Digital trade as traditional trade, is a part of the larger picture of the economy. Digital trade is part of the growing digital economy and affects the non-digital larger economy. Digital trade is not new. However, despite it being around for a while, there is no definitive definition and scope globally agreed upon. This has led to lack of consensus and a plethora of debates and discussions on how to best apply rules to digital trade. This paper shall delve into that later.
As for now, a simple way of defining digital trade is to use the narrowest definition of electronic commerce (e-commerce) which is the sale and purchase of goods and services via the internet of which the digital good or digital services are delivered digitally. Many argue that even if the whole process happened online, if the end product is a physical good or service, then it is not digital trade. This will be delved further into later in the paper. To expound on this narrow definition better, some examples of these digitally enabled transactions are presented below.
A first example of digital trade is that the whole production chain from placing the order to developing to receiving the good digitally, all happen via the internet. For example, a small company has decided that it wants to establish its presence on the internet. It then contacts a website developer who can provide the server space, the domain name and create and design the website. The website developer agrees, both parties agree on a price and timeframe and then once the website is set up online and ready to go, the small company that ordered it would pay the developer by placing a wire transfer from their bank to the developer’s bank account. Payment is received and the transaction is successful. This is digital trade.
Second example is that of streaming services of movies and TV shows. There are several companies, but for sake of brevity, this report cites the example of the pioneering company in this field, Netflix. Movies and TV shows delivered digitally are technically goods, the way this transaction is defined however, is paying for a service that is delivered directly to the consumer digitally. It is defined as a digital consumer service because Netflix does not sell the movies or TV shows, instead, it requires a subscription fee that can be paid monthly or annually via a credit card. The subscription then gives direct access to its library of movies and TV shows to the consumer. This model has been highly successful as Netflix now has 195 million worldwide subscribers, earning Netflix a spot in the top 40 global companies based on market capitalization. Other brands have popped up and started offering the same subscription model, but the closest competitor, Disney Plus has only reached 60 million subscribers so far. This business model is under digital trade. A consumer service is being provided digitally and payment is enabled electronically.
Third example is that of a business to consumer model providing transportation. Uber is a tech company that provides consumer service in the form of transportation. The Uber application needs to be installed onto a smart phone, the user then registers their details including credit card information and their address. The consumer is then able to use the Uber application and request for transportation via the application. The application then shares an alert to Uber drivers allowing them to respond to the request, usually, the one who is closest in proximity responds and is connected by Uber to the consumer. These Uber drivers are not professional taxi drivers with a taxi, but rather, an Uber driver is someone who has a car, a smartphone and has registered with Uber to be part of the roster of drivers that can be contacted via the ride hailing application. These Uber drivers then get a share of the payment that is paid to Uber. All these transactions happen and are enabled digitally. Even your tip at the end of the ride is given to the driver via the application, not in cash, even if you are physically able to give it to the driver after they drop you off at the destination you listed when you requested the ride. Also, Uber is now available in many countries, allowing its users to access the service even if you are not in your home country that you’ve registered. Being able to hail a ride from your phone in a foreign country that you’ve just traveled to, provides convenience, you wouldn’t even need to have the local currency nor speak the language, the application does all the communicating and enabling payment digitally between their Uber driver and you, the Uber customer. This is the delivery of a service enabled digitally. This is also digital trade. Following the success of the Uber model, several other tech companies have made this service available as well, such as Lyft, Grab and others.
Fourth example is a financial transaction. It is quite straightforward. For example, conference documents need to be translated into a number of languages so that participants can access them in the language of their choice. The conference organizers then contract the services of a number of professional interpreters to translate the documents. A price and timeframe are agreed upon. The translated documents are delivered via the internet to the conference organizers, who then in turn, send the agreed payment. This payment can be made several ways such as a bank transfer. In this case, the example is a payment hub called PayPal. Both the payee and payor sign up to PayPal online then either using a bank account or a credit card, the conference organizer can then send the payment to the translator via PayPal and then he/she receives into their account. This is digital trade.
Fifth example, is buying a digital good, for example, a digital book or e-book. There are many online bookstores or websites that sell e-books, one of which is Amazon. The consumer is assumed to have a gadget – an e-book reader, a Kindle, an iPad, a computer or any other tech that allows you to read digital material like e-books; that consumer then orders one or a few e-books from Amazon online, pays for it with a credit card and then receives the book/s digitally directly to their preferred gadget. That is the sale and delivery electronically of a digital good. That is digital trade.
Sixth example is buying applications or software for your gadgets. For example, people who have iPhones can connect online, browse through the App Store and choose the applications – anywhere from ride hailing apps like Uber to games to various photo editing software to document readers, the list of choices is long. All of this is done online and paid for online with your already pre-registered credit card on your gadget and then delivered to your gadget directly. This is digital trade.
There are several other examples of digital services and digital goods such as health services, technology and consumer services, consumer goods, and many more.)
Reference: Systemic Alternatives (2021) ‘What-is-Digital Trade’ Systemic Alternatives 3rd February https://systemicalternatives.org/2021/02/03/part-1-what-is-digital-trade/ (19/05/2021)