UNCTAD Policy Brief calls for holistic policy approach towards digitalisation and trade
In a recent policy brief, the United Nations Conference on Trade and Development (UNCTAD) has called for a holistic policy approach towards digitalisation and trade for ‘recognition of the right of people in developing countries to connect to the new world of technological progress and benefit from the prosperous future they deserve’.
The document notes that in most developing and transition economies, e-commerce have not seen similar traction as social networking. Possible reasons could be limited purchasing power, lack of trust, limited shopping choices (including content in local languages), as well as poor delivery and payment services.
Potential benefits of ICTs
The Brief goes on to list the various potential benefits of the application of Information and Communication Technologies (ICTs). They can reduce transaction costs and enable the remote delivery of more goods and services. Access to ICT platforms and devices may enable sellers in developing countries to reach more potential targeted customers in domestic and foreign markets, often at a lower cost than through traditional channels. This is particularly useful for small and medium enterprises, who can use the digital channels not just for expansion but also to engage in peer-to-peer collaboration in innovation and use alternative funding mechanisms such as crowdfunding.
A reduction in delivery costs can have an impact on global value chains, as more inputs can be delivered remotely, facilitating the management of fragmented production networks.
In addition, the digital economy offers opportunities for entrepreneurship, innovation and new job creation. A range of e-commerce players has emerged across developing countries and the least developed countries in recent years, offering new payment solutions, e-commerce platforms and innovative logistics.
New cloud-based solutions can reduce the need for investment in equipment and in-house expertise.
Challenges and risks
The document also highlights several challenges, costs and risks. Digital divides can result in an inequitable distribution of benefits from e-commerce. There are concerns today that the widespread use of new technologies, automation and online platforms will lead to job loss, growing income inequality and greater concentration of market power and wealth. Risks also include negative impacts on the bargaining power of users and consumers and loss of privacy. Finally, there will be digital forms of undesirable behavior and shift in criminal behaviour to the digital world, demanding response from companies, organisations, Governments and individuals.
A holistic approach
The Brief notes that the policy challenge is contextual, depending on a country’s readiness to engage in and benefit from the digital economy, and it is also multifaceted. A holistic approach would have to encompass: ICT infrastructure; education and skills development; the labour market; competition; issues relating to science, technology and innovation, and taxation; and trade and industrial policies, for example.
Cross-sectoral cooperation within Government
Dealing with the above requires effective cross-sectoral cooperation within Governments and with other stakeholders. In many developing countries, lack of ICT connectivity prevents enterprises from effectively competing online. National and international policies are needed to address this.
Furthermore, narrowing the digital divides and boosting ICT use would require securing an open, transparent and fair telecommunications market, attracting investment and facilitating infrastructure imports of relevant equipment and services.
All countries will need to update their education and training systems in order to deliver the skills required in the digital economy. Workers should be able to expand their opportunities to retrain and upgrade their skills and make use of redistribution policies to mitigate the risk of increased polarisation and income inequality.
Enhancing MSMEs’ abilities
Another important area highlighted by the Brief is enhancing the ability of micro, small and medium-sized enterprises (MSMEs) to participate in global value chains. Policymakers can explore ways to integrate digital solutions in export promotion. It is recommended that trade promotion organisations embed digital tools in the services they offer to small businesses.
The Brief says that countries should deepen their understanding of the interface of trade logistics, digitalisation and e-commerce. Today, increasingly goods are being delivered digitally rather than physically. At the same time, there is fast growth in shipments of small parcels and low-value goods due to the expansion of e-commerce in physical goods.
Policymakers should explore and harness opportunities to embrace cross-border e-commerce and create conditions, procedures and resources to enable e-commerce to thrive.
Aligning trade agreements with Internet governance
It is also increasingly important for trade policymakers to consider how the Internet is governed and operated. Internet governance is characterized by multi-stakeholder dialogues in more open settings, as opposed to the closed room nature of State-to-State trade negotiations. Trade policymakers could engage with players in the Internet community to ensure that future agreements influencing trade in the digital economy are operationally feasible and politically sustainable.
Security, privacy and data ownership
In the area of cross-border data flows, the need for companies to collect and analyse data to drive innovation must be balanced with security, privacy and data ownership concerns. Many developing countries still lack data protection in privacy legislation. Even when regulations are there, enforcement is often inadequate.
There is a need for progress towards a unifying initiative or a smaller number of internationally compatible data initiatives.
According to the UNCTAD document, the current level of support for developing and least developed countries in the area of digital economy is unsatisfactory. The share of ICT in total aid for trade declined from 3 per cent in 2002−2005 to 1.2 per cent in 2015.
UNCTAD’s eTrade for All initiative, which now gathers 29 international and regional organizations, aims to make support to developing countries wishing to benefit more from e-commerce more effective and transparent. But it will need to go hand in hand with increased financial support by the international community, including from bilateral donors, development banks and private sector foundations. And this support is required now.