The WTO Joint Initiative stabilised ‘Agreement on Electronic commerce’: Looking at the broader picture

After almost seven years of discussions and formal negotiations, the WTO Joint Statement Initiative on e-commerce (JSI) has produced a stabilised ‘Agreement on Electronic commerce‘. This milestone represents an important achievement for the members of the JSI – 91 countries, which represent over 90% of global trade – even if some JSI members, such as the United States, Brazil and Turkey, for example, could not yet endorse the text.

The world, however, looks very different to how it did in 2017, when the first Joint Statement on e-commerce was released. If the Agreement crosses the finishing line, five changes that took place the global landscape are important to consider in its implementation.

1. Rising digital inequality

Global inequality has risen, including in the digital sphere. Reports published by several organizations, such as the World Bank (2016), the Internet Society (2019), the World Economic Forum (2021), and UNCTAD (2021) have shown that the benefits and wealth stemming from the digital economy were being accrued by few countries and players, generating a trend towards growing concentration and a widening gap between developed and developing countries. In this scenario, the responsibility of JSI members to deliver an agreement that effectively contributes to development has increased.

The JSI Agreement on Electronic Commerce presents extensive provisions aiming to cater to the specific needs of developing countries and LDCs, and to help them effectively benefit from the opportunities generated by e-commerce. Nevertheless, there are doubts with regards to whether these development provisions would be fit for purpose, since most of them are formulated in a ‘best effort’ language. The word ‘endeavour’ appears 32 times in the text, while the word ‘encourage’ makes 11 appearances. Provisions do not follow the model of the Trade Facilitation Agreement (TFA), which makes implementation dependent on capacity and introduces mandatory technical assistance. 

2. A shift eastwards in digital trade rule-making

The agreement cements the the shift in the centre of gravity of trade rule-making, which has moved eastwards. In 2017, it was already possible to notice how certain countries in Asia were emerging as regulatory hubs, considering the number of connections they had to the existing network of trade agreements at the time. China has relentlessly grown its trade ties in recent years through RCEP and other endeavours, and it is no coincidence that Singapore, Japan, and Australia are the co-conveners of the JSI. Currently, these three countries not only serve as regulatory hubs, but they also exert leadership in the context of the world trading system, as has been shown by their herculean efforts to push this agreement close to the finishing line. The US also depends on these countries for strategic alliances in the Asia-Pacific region, showing that their clout goes beyond trade.

This shift eastwards happened in tandem with a retreat by US in terms of its trade policy. This is exemplified not only by the decision to withdraw support for norms on data flows, data localisation and source code in the JSI, but also by the goal to seek wider security exceptions in digital trade commitments, a stance that was notably taken by China over the years.

Changes in US trade policy not only reflect a domestic political preference for preserving policy space in order to increase the responsibility of Big Tech, but should also be seen as a corollary of the country’s aggressive industrial policy, and to the decision to approach ‘critical and emerging technologies’ (as well as the inputs that underpin these technologies, such as data flows) as a national security issue. This can be seen in recent US Executive Orders on sensitive data, and from the controversy surrounding data collection and storage by TikTok.

3. The growing importance of Digital Economy Agreements (DEAs)

Digital economy agreements (DEAs) – a special type of preferential trade agreement focused on digital issues – are much more numerous and relevant now than at the beginning of the JSI. Some examples include the 2019 Japan-US Digital Trade Agreement, the 2020 Singapore-Australia DEA, the 2020 Digital Economy Partnership Agreement (DEPA) between Australia, Chile and Singapore, the 2022 UK-Singapore DEA, and the recently finalised 2024 EU-Singapore Digital Trade Agreement.

Although agreements often ‘borrow’ text provisions from one another, a regulatory patchwork is in the making. Engaging in international trade often requires a case-by-case analysis of preferential arrangements that specific countries have chosen to undertake, and of how these agreements overlap (and potentially conflict) with one another. The complexity and cost of compliance are both rising.

In this context, the JSI agreement represents a positive step towards harmonisation by providing a normative baseline, which covers a range of issues related to trade facilitation, digitalisation of trade procedures, customs duties, and digital trust, bringing greater certainty for businesses and consumers. From this perspective, removing most digital policy topics from the negotiating agenda, such as data flows, localisation and source code, is not entirely negative.

Developed countries, such as the US and EU member states, are in the process of (re)assessing the scope of their exceptions in these areas, especially regarding security and privacy exceptions. Developing countries and LDCs will likely need even more time to understand where their national interests lie on these digital issues. Developing countries may assess that a less ambitious agreement provides a relatively safe and less daunting starting place to engage in e-commerce rule-making.

The downside of this more realistic but less ambitious agreement is that the regulation of data flows as well as other cutting-edge issues will likely continue to be carried out in the context of DEAs perpetuating the normative patchwork. Seeking broader agreement in areas that are becoming geopolitically loaded and populated by security considerations may require continued discussion in more political settings than the WTO, such as in the G7 and G20, in order for leaders to try to see eye-to-eye at the highest levels.   

4. The uncertain consequences of the re-wiring of Global Value Chains

GVCs have been significantly re-wired since 2017. This happened not only as a response to the shocks provoked by the COVID-19 global pandemic, but also by a radical change in perception. Digital Interdependence was largely seen as a positive development, as exemplified by the report from the UN Secretary General High Level Panel on Digital Cooperation, launched in 2019: The Age of Digital Interdependence. The title of the report sounds outdated in a context in which dependence is seen as a liability, and economic security strategies recalibrate the balance between trade liberalisation, export restrictions, and investment screening.

In 2023, the WTO World Trade Report affirmed that trade flows were showing the first signs of fragmentation along geopolitical lines. This process will engender winners and losers. Mexico has become the main US trade partner, partially thanks to near-shoring in the context of geopolitical tensions. Other countries are also benefiting from the fact that value chains are counter-intuitively becoming longer, not shorter, as initially imagined. Companies are shipping more Chinese products to other destinations in South East Asia and also in Mexico for final sale in the US, in order to escape US tariffs.

This scenario creates opportunities to expand the inclusion of other countries in GVCs, but  countries’ competitive advantages are less clear than before, and include non-trade considerations such as ‘like-mindedness’. Where do many non-Western countries fit in these assessments, specially the Global South majority? Initial OECD estimates suggest that the JSI e-commerce agreement could deliver an improvement in global digital market openness in the order of 30 percent, but the share accrued by developing countries and LDCs remains to be seen.

This brings us back to the initial point in this blog post: growing digital inequality. It is not possible to assume that gains from this agreement will benefit all. The impact that a future JSI Agreement on e-commerce will have on development would merit a close follow-up, not only in the context of a to-be-created ‘Committee on Trade-Related Aspects of e-commerce’ (Article 26), which will only be open to the Parties to the Agreement. The interplay between this Agreement and Development should be scrutinised by the broader WTO membership, as well as by non-governmental think-tanks and Academia.

5. The systemic nature of challenges to multilateralism  

The Agreement should indeed be commended as a ‘negotiating success‘, a step towards global legal harmonisation, and a victory of cooperation in a moment of fragmentation. It would not be be correct to perceive it, however, as a victory of multilateralism.

Large developing JSI members, such as Brazil and Indonesia, could not endorse the text at present. The US, the still unmatched global leader in the digital economy, has not agreed to the text either, and does not seem to intend to do so in the near future. According to a US statement, “the current text falls short and more work is needed, including with respect to the essential security exception.” It is unlikely that the present ‘stable text’ will receive further amendments. Moreover, there is little indication that either candidate in the US presidential election is prepared to make digital trade a priority in the near future.

The net impact of this agreement to the political environment at the WTO also seems uncertain. Joint Initiatives may be mechanisms to make progress on trade liberalization and to strengthen WTO’s negotiating function. Nevertheless, it is hard to assess its impact on the existing paralising rifts at the WTO. Some countries argue that Joint Initiatives go against consensus-based decision-making and weaken multilateralism at the Organisation. India, South Africa, and Namibia in particular, introduced a communication in February 2021 (WT/GC/W/819.Rev 1), questioning the legality of Joint Initiatives and their outcomes. Turkey, a member of the JSI, joined this opposing group.

The path to include a future agreement on e-commerce in the WTO legal architecture is also an open issue. In July, the 125 members of the Joint Initiative on Investment Facilitation for Development (IFD), failed at the fourth attempt to secure the inclusion of the agreed text under Article 4 of the Marrakesh Agreement, which deals with WTO Plurilateral Agreements. Such an inclusion requires a hard-to-achieve consensus among WTO Members. This raises questions on the path forward towards the incorporation of the outcomes of other Joint Initiatives.

The controversy over the existence and incorporation of JSI has been simplistically reduced to a matter of obtuse obstructionism by some countries. This erases important divergences about the place of ‘development’ across the WTO, and the perception that promises made during the Doha ‘development round’ were not fulfilled. Just like other important unresolved issues that have been swept under the rug (difficulties related to the classification of digital services, which have ultimately jeopardised negotiations on market access in the context of the JSI on e-commerce provides an example), divergences on the centrality of development have long been ignored.

The challenges to multilateralism are systemic, and cut across the main pillars of the international order. It is not possible to contain disagreements to the realm of the WTO. In a moment in which multilateralism is fragile (and many of its gains seem to be at stake), it is important to build bridges, not burn them. This requires finding a solution to the problem of ‘incorporation of JSI outcomes’ that takes into account the concerns of all those involved and ‘saves face’ at a diplomatic level.

6. Next steps

In a nutshell, the members of the JSI on e-commerce chose to realistically focus in areas where consensus could be achieved among members at the present time. With that, the agreement may become a pioneer and potentially global legal benchmark. It is a practical step towards more harmonisation and a political victory for countries which have put much effort in pulling it through – not only the three co-conveners, but also the EU, which has also enriched its political weight during negotiations. The steps leading to the formal approval of this agreement will say much about its net systemic geopolitical impact. If the Agreement comes into force, much work will be needed, inside and outside the bounds of the JSI, to ensure a positive impact on development.