WT/COMTD/W/264  
 
9 November 2021  
(21-8501) Page: 1/4 
Committee on Trade and Development  Original: English  
 
GLOBAL ELECTRONIC COMMERCE FOR INCLUSIVE DEVELOPMENT  
The following communication, dated 9 November 2021, is being circulated at the request of the 
delegations of India and South Africa.  
 
_______________  
 
 
1  INTRODUCTION  
1.1.  Under the 1998 Work Program on E -Commerce, Members had decided to examine all 
trade-related issues relating to global electronic commerce, considering the economic, financial, and 
development needs of developing countries. The Committee on Trade and Development was 
specifically tasked to examine and report on the development implications of electronic commerce, 
including in relation to SMEs; challenges to and ways of enhancing the participation of developing 
countries in electronic commerce; implications for developing co untries of the possible impact of 
electronic commerce on the traditional means of distribution of physical goods.  
1.2.  However, to date, no comprehensive assessment of the developmental impacts of global 
e-commerce focusing on exports and export -oriented devel opment of developing countries has been 
undertaken. This proposal highlights the development impacts of e -commerce, particularly on 
developing countries’ exports and its financial implications with focus on SMEs and digital technology 
transfer.  
1.3.  Given the existing digital divide, which is exacerbating global inequalities especially in the times 
of Covid -19, it is important for WTO members to ensure that global e -commerce delivers inclusive 
and equitable development.  
1.4.  To gain from global e -commerce, developing countries will need to advance their digital 
industrialization by building their digital infrastructures and developing their digital skills and 
capacities. Linking into digital platforms alone is not sufficient, as the products sold on these 
platforms also need to be competitive in the digital world.  
1.5.  For this, countries will need to learn to use big data analytics and digital technologies. They 
will have to learn to collect, store and process their data and regul ate their data flows. They will also 
require digital technology transfers so as to hasten their digitalization processes while also improving 
competitiveness of their products.  
2  GROWING DIGITAL DIVIDE  
2.1.  Covid -19 has exposed the existing digital divide and its  repercussions. Almost half of the world 
population has no access to the internet. Only 35 % of population in developing countries have 
internet access as compared to 87 % in the developed world. Only 1 in 5 people in LDCs are 
connected. As a result, countri es which are hyper connected have been able to continue many of 
their economic operations online during the ongoing pandemic, but countries which are less 
connected were not even able to provide basic  information on combating Covid -19 where it was 
most nee ded.  
2.2.  But this is only one of the aspects of the existing global digital divide. The digital divide is more 
pronounced in terms of existing digital infrastructure, data processing skills and digital technologies. 
The capacity to store and process data is a n important aspect of a data driven economy. According WT/COMTD/W/264  
 
- 2 - 
 
  to the Digital Economy Report, UNCTAD (2019)1, out of a total of 4,422 so -called colocation data 
centers, 80 % are in developed countries, with the United States  (US) accounting for about 40 %. 
Africa and Latin America together account for less than 5 % of the world’s colocation data centers. 
The Cloud market is also highly concentrated where the share of top five providers, with 4 out of 
the five based in US, which exce eds 75 %. 
2.3.  The digital divide between developed countries and developing countries is a matter of 
considerable concern. With the digital divide widening over time, the problem has got further 
accentuated. Without a doubt, some of the developing countries hav e made improvements in respect 
of some indicators of digital infrastructure. Notwithstanding this, it is a reality that on many key 
indicators of digital infrastructure, most of the developing countries have fallen behind the developed 
countries.  
3  GROWING C ROSS BORDER E -COMMERCE: IMPLICATIONS FOR SMEs IN DEVELOPING 
COUNTRIES  
3.1.  Advanced digital infrastructure and skills in data collection, storage and processing have given 
first-mover advantage to digital platforms in e -commerce leading to growing concentration  of rents 
and monopolies. Three developed countries ( US, Japan  and Germany) together account for 45% of 
global e -commerce sales (Digital Economy Report, UNCTAD 2019)2 and a handful of digital platforms 
have captured the cross -border e -commerce markets. Co vid-19 has further increased the market 
dominance of digital platforms and big -tech firms.  
3.2.  While theoretically digital technologies can benefit small and medium firms (SMEs) in 
developing countries through easier market access in the digital world, in pra ctice digital 
technologies and growth of super platforms have led to extreme concentration of export markets 
which has affected distributional outcomes adding to existing global inequalities. This greater 
vulnerability, and in some cases ultimate bankruptc y of SMEs within developing countries could also 
lead to their integration into larger companies as antitrust authorities are likely to address vertical 
integration more favorably than horizontal mergers between companies in the same sector  
(Trade  and Deve lopment Report, UNCTAD 2020)3. It is now extensively documented that MSMEs 
face considerable challenges in selling their products through online retail platforms, where the 
platform owner can also function as a vendor. Some of the problems confronted by M SMEs include 
the following:  
• On average, some of the prominent online platforms keep 30%  of the sale value made by 
independent vendors on their platforms, thereby squeezing the profits of vendors whilst 
enriching the platform owners.4 
• Online platforms leve rage their access to data of vendors and consumers for identifying the 
popular and profitable products. Thereafter, the platform itself becomes a vendor of these 
products. This adversely affects the MSME vendors and allows platforms to free ride on the 
innovations of vendors.5 
• Online platforms almost compel vendors to purchase additional services, such as 
advertisement, warehousing, transportation etc. It is not uncommon that vendors who 
decline to purchase the additional services, find access to their pro ducts blocked.6 
• The products of the platform often appear much higher in the search listing, as compared to 
similar products of independent vendors.7 
 
3.3.  Thus, the narrative that MSME vendors can expand their sales and exports by linking with 
online retail platforms may not be entirely accurate. This narrative completely ignores the adverse 
impact of practices followed by many online retail platforms on MSME vendors who seek to sell 
 
1 https://unctad.org/system/files/official -document/der2019_en.pdf   
2 https://unctad.org/system/files/official -document/der2019_en.pdf   
3 https://unctad.org/system/fi les/official -document/tdr2020_en.pdf   
4 Investigation of Competition in Digital Markets, United States, pages 220,  339 and 354; and Amazon’s 
Stranglehold, Stacy Mitchell and Olivia LaVecchia, page 20.  
5 Investigation of Competition in Digital Markets, United States, pages 267 and 274.  
6 Investigation of Competition in Digital Markets, United States, page 291.  
7 Investigation of Competition in Digital Markets, United States, page 359.  WT/COMTD/W/264  
 
- 3 - 
 
  through such platforms. It is apprehended that on account of the practices f ollowed by the super 
online retail platforms, most MSMEs may not be able to sustain their businesses.  
3.4.  Lack of digital infrastructure and digital skills pose grave threats to the existing export 
competitiveness of SMEs in developing countries and LDCs. Ther e is potential danger of many of the 
SMEs in the developing world to be outcompeted by those in the developed countries with access to 
digital technologies.  
3.5.  Overall, SMEs in developing countries have an insignificant share in the profits and sales 
emerging from the exponential growth of global e -commerce with most of the gains accruing to big 
tech firms and digital platforms, which are ''majorly owned by entities in developed countries.  
4  FINANCIAL IMPLICATIONS OF CROSS BORDER E -COMMERCE FOR DEVELOPING 
COUNTRIES  
4.1.  The unfairly skewed distribution of rents in favour of a few super platforms arising from global 
e-commerce is reinforced by their ability to pay little or no taxes on the profits they earn.  
4.2.  The existing E -Commerce Moratorium on electr onic transmissions also limits the ability of 
developing countries to impose tariffs on the growing imports of electronic transmissions. 
UNCTAD  Research Paper 478 estimates potential tariff revenue loss of $10 billion per annum for 
developing countries as  compared to $289  million for advanced countries. It has been argued that 
developing countries can impose internal taxes to compensate for the tariff revenue losses, however 
a recent study from Boston University has shown that developing countries lose the se tariff revenues 
permanently9. 
4.3.  As more goods are getting digitized with the advent of industry 4.0 and advances in 3D printing 
technologies, this estimate of fiscal revenue foregone will snowball. With the advance of 3D printing 
technologies in the near  future, carefully negotiated GATT bound rates which are typically higher in 
developing countries, will be brought to zero for their digitized counterparts.  
5  NEED FOR DIGITAL INDUSTRIALIZATION TO GAIN FROM GROWING GLOBAL 
E-COMMERCE  
5.1.  The above discussed chall enges highlight that the gains from the growing global e -commerce 
will not be automatic for developing countries. This will require strategic interventions at all levels, 
including at the national and international levels. Policy and fiscal space will be r equired by the 
developing world to rebuild their economies and revive their declining trade competitiveness and 
falling exports.  
5.2.  Data is a key economic resource for developing countries. Developing counties need to leverage 
their position as one of the maj or sources of data to capture a larger share of the digital pie and 
achieve digital industrialization. The need to collect, store and process data and regulate its flows 
for development is well understood. For this, national laws and regulations, like laws  regarding data 
sovereignty, will need to be designed and enacted.  
5.3.  While 3D printing is currently at a nascent stage in developing countries, its market has grown 
annually by 22% in the period 2014 -2018 and with estimates that it could potentially replace almost 
40% of cross -border physical global trade by 2040 if investments in 3D printing is doubled10. The 
most affected sectors would include  sectors such as textiles and clothing, footwear, 
auto-components, toys , mechanical appliances, and hand tools, etc. – the very sectors which 
generate large scale employment for low skilled workers and in which most SMEs operate11.This 
could have a catastrophic effect on the ability of developing countries to protect their nascent 
domestic digital industries.  Developing countries therefore need to take a more strategic approach 
and manage the potential  impact of e -commerce.  
 
8 https://www.researchgate.net/publication/342411898_UNCTAD_Research_Paper_47  
9 https://onlinelibrary.wiley.com/doi/abs/10.1111/1758 -5899.12803  
10 UNCTAD Research paper No 58  
11 Ibid 
 WT/COMTD/W/264  
 
- 4 - 
 
  5.4.  Developing countries including the least developed countries will also have to build their digital 
infrastructure and design digital indus trial policies to rebuild their trade and industry post pandemic. 
Else, they may lose even their existing export competitiveness.  
5.5.  Digital technology transfers will be pivotal in bridging the digital divide and building export 
competitiveness of developing countries. The active role of developed countries to realise such 
technology transfers will also be crucial . 
6  GUIDING QUESTIONS:  
1. What steps can be taken to improve digital infrastructure in developing countries including 
least developed countries?  
2. How can t he digital technology transfers to developing countries including least developed 
countries be facilitated so as to hasten their digitalization process?  
3. What steps have Members taken in their domestic economies to provide easier market 
access for developing countries ' companies in the digital economy, in keeping with Part IV  of 
the GATT [e.g. Article XXXVIII.1a on reducing barriers to products from less developed 
countries and the GATS [e.g. Article IV on increasing participation of developing coun tries]?  
4. How can the financial implications arising out of cross -border E -commerce for developing 
countries be addressed?  
5. What has been the experience of MSMEs who have sold their products through online retail 
platforms over the past 4 -5 years? What favora ble conditions if any have Members put in 
place to support sustainable participation of MSME in digital trade?  
 
__________