Digest Content
- Goods Barometer signals strong trade rebound but momentum may be short lived
- Working group on small business reflects on topics for 2021 workplan
- Developing countries and trade negotiations on e-commerce
Goods Barometer signals strong trade rebound but momentum may be short lived
World merchandise trade volume growth remained strong in the fourth quarter of 2020 after trade rebounded in the third quarter from a deep COVID-19 induced slump; however, the pace of expansion in the fourth quarter is unlikely to be sustained in the first half of 2021 since key leading indicators appear to have already peaked, according to the WTO’s latest Goods Trade Barometer of 18 February 2021.
In the third quarter of 2020, the seasonally-adjusted volume of world merchandise trade bounced back from a deep second quarter slump, boosted by rising exports in Asia and increasing imports in North America and Europe. Goods trade in the third quarter, nevertheless, was still down 5.6% compared to the same period in 2019 after having falling 15.6% in the second quarter. These declines, while still very large, are less severe than many analysts feared at the start of the pandemic.
The WTO’s most recent trade forecast of 6 October 2020 predicted a 9.2% drop in the volume of world merchandise trade in 2020, but the actual decline may be slightly less severe.
Prospects for 2021 and beyond, moreover, are increasingly uncertain due to the rising incidence of COVID-19 worldwide and the emergence of new variants of the disease. Recovery will depend to a large extent on the effectiveness of vaccination efforts. The WTO expects to release its next trade forecast in mid-April.
Working group on small business reflects on topics for 2021 workplan
At the first meeting of the year for the Informal Working Group on Small and Medium-sized Enterprises (MSMEs), held on 18 February, WTO members reflected on how to implement the package of declarations and recommendations agreed in December 2020 and what new issues the group would like to tackle in the year ahead.
The Coordinator of the Group, Ambassador José Luís Cancela (Uruguay), invited members to think about new issues on which they would like to organize information sessions and presentations at the working group’s meetings and submit proposals.
The impact of the COVID-19 pandemic on MSMEs and how to help them overcome the crisis and become more resilient was suggested as a theme for future discussions by some members.
The Coordinator announced that Kuwait and Thailand have endorsed the package of six recommendations and declarations finalised in December 2020 and that the number of sponsors now stands at 94. The package aims at addressing challenges smaller businesses face when they trade internationally.
Mexico updated the group on the work under way to establish the Trade4MSMEs platform aimed at helping MSMES tackle non-tariff barriers by facilitating access to relevant information. The group is eyeing the WTO’s 12th Ministerial Conference, which is due to take place this year, for launching the platform.
The Global Express Association gave a presentation on how simplifying and automating the handling of low-value shipments can facilitate trade conducted by small businesses and make it more efficient for governments to collect revenues.
The group heard an update from the United Nations Economic Commission for Europe on their Integrated Services for MSMEs in International Trade (ISMIT) project. This project calls for the establishment of private or public-private portals to provide information on services suppliers to MSMEs. For instance, the portal could provide access to logistics service providers, financing services, insurance services and regulatory services. A representative from the Organisation for Economic Cooperation and Development shared information on the organization’s work on MSMEs. Canada shared with the group how its national cybersecurity strategy helps MSMEs to mitigate cybersecurity risks.
Developing countries and trade negotiations on e-commerce
Over 80 members of the WTO are currently negotiating trade rules on electronic commerce under the so-called “Joint Statement Initiative (JSI). These WTO Members seek to make progress in advance of the 12th WTO Ministerial Conference to be held when conditions so permit.
Digitalization has greatly affected the world of trade in the past two decades with more and more goods and services being sold online. E-commerce was growing fast even before the COVID-19 pandemic. In 2019, about 1.5 billion people shopped online, an increase of 7% from 2018. The pandemic has further accentuated the shift towards e-commerce as people and businesses have gone online to cope with various lockdown measures and travel restrictions. It is estimated that online shopping as a share of global retail surged from 13% in 2019 to 17% in 2020. The pandemic has also reminded us of the huge divides that still characterize the world in terms of country readiness to engage in and benefit from e-commerce.
Like in previous technological revolutions, the benefits from digital transformations will be immense, but they will not materialize automatically. The outcome will depend on policies, regulations and measures undertaken at both national and international levels to build the capabilities needed for countries to deal with technological disruptions. Development-friendly e-commerce regulation therefore matters.
In a new report entitled, “What is at stake for developing countries in trade negotiations on e-commerce? The case of the Joint Statement Initiative” UNCTAD assesses various options for harnessing e-commerce for sustainable development.
Same goal, different paths
Opinions remain widely divided on how best to regulate e-commerce, especially at the international level. Many developing countries have chosen not to engage in JSI e-commerce negotiations, stating inter alia a preference for first building their regulatory and institutional capacities and safeguarding their policy space to pursue development objectives in this fast-evolving area. While this is understandable, the possible outcome of the JSI negotiations will likely affect the governance of various dimensions of e-commerce, with implications for all countries, whether they are party to these negotiations or not. One key question that confronts trade negotiators is what negotiated outcome would best enable developing countries – both participants and non-participants – to harness potential benefits of e-commerce for sustainable development.
Multilateral vs “plurilateral” routes
Questions also arise as to whether and how the outcome of the JSI negotiations may be multilateralized. Defining the JSI outcome as a “plurilateral” agreement is not likely to settle the ambivalence associated with the future e-commerce agreement. Procedurally, incorporating a plurilateral agreement within the WTO framework would require consensus among all WTO members. Moreover, plurilateral approaches should be a temporary journey and not a substitute for multilateralism. It will also be important to consider how the content and implementation modalities of the possible outcome should be crafted to facilitate greater participation.
Data challenges
Policymakers across the globe are considering various approaches for defining categories of data, including to establish ownership of data generated by individuals and communities when using digital platforms and possible compensation for those whose data are being used. Adequate regulation of cross-border data flows will be essential to ensure sustainable development outcomes from the data-driven economy. But given the impact that privileged access to data can have on the competitiveness of firms, on the overall income distribution and on market concentration, the regulation of data remains complex. It has to take into account not only the trade dimension but also issues related to national security, human rights (such as the right to privacy) and law enforcement. This raises concerns among many developing countries as they see the risk of becoming mere providers of raw data to global digital platforms – most of which are based in the United States and China – while having to pay for the digital intelligence produced from those data by the platforms.
What about SDT?
As for the implementation of a JSI outcome, member States will need to consider if special and differential treatment can be applied in a way that makes it possible for developing countries at varying level of e-commerce readiness to assume a higher level of commitments gradually and at different speeds. The report discusses the useful lessons that may be learnt from the scheduling approach used in WTO’s Trade Facilitation Agreement (TFA), which allows parties to take into account individual countries’ implementation capacities, capacity-building support and capacity acquisition.
Old issues applied to a new form of trade
Not all issues addressed in the JSI negotiations are novel. Some concern longstanding challenges that developing countries face in reaping the benefits associated with trade liberalization. For example, future trade rules on e-commerce could have considerable effects on scarce government revenues for many developing countries. While existing practice has waived customs duties on electronic transmissions, there are concerns that rapid technological advances will increase the number and volume of products that may be transmitted electronically with adverse effects on customs revenue.
Likewise, the regulatory capacity of developing countries would be the key factor that could affect the effectiveness of future disciplines. Many developing countries suffer from lack of national laws regulating, for instance, online consumer protection, electronic transactions, data protection and cybercrime. As shown by the UNCTAD “Cyberlaw Tracker”, less than half of the least developed countries have adopted legislation to protect consumers online and to protect data. These regulations are essential in ensuring the validity of contracts, and enhancing trust on online transactions.