E-trade and its opportunities for Developing Countries

E-trade has opened up a huge opportunity for developing countries and exporters in the coming era. But maximizing benefits requires establishing smart and efficient policies. During the past year, the World Bank have realised E-Trade to be one of their most important areas of impact, both in national policy making and international e-trade competitiveness. So what are the real implications?

E-commerce (where goods and services trade are facilitated by the Internet)

E-trade opens new opportunities to export-oriented firms, especially small ones. Firms can source production inputs more expeditiously, streamline (i.e., eliminate intermediaries) supply- and export-distribution chains and reduce business transaction costs. In short, e-trade allows the enterprise to reposition itself in the international marketplace.

For e-commerce in goods, the trade regime that affects these goods remains important, including issues like trade facilitation. Producers or consumers aiming to participate in this trade need not necessarily have access to cutting-edge technology and skills – access to a simple web platform to engage in online retailing might be the key objective.

Similarly, for services trade being facilitated through e-commerce, the underlying services regime remains important – although certain issues like consumer protection may become more important given the greater ease of service providers to reach individual consumers through online sale of their products.

E-trade capability does not mean that the exporter must be able to conduct each stage of the international transaction electronically, as the market currently doesn’t demand it. Export development in the digital economy is not an “all or nothing” proposition. The challenge is, nevertheless, to work towards acquiring e-trade capability at every stage of the transaction which requires a concerted response not just from the entrepreneur, but also from the public-sector strategy-maker and managers of trade support institutions.

Digital Trade (where goods and services are traded in digital form)

Turning to digital trade, where the goods and services are traded directly online, policies that affect cross-border flows of data are of central importance.

One of the challenges in this area is facilitating the free flow of data while retaining space for governments to address national public policy concerns like the protection of privacy. While some international organizations such as the OECD and APEC have developed valuable guidelines, it is unlikely that International standards on the protection of privacy can be agreed upon in the foreseeable future. In such cases the important principle to retain will be to balance public policy objectives at the national level with their impact on e-trade. Practical steps like promoting transparency in what regulations exist, and fostering dialogue between regulators, can also be helpful.

This has implications for countries at different levels of development. While many countries, including LDCs, are finding valuable niches for digital exports, such as Cambodian-made animation and games, it may not be realistic to think of firms in many low-income countries as competing in the data-driven, high-tech world of digital trade in the short term. A more practical way of focusing scarce resources may be to address the drivers of competitiveness in goods and services e-commerce, like increasing basic internet connectivity, strengthening trade facilitation, streamlining non-tariff measures, and improving the services regulatory regime.

The continued growth of E-trade will be watched from all over the world, ultimately connecting us and opening up endless opportunities of economic development.

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