Questions with no answers in digital age

GLOBALLY, the value of e-commerce reached US$15.2 trillion in 2012-13, and countries need to adopt laws to facilitate this, at a domestic,
regional and international level, says UNCTAD’s Head of ICT analysis, Torbjorn Fredrikssen. Currently, he says, there is no answer to such issues as data protection involving the use of cloud services . . .

ASIA-PACIFIC is spearheading world growth in e-commerce, driven by rapid embrace of the digital economy. Based on parcel flows, e-commerce is reinforcing Asia’s strong trade performance.
Globally, the value of e-commerce reached US$15.2 trillion in 2012-13, according to the Geneva-based United Nations Conference on Trade and Development  (UNCTAD).
Ninety per cent of that e-commerce was conducted at a corporate level between businesses or intra-company.
But while business-to-business (B2B) represents the largest share of e-commerce. UNCTAD says business-to-consumer (B2C) appears to be expanding faster. Quoting private research firm e-Marketer, the UN agency says B2C e-commerce is forecast to double from US$1.2 trillion in 2013 to US$2.4 trillion in 2018.
China is leading the race in terms of online revenue and the number of buyers, says    Torbjorn Fredriksson, head of UNCTAD’s ICT analysis section, and main author of the Information Economy Report 2015. In an interview with ATI in Geneva, Fredriksson said B2B e-commerce is 10 times larger than B2C volume, largely because the global value chain has switched to electronic ordering systems.
However, he stresses that these transaction figures are total e-commerce and not cross-border e-commerce. “If you look at Canada, for example, 80 per cent of its e-commerce is domestic business, with 15 per cent to the United States and five per cent to the rest of the world.”
Similarly, even fewer European countries engage in e-commerce outside their own boundaries. This is due to barriers within the EU.
By comparison, Fredriksson quotes the examples of Singapore and India, which conduct more than 50 per cent of their B2C and B2B transactions across borders. In India’s case, the sales are primarily exports.
The size of e-commerce globally or within countries may not have been captured in its entirety because of incomplete data collection, different payment methods or definition of what constitutes online sales. Fredriksson says countries need to capture trade data better than they are doing now. For instance, he believes that if there was a global standard system of measuring e-commerce, India should be on the list of the top 10 largest e-commerce markets in Asia. But it is not on that list.
One explanation could be that credit cards are not widely used in India, and although B2C business is growing exponentially, consumers pay for parcels on delivery – hence, the transation is not picked up online.
Looking at the US, which has more comprehensive data than many other countries, Fredriksson says the share of e-commerce in manufacturing sales there has risen from 19 per cent in 2002 to more than 50 per cent in 2012. “That is a dramatic shift within 10 years and shows just how much more important the
e-commerce element is,” he says.
In all sectors where data has been collected since 2002, US online transactions have doubled from 15 to 30 per cent, but the impact is particularly striking in manufacturing because of global value chains.
Asian countries could be considered late bloomers, but once they have adopted e-commerce, growth has been dramatic. In South Korea, B2B accounted for 91 per cent of all e-commerce revenue in 2013.
Fredriksson says Asia Pacific is showing more dynamism than, say, the US. But he cautions: “It is very difficult to predict where e-commerce will go because the landscape is evolving so rapidly. “
E-commerce is helping to return to trade surplus some developed countries which have endured deficits with other parts of the world in conventional trade.
Looking at global flows in small parcels, Fredriksson says developed countries and parts of Asia show big trade surpluses in B2C e-commerce.  He says 70 per cent of parcels went from developed countries to the rest of the world in 2013, but that number slipped to 63 per cent of outbound parcels in 2014.
Asia exported 44 per cent of all parcels internationally, and received 23 per cent of the
global volume. Fredriksson says this reinforces Asia’s strong performance in international trade. By contrast, parcels from Latin America to the world represented 1.7 per cent of the global number compared with 6.9 per cent of inbound parcels, showing a trade deficit with the rest of the world.
The rate of growth in e-commerce is dependent on a country’s level of economic development, the extent of broadband connectivity, ICT infrastructure, usage of credit cards, and delivery logistics, says UNCTAD. In other words, their degree of e-commerce readiness reflects their participation.
UNCTAD has developed an index measuring the readiness of 130 countries. On a global scale, just four Asia Pacific economies — Japan, Australia, South Korea and Hong Kong — make it to the top 20 most ready countries.
“This index is useful as you can see where the big weaknesses are,” Fredriksson says, adding that the index is intended to be a tool for governments to work with in helping the private sector lift its game.
The index, he says, is a fairly reliable indicator as to the state of e-commerce development in those countries in it. He points out that the role of UNCTAD is to present information to governments. With such information, governments can work in collaboration with other stakeholders in the private sector to identify where the bottlenecks are so that they are able to seize the potential of e-commerce.
It is especially challenging for low-income countries — whether in Asia, in countries such as Cambodia, or in Africa, where, of all a sudden, e-commerce has arrived with a vengeance and governments are confronted with issues such as consumer protection legislation.
Fredriksson says legislation is needed in four areas – e-transaction laws, consumer protection online laws, privacy, and cybercrime laws. “These are essential to create trust among users of e-commerce. It is not enough to have the legislation, you have to make sure that it can be enforced and has the right content.“
As well as protecting buyers and sellers in their own countries, governments also have to grapple with cross-border laws. “For example, when the consumer protection laws are different between countries, which law will apply?
“We are working with many countries to adopt laws in these areas that are compatible with international best practice. From the outset, countries need to adopt laws that help facilitate both domestic e-commerce and regional and international e-commerce.” Fredriksson adds that ASEAN has a common framework for e-commerce legislation. But not all regions have taken such a collective approach. There are differing views on data protection — an issue steeped in political overtones.
 “The European approach is different to that of the US. That raises issues. For example, we are increasingly going to cloud solutions, so
users of a cloud service may not even know where the server will be kept, which data protection law will apply, and in which jurisdiction.
“There is no answer for these issues at present. So there is a need to establish clarity to remove uncertainty.
“Users and companies which use cloud services should be informed of their rights and protection so that when they use this kind of service, they know the implications. If an American firm offers cloud services in Europe, the European rule says you are not allowed to take out data from European citizens unless you can offer adequate protection in the country to which it goes.  The EU considers that the US is currently not meeting those requirements. So it is a concern for the Europeans.”
Fredriksson says companies can sign up under Europe’s stricter Safe Harbour agreement. (Safe Harbour is a policy agreement established between the US Department of Commerce and the European Union (EU) in November 2000 to regulate the way US companies export and handle personal data (such as names and addresses) of European citizens. US companies can seek protection under this agreement.
“But the problem here is, after September 11, the US introduced some extra territoriality into their data reach. US authorities can access data kept in the US but not what is kept by US companies elsewhere.
“Let’s take Google, which is covered by US legislation. When Google offers service in Sweden, it is covered by Swedish and European laws. But if there is a clash, what does Google do. It is between a rock and a hard place.”
Frederiksson says the problem is not limited to the US and EU. Other countries, for example Indonesia, also have strict rules requiring cloud companies to keep their data on services in
Indonesia in the country. With rapid development of the digital industry, he says it is a matter of considerable urgency that countries get together to clarify their positions. There has to be clarity on all these important issues.
Another pressing concern is security.  Incidents of fraud and hacking of passwords and emails are rising.  UNCTAD, which runs a
global cybercrime tracker, says combatting
cybercrime is a global priority. In 2012, an estimated US$3.5 billion was lost in supplier revenue due to online fraud. UNCTAD says cybercrimes target laptops, tablets, mobile phones and entire networks. In March, UNCTAD hosted an international expert meeting with 250 government officials and representatives of the private sector to look into the issue.
As of November 2014, 117 countries had enacted legislation against cybercrime, but more work is needed on cross-border enforcement and jurisdictional problems, Fredriksson says.
Rapid development of cross-border online trade also has implications for global trade rules.  UNCTAD is working with UNCITRAL (the UN Commission for International Trade Law, based in Vienna), to develop model laws for countries to adopt.