Challenges and opportunities for small economies in using e-commerce and digital ecosystem to drive competitiveness

Note by the Secretariat[1]

Table of Contents

1   The potential of e-commerce to boost growth in small economies. 2

1.1   Introduction. 2

1.2   Definitions and measurement 2

1.3   Digital trade and economic growth. 4

1.4   Importance of digital trade for small economies. 5

2   Digital connectivity for development and digital transformation. 7

2.1   Internet accessibility and affordability. 7

2.2   Use of digital tools for tourism.. 10

3   The regulatory ecosystem of e-commerce for competitiveness. 11

3.1   Digital infrastructure and regulation. 11

3.2   Digital trade provisions in SVEs' regional trade agreements. 15

3.3   E-commerce and the Trade Facilitation Agreement 15

4   Analysis of the WTO moratorium on customs duties on electronic transmissions for small economies. 16

4.1   Discussions regarding the moratorium.. 16

4.2   Trade in digitizable goods. 17

5  Some considerations for government policies regarding digital trade. 18

6   Case study. 19

7   Bibliography. 22

1  The potential of e-commerce to boost growth in small economies

1.1  Introduction

1.  This document has been prepared pursuant to the Ministerial Decision on the Work Programme on Small Economies adopted at the Thirteenth WTO Ministerial Conference (MC13).^[2] It is based on an outline proposed by the Group of Small, Vulnerable Economies (SVEs) which was agreed by the Committee on Trade and Development meeting in Dedicated Session on Small Economies on 16 July 2024.^[3] The Members of the SVE Group are used as the basis for the statistical analysis. For purposes of this document, the term "SVEs" refers to the Members of the SVE Group.^[4]

2.  The digital transformation is significantly impacting the global economy by changing communication, production, governance, and trade. Digital technologies are driving growth, increasing productivity, and fostering innovation. Trade is increasingly digital, but some developing economies are struggling to harness opportunities in this transformation.

3.  Digitalization has significantly transformed the services sector, driving global outsourcing and boosting productivity in industries such as information and communication technology (ICT), finance, and business services. It reduces production costs, supports innovation, and expands trade by making services tradable across borders. The COVID-19 pandemic accelerated digital ordering of goods and services, increasing both business-to-business (B2B) and business-to-consumer (B2C) sales, while digitally delivered services have become a crucial part of global trade. However, gaps in data, particularly in developing economies, hinder a full understanding of digital trade's scope and impact. Consequently, parts of the analysis in this report refer to a subset of SVEs for which data is available.

4.  Digitally delivered services trade has seen rapid growth, increasing nearly fourfold since 2005. In 2022, these services made up 54% of global services exports, creating new opportunities for various market players, particularly micro, small, and medium-sized enterprises (MSMEs). While developed economies lead in exporting digitally delivered services, growth in SVEs is lagging behind the global average.[5]

5.  MSMEs and entrepreneurs, especially in developing regions, are increasingly leveraging digital platforms to access global markets. Digital trade allows MSMEs to bypass traditional intermediaries, offering new opportunities for growth. However, challenges such as inadequate infrastructure in some regions continue to limit the full potential of digitalization in global trade.