E-commerce gained significant attention at the 11th Ministerial Conference in Buenos Aires in 2017, where 71 member states released a Joint Statement affirming their intent to advance negotiations on trade related aspects of e-commerce under the WTO ambit. E-commerce was first recognised in global trade agreements at the Second Ministerial Conference in Geneva in 1998, where member states adopted a Declaration on Global Electronic Commerce and called to establish a Work Programme to examine issues of e-commerce related to trade).
The Work Programme was required to pay specific attention to the economic, financial and development needs of developing countries. India participated in the early rounds of discussion, raising key issues of intellectual property in e-commerce in its communication to the Council for Trade Related Aspects of International Property Rights in 1999. Its representative noted before the General Council the importance of e-commerce, specifically e-retail, for development. But he also stressed the importance of providing adequate policy space for developing states to establish domestic policies to govern e-commerce, and to build capacity among domestic MSMEs. These concerns were echoed by other developing states. As a result of this fundamental disagreement, progress under the Work Programme has been slow in the past two decades.
Recent years have seen a marked shift in the positions of several developing and Less Developed Countries, which are moving now toward a global compact on e-commerce. China, Saudi Arabia, Thailand and Kenya are just a few of the states to have signed and participated in discussions under the Joint Statement Initiative. Another prominent trend is the emergence of regional, interest-based groupings to promote the use of e-commerce for development. For instance the Friends of E-Commerce for Development, a group of developed and developing countries that include Pakistan, Sri Lanka and Australia, are working together to use e-commerce in a manner supportive of local industry and small enterprises. Further, regional trade agreements or RTAs increasingly incorporate clauses related to e-commerce. A recent study found that of 275 RTAs registered with the WTO, 75 contained at least one clause dealing explicitly with e-commerce. Yet India continues to oppose the formalisation of talks on e-commerce under the WTO. In its communication to the General Council prior to MC11, India advocated continuing talks under the existing Work Programme without altering its mandate. Statements from Indian representatives at the WTO show this opposition remains grounded in apprehension, that the entry of global retail brands would significantly hinder the development of domestic retail enterprises.
Failure to develop a more nuanced negotiation strategy at the WTO may have significant consequences for India. It risks being cut off from the preferential market access to be gained from participation in any multilateral or plurilateral agreement. This would hinder the flow of investments into the country, and its integration with the global supply chain. By choosing to completely distance itself from ongoing negotiations, India also loses the opportunity to shape global rules of digital trade. Historically, states that adopted global rules and technical standards have gained a significant first-mover advantage.
To negotiate more effectively at the WTO, India must first build sufficient local capacity, so that domestic products can effectively compete in global markets. It can learn from the experiences of nations such as Malaysia, Singapore and Thailand, which adopted a state-led approach to online retail development, and are able as a result to participate in deliberations under the Joint Initiative.
The focus of this analysis is online retail, a narrower sector than e-commerce. E-retail is concerned primarily with the online sale and purchase of goods, while e-commerce includes a wide range of services such as OTT platforms. A key impediment to India’s participation in global talks on e-commerce is the apprehension that its domestic retail sector will be unable to compete with large global corporations: this can be overcome through capacity building backed by the state, to let domestic retailers harness online retail opportunities, and eventually compete with foreign entities.
This paper attempts to define the broad contours of a specialised development agency that could undertake such capacity building effectively. The next section surveys the existing literature to identify key capacity deficits faced by Indian MSMEs in adopting digital technologies and e-retail. Section 3 outlines India’s approach to regulating e-commerce, contrasting it with the specialised bodies in other developing countries, and identifying certain principles of regulatory design that inform their functioning. Section 4 suggests how these principles could be applied within the Indian context.
Attribution: Mohit Chawdhry, “Digitalising Indian Retail: Capacity Building for a Global Context,” Issue No. 007, February 2021, Esya Centre.