By: Mary Louise Malig

[Versión en español]

Read the entire publication in PDF here

Contents

Part 1: What is digital trade?

Part 2: The Digital Platform Economy and Who Owns It

Part 3: The State of Play on the debate on the Rules

Part 4: The Digital Economy: There is more to it than trade

Conclusions

Introduction

A current buzzword not only in technology circles but in social media, traditional corporate and the hip millennial and Generation Z youth has been and continues to be “digital trade” or for older circles, e-commerce, short for electronic commerce. It is interesting to note that years before, e-commerce was the preferred term and was not equated to the term digital trade. However, that did not last long and as can be seen today, the two terms are used interchangeably.

E-commerce or digital trade is not a new concept; however, the COVID-19 pandemic has played a major role in bringing to the forefront many digital goods and services, either by increasing the customers and profits or even introducing fledgling start-ups. Online services for telecommunications such as Zoom, Microsoft, and Google have all grown virtual classrooms or meeting spaces, as schools and offices opted to use the services for online learning from home and offices chose video conference calls in lieu of physically going to the offices. As people stayed at home during lockdown or quarantine, shopping online for everything from groceries to clothes to gadgets increased and contributed to making the owner of Amazon, Jeff Bezos, one of the richest man in the world at 182.1 billion USD[i].  During the pandemic, Zoom, the videoconferencing service grew by “early September the company reported revenue growth surged 355% year-over-year. Remarkably, that growth was on top of a 169% expansion in the previous quarter.”[ii]

However, not all things referred to as digital trade or e-commerce are in fact digital trade nor e-commerce. The debate on the definitive scope and definition of what is e-commerce or digital trade has been ongoing since 1998 at the World Trade Organization (WTO). The ongoing debate on definitions has a significant impact on many things but most importantly, on global trade rules. Currently, the WTO, the only multilateral organization dealing with trade, has yet to reach an agreement on global trade rules on digital trade or e-commerce. A lot is at stake on what rules are agreed upon, potential government revenue gains or losses, positive or negative impacts on local economies, companies and all the players in the global value chain dealing with digital trade and digital services facing tougher regulations or not, and the potential impact on consumers and their data. In all this time of not reaching consensus however, other regional free trade agreements have gone ahead and adopted the original WTO agreement in 1998 to uphold a Moratorium on tariffs on e-commerce, while the multilateral trading body reaches a decision. This situation has also allowed digital trade corporations to rake in millions of dollars. What this Moratorium and rules and lack of rules mean will be explained in greater detail in the part on state of play later in this paper.

But to truly comprehend the state of play, the debates, what is or what is not considered digital trade, one must go back to understanding the origins, definitions, new forms of digital platforms and economy formed and who the key players are.

This paper therefore aims to: 1) Break down digital trade and provide examples of what transactions fall into this definition; 2) Lay out the digital platform economy, how it works and who runs it; 3) Present a brief state of play on the global debates on the proposals for global trade rules on digital trade and 4) Provide a glimpse of the larger world of the digital economy, of which digital trade is a part of.

---

[i] Klebnikov, S. (2021) “Elon Musk Falls To Second Richest Person In The World After His Fortune Drops Nearly $14 Billion In One Day” Forbes https://www.forbes.com/sites/sergeiklebnikov/2021/01/11/elon-musk-falls-to-second-richest-person-in-the-world-after-his-fortune-drops-nearly-14-billion-in-one-day/?sh=474a0f1b0a91

[ii] Markman, J. (2020) “Zoom Enters Perilous New Growth Phase” Forbes https://www.forbes.com/sites/jonmarkman/2020/10/26/zoom-enters-perilous-new-growth-phase/