International Trade and E-Commerce

International Trade and E-Commerce

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Updated March 14, 2022
International Trade and E-commerce
Online transactions through e-commerce allow customers to
China’s e-commerce market is currently the world’s largest
research and purchase goods without leaving their home or
in terms of both transactions and potential consumers,
office, increasing access and convenience. Using online
surpassing those of the United States, the United Kingdom,
sales, businesses are able to scale efficiently and reach
Japan, and Germany combined. China is home to
customers in new markets, both domestically and abroad,
approximately 710 million e-commerce customers,
especially small and mid-sized enterprises (SMEs).
according to Commerce data. In 2020, Alibaba’s Taobao
Although some online purchases replace what may have
sales dwarfed those of Amazon for B2C e-commerce, with
been in-store transactions, other purchases are new sales.
the former having sales of $1.1 trillion, compared to
Amazon’s $269 billion, according to eMarketer.
The Coronavirus Disease 2019 (COVID-19) pandemic led
Potential Barriers to Growth
to a boom in online sales as lockdowns temporarily closed
stores and consumer spending shifted from services to
The U.S. Trade Representative’s (USTR’s) annual National
goods. According to the U.S. Department of Commerce
Trade Estimate Report on Foreign Trade Barriers
(Commerce), in the second quarter of 2020, business-to-
highlights various policy restrictions on e-commerce in
consumer (B2C or retail) e-commerce rose to 16% of all
other countries. Trade barriers, poor infrastructure, and
U.S. retail sales, up from less than 11% the second quarter
discriminatory trade practices to international e-commerce
of 2019. COVID-19 hastened the growth of online sales,
may occur at different points in the process, limiting
and many analysts expect continued growth in online
businesses’ ability to sell or customers’ ability to purchase
shopping as pandemic restrictions and concerns ameliorate.
online or receive goods. Because e-commerce in goods
In 2021, 79% of the U.S. population engaged in e-
involves the online and offline worlds, trade obstacles span
commerce, with clothing as the top category of online
both spheres. The report notes key trade barriers including:
purchases. Statista projects that the global B2C e-commerce
Market Access: Restrictions for foreign investment in
market will grow to $4.1 billion in 2022 (see Figure 1).
e-commerce website ownership, or limits on the ability of
Agileintel Research estimates the larger global business-to-
platforms to operate, impede market access. Similarly,
business (B2B) e-commerce market was $15 billion in
limits or constraints on what goods a firm may sell or
2020, and will grow to over $35 trillion by 2025.
technical regulations on how it must label specific products
Some Members have raised concerns that certain foreign
(e.g., medicines) may vary by jurisdiction.
trade policies, friction in international shipping and border
Example: India prohibits foreign investment in business-to-
processes, poor infrastructure, and the lack of enforceable
consumer (or “inventory-based”) e-commerce.
multilateral trade rules may impede U.S. companies’ access
Localization: Market access barriers include requiring
to overseas markets and hinder further e-commerce growth.
firms to have a physical presence, local internet domain
name, or local representative in a country, adding costs to
COVID-19 and E-commerce
online selling to customers abroad.
B2B and B2C e-commerce sales surged during the COVID-19
Example: Indonesia’s regulation requires e-commerce
pandemic globally and domestically. Marketing firm Acosta found
operators to obtain local licenses and promote local
that 45% of U.S. consumers increased online grocery shopping
products. South Korea requires a local presence to process
during the pandemic. In 2020, U.S. online holiday sales grew 32%
won-denominated transactions.
over 2019, according to eMarketer, far outpacing the 2% growth
Data Localization: Restricting the flow of data beyond a
in non-e-commerce (e.g., in-store) seasonal sales.
country’s borders may limit what websites and platforms
are available, how they can operate, and what goods and
E-commerce platforms offer a way for SMEs to grow by
services, such as online payments or shipment tracking, can
providing access to a wider consumer base, domestically
be offered online. Consumer privacy rules may restrict how
and globally. Platforms offer online services to match
e-commerce firms can process customer data, often limiting
shoppers to suppliers, facilitate ordering, accept payments,
companies from sending the data across borders.
and coordinate the physical logistics and delivery of goods.
Data Catalyst found that almost 70% of U.S. SMEs use
Example: China broadly restricts cross-border data transfer.
third-party online marketplaces and/or their own web store,
The European Union (EU) imposes extensive data
with the majority of those firms opting to use multiple
protection requirements for all entities that process or offer
online markets. Many of these platforms and online
goods or services online to individuals in the EU. Draft e-
marketplaces are household names in the United States,
commerce legislation in India would require certain data be
such as Amazon, Shopify, Facebook, PayPal, or Etsy;
stored domestically and other data processed only in India.
others specialize in niche markets. A study of U.S. SMEs
E-payment regulations: Limiting access to electronic
on the e-commerce platform eBay found that 96% export to
payment services, such as credit cards, restricts how buyers
an average of 17 different foreign countries. Competition
are able to purchase and finance goods.
from foreign platforms is growing.
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International Trade and E-commerce
Example: India imposes a domestic storage mandate for
WTO. World Trade Organization (WTO) obligations on
electronic payment services. Thailand requires in-country
nondiscrimination and transparency apply to e-commerce
processing for certain electronic payment transactions.
transactions. WTO members have agreed to temporarily
suspend customs duties on electronic transactions since
Counterfeits: The growth of e-commerce platforms has
1998. The WTO Information Technology Agreement
helped fuel the growth of counterfeit and pirated goods.
USTR’s annual
(ITA), with 74 WTO participants including the United
Notorious Markets List reports on online
States, eliminates tariffs on many information technology
markets engaged in facilitating trade in these goods.
products that underlie e-commerce.
President Biden has ordered the Department of Homeland
Security to strengthen customs enforcement to help prevent
TFA. The Trade Facilitation Agreement (TFA) aims to
the import of counterfeit items ordered online.
reduce trade costs by streamlining, modernizing, and
speeding up customs processes for cross-border trade. With
Example: Mercado Libre is a leading e-commerce operator
provisions to increase transparency and eliminate or reduce
in Latin America and many U.S. intellectual property
inefficiencies at the border, the TFA may facilitate and
owners report high volumes of counterfeit products for sale
lower trade costs for e-commerce.
on the site.
Figure 1. Global B2C E-commerce Revenue Forecast,
E-commerce Plurilateral. A group of over 85 WTO
2021 ($ in billions)
members are negotiating an agreement to set new global
digital trade rules. The United States seeks a broad digital
trade agreement to make the WTO customs duties
moratorium permanent and address barriers and
discriminatory practices, such as data localization. To date,
the parties have agreed on some e-commerce-enabling
provisions, including ensuring electronic signatures and
authentication, e-contracts, open government data, and
online consumer protection. Though developed and
developing countries, including China, have joined, others,
such as India, have opted out. The parties aim to have a
final draft in 2022, but would need to overcome contentious
issues, including on cross-border data flows.
U.S. FTAs: Since the U.S.-Singapore FTA in 2003, U.S.
FTAs have included an e-commerce chapter with

provisions such as nondiscrimination, prohibition of
Source: CRS, based on data from Statista.com, 2021.
customs duties, transparency, and consumer protection, and
Tariffs, Duties, and Digital Taxes: Tariffs or customs
have evolved to prohibit limits on cross-border data flows.
duties on international shipments raise prices for customers,
The digital trade chapter of the United States-Mexico-
as do taxes on online purchases, though the latter may apply
Canada Agreement (USMCA) sets new rules and advances
to both domestic and foreign purchases. Some countries
U.S. objectives such as eliminating trade barriers and
establish a de minimis level and shipments below that value
requiring privacy and consumer protection legal
do not pay duties; Congress set the U.S. de minimis at $800.
frameworks. USMCA chapters on customs administration
Example: Some countries, such as Brazil, set a low de
and trade facilitation and on cross-border trade in services
minimis, effectively broadening the scope of traded
also address e-commerce. The 2019 U.S.-Japan Digital
products and e-commerce goods subject to duties.
Trade Agreement aligns with the standards set in the
USMCA and the U.S. WTO proposal.
Trade Facilitation: Inefficient customs procedures or
delayed clearance of goods, especially for express or
Congressional Interest
perishable deliveries, may deter buyers and sellers.
As Congress considers addressing e-commerce provisions
Shipments valued below a de minimis level may be eligible
in trade policy, it may oversee and legislate on a number of
for less stringent customs procedures.
issues, including the following:
Example: According to U.S. express delivery firms, China
 What should be the U.S. priorities for the WTO e-
applies overly burdensome rules, such as inspections, for
commerce negotiations? How can the United States
domestic package delivery. Argentina does not allow the
ensure a potential agreement sets high standards when
use of electronically produced documents, hindering the
countries such as China seek a more limited agreement?
customs processing of e-commerce delivery.
 What are the implications of USMCA rules on digital
Trade Rules
trade and e-commerce for future U.S. trade policy?
Existing multilateral trade rules cover some issues related to
 Are countries complying with the obligations of the
e-commerce, but they are not comprehensive and are
WTO TFA? Is the United States fulfilling its
generally viewed as outdated. Some recent free trade
commitments to trade assistance and capacity building
agreements (FTAs) include more robust e-commerce
for developing countries, as required in the agreement?
commitments, but only among certain countries. There is no
single set of global rules or disciplines that govern many
Rachel F. Fefer, Analyst in International Trade and
key e-commerce issues. Rules addressing e-commerce
Finance
include the following:
IF11194
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International Trade and E-commerce

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https://crsreports.congress.gov | IF11194 · VERSION 4 · UPDATED