Throughout the history of the global economy, crises have played a pivotal role in encouraging the international community to look for mechanisms to adjust it and to develop the framework within which it functions. The establishment of the World Bank (WB), the International Monetary Fund (IMF) and the General Agreement on Tariffs and Trade (GATT) were a response to the crisis the global economy faced after World War II, for example.
As early as the Second Ministerial Conference of the World Trade Organisation (WTO) held in May 1998, it was recognised that global electronic commerce (e-commerce) was growing and creating new opportunities for trade. A declaration on global electronic commerce and a work programme related to it were adopted at the conference as a result, and since then there have been many discussions on the development of e-commerce. However, these have not produced a single framework within which e-commerce can be organised at a global level.
The global economy at present is facing critical circumstances that have hit every corner of the Earth and left no economic activity unaffected. The Covid-19 pandemic has brought to the fore the vulnerabilities of supply chains and has tested wholesale and logistical services in a manner that has never happened before in recent history.
As a consequence of the outbreak of the pandemic, lockdowns have been instituted in many countries in order to contain the spread of the virus, and these have led to supply-chain disruptions in which e-commerce in goods has faced particularly hard times. Many firms have experienced supply challenges as a result of the suspension of manufacturing activity, decreased production and labour shortages.
The WTO’s information note on “E-commerce, Trade, and the Covid-19 Pandemic” published in early May declared that the enforcement of social-distancing, lockdowns and other measures in response to the pandemic had led consumers to ramp up online shopping, social-media use, Internet telephony and teleconferencing and the streaming of videos and films. This had resulted in spikes in business-to-consumers (B2C) sales and an increase in business-to-business (B2B) e-commerce, it noted.
Such developments have not been surprising, since crises always lead to turning points in international systems. World War II led to the emergence of new international organisations and the rules governing the global economy. Similarly, during 2002-2003, the Severe Acute Respiratory Syndrome (SARS) epidemic led to the extensive usage of teleworking and e-commerce in Asia, leading to the increasing business of firms such as the online site Alibaba.
Covid-19 will also lead to the emergence of new firms and the expansion of the activities of existing ones. No one knows how long the Covid-19 pandemic will last, but the fact is that it could trigger the further digitisation of society and the development of new policies and rules to regulate online trade.
The bright side of Covid-19 is that such developments in e-commerce will become powerful drivers of economic growth, inclusive trade and job-creation across the developing world. Even so, the international transportation and logistics services on which all e-commerce and more traditional trade transactions rely have been severely affected by the introduction of new health regulations, and as a result there is a need to ensure a conducive environment in which the new e-commerce can work and be coordinated among all stakeholders.
Covid-19 has highlighted the need for increased digitisation because of the pivotal role the digital economy can play in the future. The importance of this has been confirmed particularly in the light of present obstacles that have accentuated and continued to hamper greater participation in e-commerce activities by small producers, sellers and consumers throughout the world and particularly in developing and least-developed countries (LDCs).
Creating a conducive environment for e-commerce needs collaboration from all the concerned parties. Governments should be required to invest more in infrastructure related to information technology and telecommunications (ITC), and development partners and the private sector should help to unlock the power of the Internet for economic development.
The current situation is that the value of e-commerce sales, including B2B and B2C sales, is equivalent to 30 per cent of global GDP. But only half of the world’s 7.7 billion people are currently connected to the Internet and its benefits, according to a recent UN Conference on Trade and Development (UNCTAD) analysis. This situation sends out two clear messages: first, that e-commerce constitutes a significant portion of the global economy; and second, that more effort is needed to enable the developing countries and LDCs to gain more benefit from e-commerce and digital solutions to cope with the current health and economic crisis.
In order to assist the developing and LDC countries, UNCTAD has thus adopted an initiative entitled “E-Trade for All” that aims to improve their ability to use and benefit from e-commerce. The Covid-19 pandemic will open up more room for the use of technology in commercial transactions, and it means that WTO member states should start seriously to engage in negotiations towards reaching an agreement governing e-commerce on a global level.
It is high time that we turn current challenges into opportunities. There is a dire need for efficient and affordable information and communications technology services, such as telecommunication, computer and other IT services, and for emerging technologies to help to mitigate the negative consequences of Covid-19 and to cope with any similar crises that may emerge in the future.
The writer is an expert on international trade.
*A version of this article appears in print in the 4 June, 2020 edition of Al-Ahram Weekly