The World Trade Organization said today that member nations will begin talks in March to put in place global rules governing the fast-growing e-commerce sector, a clear sign the WTO understands its traditional protocols aren’t suited to a relatively new but increasingly mainstream way of doing business.
WTO made the announcement at the World Economic Forum in Davos, Switzerland. In a statement, the world’s trade body said that despite exponential growth in electronic transactions over the past 20 years, “there are no specific multilateral rules…regulating this type of trade.” Businesses and consumers “instead have to rely on a patchwork of rules agreed by some countries in their bilateral or regional trade agreements,” it said.
The negotiations should “result in a multilateral legal framework that consumers and businesses, especially smaller ones, could rely on to make it easier and safer to buy, sell and do business online,” the WTO statement said.
Cecilia Malmstrom, WTO’s commissioner for trade, said e-commerce is a “reality in most corners of the world, so we owe it to our citizens and companies to provide a predictable, effective and safe online environment for trade.”
The announcement is significant in that it separates e-commerce from the existing rules that govern traditional movements of containerized or palletized goods. WTO has recognized that much of the world is now digitally enabled, and that users expect to place orders for individual items and receive immediate deliveries regardless of distance, according to a person familiar with the WTO’s thinking.
The communique builds upon comments made at the WTO’s 11th Ministerial Conference in Buenos AIres in December 2017, when the body stated its intent to move forward on such a framework. In today’s communique, the WTO said it recognized the “unique opportunities and challenges” faced by countries and businesses as they adjust to a changing way of conducting commerce.
DHL, the world’s oldest and largest express carrier, hailed the WTO for understanding that, increasingly, “e-commerce is commerce.” Nations can now “clarify and improve the existing framework of trade rules and commitments around trade facilitation, services, digital trade, transparency and trust” to allow businesses to “access the global marketplace and realize the potential of e-commerce for development,” the company said.
UPS Inc. said the WTO statement is a major advance in the rules-based trade landscape. As more commerce is conducted digitally, “we need to ensure that we are operating within a modern e-Commerce policy and regulatory framework that improves the ability of all businesses, large and small, to compete and grow,” said David Abney, UPS’ chairman and CEO.
E-commerce that is transacted across borders is growing at a faster clip than domestic e-commerce, and is expected to continue to do so. The value of international or “cross-border” commerce could hit $900 billion by the end of 2020, according to estimates at the end of 2017. Some consider international and cross-border e-commerce to be synonymous because they both involve movements from one country to another. Others have said the services have different characteristics and should be treated separately.
E-commerce between two countries is growing by 25 percent a year, according to DHL’s estimates from 2017. Global e-commerce shipments moving by parcel–the dominant if not exclusive transport mode—were expected to rise 17 to 18 percent a year from 2017 to 2021, according to projections from Pitney Bowes Inc., (NYSE:PBI) a data specialist.
For all its potential, global e-commerce faces enormous challenges given the complexities of the global trading system. Goods will need to travel, in some cases, thousands of miles, and must comply with a dizzying array of laws and regulations in order to be cleared into the destination countries. Country-specific websites must be built with content customized for end customers in those countries. High-quality mobile payment systems are also seen as a must.
Customs inspectors accustomed to working with familiar customers moving pallets and containers in a B2B environment must now manage what one world customs official has called a “tsunami” of individual shipments from merchants to consumers. Inspectors are unlikely to know many of those players in the B2C channel, industry experts have said.