-payment frameworks; and establish benchmarks for regulatory reforms that support the digital economy, foster inclusion and bolster the associated governance frameworks,” according to the WTO’s Digital Trade Study. 

Developments in digital trade in 2023 will likely focus on promoting the inclusive and sustainable growth of the digital economy, while preventing further digital policy fragmentation. The negotiations on e-commerce currently taking place among WTO members can be finalized before the end of 2023.