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E-commerce Regulations: International Opportunity or Threat

The US, Japan, and Singapore are among nearly a dozen World Trade Organization (WTO) members that are pushing for international e-commerce regulations.  The US has specified that the agreement should cover the free flow of information, digital security, fair treatment of digital products, trade facilitation, protection of proprietary information, and facilitation of internet services. At the WTO Ministerial Conference in Buenos Aires last December, 71 members of the 164 WTO members were in support of beginning talks on e-commerce with a join statement formalizing this stand.

India, which has yet to establish a national policy on e-commerce, is concerned that many countries do not yet understand the full implications of binding rules in this space due to asymmetric development of e-commerce globally. Several countries in Africa have are also opposed to e-commerce negotiations at this point.  However, with the US, EU, Japan, and China backing negotiation proposals, it is unlikely that India will be able to prevent negotiations from going forward.

This comes at an interesting time for India as India’s e-commerce is experiencing a period of rapid growth and its largest e-commerce player, Flipkart.com, is close to closing a deal with Walmart and Alphabet, Google’s parent holding company.  According to Forrester Research, India’s online commerce is expected to grow from $19.6 billion in 2017 to $27 billion this year, nearly a 38% growth. Additionally, the deal to acquire a more than 70% stake in Flipkart.com for $20 billion by Walmart and Alphabet is close to closing.  As a nation with a quickly growing e-commerce market and no national policy for e-commerce, an agreement by the WTO is of great concern to the country. It is for this reason that India is now rapidly working to develop a detailed national policy, which Commerce Secretary Rita Teaotia has stated would assist “India in articulating its stand on e-commerce at the World Trade Organization.”

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There is also speculation that the US is attempting to utilize an agreement on digital trade to counter China’s digital trade barriers. As Stephen Claeys noted in an article in The Hill, the US paper on negotiations states that the agreement should cover all trade-related aspects of commerce through electronic means.  This would expand the negotiation agreement beyond the WTO’s narrow definition of e-commerce, which “only covers activities related to the electronic provision of goods and services, such as distribution, marketing and sales (Claeys).”   Although it is unlikely that all objectives in this paper would be accepted into a WTO on e-commerce, if they were, it would eliminate the top barriers to technology and information companies and would make a significant move towards the liberalization of digital trade.  

For companies currently in the global e-commerce market or considering entering this market, a WTO agreement regarding e-commerce could pose a large opportunity or threat.  One topic of concern is that of information freedom and security which may alter the gathering and storage of data for companies either in a more restrictive way or more open.  Additionally, the negotiations are likely to cover taxation, tariffs, and other potential costs for companies, which may increase or eliminate these costs for international e-commerce.  If eliminated or reduced, large international companies would be able to compete more aggressively with domestic companies in many countries. Companies looking to enter international markets through e-commerce will need to continually monitor progress on this front as regulations may offer a significant opportunity or threaten the profitability of their business in the near future.

 

References

Clays, Stephen. The Hill. http://thehill.com/opinion/finance/384120-digital-trade-paper-shows-us-using-wto-as-part-of-approach-to-china

https://thewire.in/trade/as-push-for-global-e-commerce-rules-gain-pace-india-starts-taking-a-stand

https://timesofindia.indiatimes.com/companies/walmart-alphabet-together-may-buy-over-70-in-flipkart/articleshow/64036426.cms

https://www.businesstoday.in/current/corporate/google-alphabet-walmart-flipkart-deal-amazon-stake/story/275751.html

https://www.thehindubusinessline.com/info-tech/govt-to-frame-policy-on-e-commerce/article23660302.ece