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May 1, 2019
International Trade and E-commerce
The McKinsey Global Institute estimates that e-commerce
accepted digital payment method for North American
accounts for 12% of global trade of physical goods, both
sellers, but is dwarfed by Alibaba’s Alipay, which has more
business-to-business (B2B) and business-to-consumer (B2C
than three times the number of users.
or retail) sales. The U.S. International Trade Commission
reports global e-commerce totaled over $27 trillion in 2016,
Potential barriers to growth
with B2B comprising over 85% of that total. Other studies
The U.S. Trade Representative’s annual report on trade
show 1.8 billion people globally purchased goods online in
barriers highlights various policy restrictions on
2018, and 57% of online buyers purchase from foreign
e-commerce. Trade barriers, poor infrastructure, and
sellers. Nevertheless, certain foreign trade policies,
discriminatory trade practices to international e-commerce
infrastructure inconsistencies, and the lack of globally-
may occur at different points in the process, limiting
enforceable rules potentially hinder further e-commerce
businesses’ ability to sell or customers’ ability to purchase
growth both globally and within U.S. borders.
online or receive goods. Because e-commerce of goods
involves the online and offline worlds, trade barriers span
E-commerce allows customers to research and purchase
both spheres. Examples include:
goods without leaving their home or office, increasing
access and convenience. Through online sales, businesses
Market Access: Investment restrictions in e-commerce
are able to scale efficiently and reach customers in new
website ownership, or limits on the ability for platforms to
markets both domestically and abroad, especially small and
operate, impede market access. Similarly, limits or
mid-sized enterprises (SMEs). Some online purchases
constraints on what goods a firm may sell or technical
replace what may have been traditional (e.g., in-store)
regulations on how it must label specific products (e.g.,
purchases, while other purchases are new sales. McKinsey
medicines) may vary by jurisdiction.
estimates that global e-commerce could add $1.3-$2.1
Example: India prohibits foreign investment in B2C
trillion in international trade by 2030, boosting trade in
e-commerce marketplaces and limits what items foreign-
manufactured goods by 6-10%.
owned B2B platforms can offer. Indonesia limits foreign
SMEs and e-commerce platforms
investment in e-commerce sites and a draft regulation
would require prioritizing Indonesian products online.
Amazon reports over 1 mil ion U.S. SME sellers.
Paypal shows 79% of U.S. SMEs on PayPal export.
Localization: Impediments include requiring firms to have
Facebook says 6.75% U.S. SMEs on the platform
a physical presence, local internet domain name, or local
export; above the national average of 4.33%.
representative in a country, and add costs to online selling
to customers abroad.
Etsy asserts over one-third of sales on its SME
e-commerce platform are international.
Example: Indonesia’s draft regulation would require online
eBay reports 97% of eBay-enabled SMEs export.
merchants, platforms, and intermediaries to register with
the government. Vietnam’s proposed regulation would
E-commerce platforms provide a way for SMEs to grow by
require online platforms using a “.vn” domain to register
reaching customers across the country and the world.
and be certified locally.
Platforms offer online services to match shoppers to
Data Localization: Restricting the flow of data beyond a
suppliers, facilitate ordering, accept payments, and
country's borders may limit what websites and platforms are
coordinate the physical logistics and delivery of goods.
available, how they can operate, and also what goods and
Many of these platforms and online marketplaces are
services, such as online payments or shipment tracking, can
household names in the United States such as Amazon,
be offered online. Consumer privacy rules may restrict how
Facebook, eBay or Etsy; others are specialized for niche
e-commerce firms can process customer data, often limiting
markets, such as a specific industry. Competition from
companies from sending the data across borders.
foreign platforms is growing.
Example: Algeria requires e-commerce operators to register
The German research firm Statista expects Asia to be the
and use local data centers. China broadly restricts cross-
largest e-commerce market in 2019, making it attractive to
border data transfer. The EU imposes extensive data
U.S. firms; by 2023, retail e-commerce in Asia is predicted
protection requirements for all entities that process or offer
to exceed that of the rest of the world. Chinese retail
goods or services online to individuals in the EU.
e-commerce alone is expected to grow 70% from 2018 to
2023, compared to 45% U.S. growth over the same time
E-payments: Limiting access to electronic payment
period (see Figure 1). While Amazon hosts over two
services, such as credit cards, restricts how buyers are able
million third-party sellers, China’s Alibaba platform hosts
to purchase and finance goods.
over ten million. Similarly, PayPal is the most widely
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International Trade and E-commerce
Example: Turkey requires electronic payment services to
countries. There is no single set of global rules or
store data in Turkey and India also imposes a domestic
disciplines that govern many key e-commerce issues. For
storage mandate. Israel allows consumers to decline to pay
example:
for merchandise for which the individual did not physically
WTO. WTO rules include obligations on nondiscrimination
sign. U.S firms selling in the South Korean online market
and transparency that apply to e-commerce transactions.
cannot accept payment through local Korean-branded credit
WTO members have agreed to a temporary moratorium on
cards.
customs duties on e-commerce. The WTO Information
Tariffs, Duties, and Digital Taxes: Tariffs or customs
Technology Agreement, with 54 WTO members including
duties on international shipments, raise prices for customers
the United States, eliminates tariffs on many information
as do taxes on online purchases, though the latter may apply
technology products that underlie e-commerce.
to both domestic and foreign purchases. Some countries
TFA. The TFA aims to reduce trade costs by streamlining,
establish a de minimis level below which duties do not
modernizing, and speeding up customs processes for cross
apply; Congress set the U.S. de minimis at $800.
border trade. By increasing transparency and eliminating or
Example: Some countries set a low de minimis, effectively
reducing inefficiencies at the border, the TFA facilitates
broadening the scope of traded products subject to duties
and lowers the cost of cross border e-commerce.
(e.g., Canada’s de minimis is $15). Argentina imposes an
E-commerce Plurilateral. A group of more than 70 WTO
extra tax on online purchases of foreign products that are
members, including the United States, are negotiating a
delivered through the official postal system. France has a
plurilateral agreement on e-commerce. The parties are
proposed digital tax on intermediation and advertising
discussing the scope of the potential agreement; some seek
services, including online marketplaces.
a limited agreement focused on customs duties and further
Trade Facilitation: Inefficient customs procedures or
trade facilitation, but others, including the United States,
delayed clearance of goods, especially for express or
seek a broader digital trade agreement to address barriers
perishable deliveries, may deter buyers and sellers.
and discriminatory practices such as data localization.
Shipments valued below a de minimis level may be eligible
Though developed and developing countries, including
for less stringent customs procedures. The newest
China, are participating, some WTO members, such as
multilateral trade agreement, the World Trade Organization
India, have opted out.
(WTO) Trade Facilitation Agreement (TFA), aims to
U.S. FTAs: Since the Singapore FTA in 2003, U.S. FTAs
improve trade facilitation globally (see below).
have included an e-commerce chapter, containing
Example: According to U.S. express delivery firms, China
provisions such as nondiscrimination, prohibition of
applies overly burdensome rules, such as inspections, for
customs duties, transparency, and consumer protection, and
domestic package delivery.
have evolved to prohibit limits on cross-border data flows.
Figure 1. The U.S. and China Digital Trade Markets
The proposed United States-Mexico-Canada Agreement
(USMCA) contains a digital trade chapter that sets new
rules and advances U.S. objectives such as requiring
privacy and consumer protection legal frameworks.
USMCA chapters on customs administration and trade
facilitation and on cross border trade in services also
address e-commerce.
Congressional Interest
As Congress considers addressing e-commerce, it may
consider a number of issues, including the following:
What are the U.S. priorities for the WTO plurilateral
negotiations that will address digital trade barriers? How
can the United States ensure the agreement sets high
standards when countries such as China seek a more
limited agreement?
Does the proposed USMCA sufficiently facilitate
e-commerce trade in North America? Should its
provisions be used as a template for future U.S. FTAs?
Are countries complying with the obligations of the
WTO TFA? Is the United States fulfilling its
commitments to trade assistance and capacity building
Source: U.N. Population Statistics, Statista.com, Internetworldstats.com.
for developing countries, as required in the agreement?
Trade Rules
How can the U.S. government best support SMEs
seeking to grow through e-commerce exports?
Existing multilateral trade rules cover some issues related to
e-commerce but are not comprehensive and are generally
Rachel F. Fefer, Analyst in International Trade and
viewed as outdated. Some more recent free trade
Finance
agreements (FTAs) include more robust e-commerce
commitments, but are limited to a select number of
IF11194
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International Trade and E-commerce
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