Digital Trade and eCommerce: Promoting Equitable and Inclusive Economic Growth

July 27, 2021

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Graham Crouch, World Bank
Graham Crouch, World Bank

ABOUT THE AUTHOR: Paul Fekete is a Senior International Trade Advisor at the Center for Economics and Market Development in the Bureau for Development, Democracy and Innovation at USAID.

The proliferation of digital technology is transforming economies around the world and changing the way that consumers and businesses trade goods and services. As digital technologies and tools become more accessible in developing countries, they provide a unique opportunity for entrepreneurs and enterprises of all sizes to engage in the global economy and access new markets promoting equitable and inclusive economic growth.

“Digitally-enabled trade, such as through e-commerce platforms or more-efficient customs processes, is one of the fastest-growing areas in the global economy.” 

– USAID Digital Strategy 2020-2024

As outlined in USAID’s Digital Strategy, the Agency has a key role to play in shaping the enabling environment that allows the private sector in developing countries to take advantage of these new opportunities in digital trade and ecommerce. A robust regulatory environment relies on many factors beyond digital policy including investing in physical ICT infrastructure to expand connectivity, building Micro, Small, and Medium Enterprises (MSMEs) capacity to engage in the digital economy, and improving trade logistics and trade facilitation for the movement of goods. However, developing a strong digital regulatory framework that supports innovation and growth presents a new and unique challenge for most developing country regulators. 

A digital regulatory framework must address new technologies and new approaches to conducting trade and transactions. In some cases, this means developing entirely new policies or regulations or re-working existing frameworks, making them sufficiently flexible to cover new digital innovations such as digital signatures and paperless clearance processes. As the digital economy continues to evolve and new technologies and applications are developed, the regulatory environment must also adapt. The following list summarizes some of the current digital regulatory issues that are critical for developing a strong enabling environment:

  • Information and Communications Technology (ICT) and Telecoms regulations cover oversight of telephone and data transmissions including the roll-out of 5G networks or innovations like using TV whitespace to expand broadband internet access. They are critical to expanding digital connectivity and enabling digital trade.
  • Digital Regulations on Online Behavior set the framework for online engagement including establishing data transfer rules, online dispute resolution mechanisms, the enforceability of electronic signatures, and liability rules for internet intermediaries.
  • Data Privacy Regulations which focus on norms, regulations, practices, or standards related to the use of data, including disclosures, data-use limitations, and other safeguards.
  • Consumer Protection policies and regulations address key issues such as protection against online fraud, cyber attacks, counterfeit goods sold online, and efficient, equitable recourse mechanisms for issues encountered online. 
  • Digital Payments Regulations lay the groundwork for consumers, merchants, and other actors to either pay for goods and services or pay taxes and fees.  Frequent priorities include advancing real-time payment capabilities; interoperability across payment instruments and providers; and reducing costs, risks, and inefficiencies in cross-border payments important for economic activity.
  • Digital Financial Services and FinTech regulations cover bank and non-bank financial institutions that provide digital-enabled financial services to actors across the digital economy, including digital banking, credit guarantees, direct loans, or equity (especially crowdfunding equity). This expands access to financial services and credit beyond the reach of physical branches and leverages new sources of data for alternative credit scoring.
  • Cyber Security & Supply Chain Security Regulations set rules and requirements to support data security, reporting on data breaches, and developing procedures and plans to mitigate the threats of ransomware or other cyber-attacks that can cripple individual companies or entire digitally integrated supply chains. 
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Photo: John O'Bryan/ USAID

The Center for Economics and Market Development (EMD) here at USAID is ready to support Missions, Bureaus, Independent Offices (MBIOs) and our local partners in integrating digital trade and e-commerce activities and enabling environment issues into project design and implementation. 

In the case of MBIOs who may have ongoing activities that could use additional support relating to the enabling environment for ecommerce or digital trade, EMD’s portfolio includes both on-demand mechanisms like the Digital Economy and Market Development Activity (DEMD) as well as several private sector partnerships such as the Alliance for eTrade Development II that can provide short term activity support. Activities could include the eTrade Alliance coordinating with the mission to engage local and international private sector partners in a policy dialogue on key regulatory issues such as data localization, or DEMD providing targeted training to local policy makers on the development of fintech regulations. The Alliance's eTrade Policy Center brings together actionable and comparative policy mappings; policy impact assessments; case studies on good policies and practices; and reports and white papers on policy and technology solutions conducive to cross border ecommerce. 

Additionally, EMD’s portfolio of projects have developed (or will soon be releasing) a variety of resources and tools that are available to MBIOs and the local stakeholders they support. This includes the eTrade Alliance’s eCommerce Digital Policy Index, which maps and ranks countries’ adoption of over 100 policies conducive to MSME ecommerce; a soon to be released series of webinars compiled by DEMD highlighting different country regulators’ experiences developing and implementing critical digital regulations such as internet intermediary liability, or electronic invoicing; and a forthcoming Cyber Security Guide for MSMEs highlighting practical approaches to building digital resilience under the Trade and Competitiveness Activity.  

For more information on how to work with EMD or any of its portfolio of projects or resources please contact the Center for Economics and Market Development at [email protected]