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UNCTAD Policy Brief calls for holistic policy approach towards digitalisation and trade

UNCTAD Policy Brief calls for holistic policy approach towards digitalisation and trade

In a recent policy
, 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

Source: UNCTAD, 2017 (Note: Data for Turkey relate to 201)/ via Digitalization and Trade: A holistic policy approach is needed

Potential benefits of

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

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.

Source: UNCTAD, 2017b, Global Cyberlaw Tracker database/ via Digitalization and Trade: A holistic policy approach is needed

There is a need for progress towards a unifying initiative
or a smaller number of internationally compatible data initiatives.

International support

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

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