Today, as a result of the physical distancing measures set in place to limit the spread of COVID-19, more people are working remotely, shopping for groceries online, connecting with family and friends through teleconferencing and mobile messaging, and streaming music and films for leisure.1 However, our ability to shift activities to the digital realm depends on a range of factors, including measures that affect, or are related to, digital trade.

For instance, a great number of digital enablers such as computers, smartphones, network equipment and related services are produced abroad.2 These tools play a key role in alleviating some of the social and economic consequences of physical distancing measures. Digital solutions that operate across global communications networks enable individuals to order goods online, facilitate teleworking and provide a means to deliver services digitally, helping to cushion the economic impact of health-related restrictions.

The benefits of digital trade were already apparent before the COVID-19 pandemic (López González and Ferencz, 2018[1]), but the current crisis has brought these into sharper relief and accelerated the digital transformation. These developments underscore the need for governments to further enable digital trade to mitigate the economic slowdown and support a more rapid recovery (WTO, 2020[2]).

The physical distancing measures put in place to tackle the spread of COVID-19 have resulted in a considerable reduction in workplace mobility – declining by 55% relative to the period January-February 2020 – and an increase in mobility around residential areas (Figure 1). Change has been gradual yet taken place in a very short time-span, with declines in workplace mobility starting as early as one week prior to the adoption of confinement measures. For many people, this has resulted in job losses, with wider economic and social consequences (OECD, 2020[3]). However, others have been able to continue working remotely.

The ability to work from home depends on a range of factors. These include the extent to which job functions can be performed remotely, an issue that is likely to be specific to particular tasks or sectors of activity (Dingel and Neiman, 2020[4]). It also depends on the capacity to leverage digital technologies, the degree of adoption, and the stock of skills needed to thrive in a digital economy (OECD, 2019[5]) (OECD, 2020[6]). Working remotely also requires access to ICT goods and reliable digital networks – an area where trade can play an important role.

Across the OECD, those countries that have the highest share of jobs that can be performed remotely witnessed the highest drop in workplace mobility following the imposition of national confinement measures (Figure 2). This suggests that many OECD countries have, to some extent, been able to adapt to new circumstances. However, across non-OECD countries, jobs may be less readily carried out remotely, whether because they are in sectors which require physical presence or for other reasons (such as access to infrastructure or skills), and there is no correlation with reductions in workplace mobility, suggesting that the challenges faced by these countries might be of a different nature.

The COVID-19 outbreak has not only had an impact on the way we work, but also on how and what we consume. With many bricks and mortar businesses experiencing temporary closures, consumers have turned to online solutions to purchase the goods and services they need. The type of goods and services purchased has also changed. Demand for medical and ICT goods, many of which are transported across different borders and arrive directly at home in parcels, has grown. At the same time, demand for services, including many that are digitally deliverable such as streaming media or teleconferencing services, has also increased.

International trade, and in particular digital trade and related policies, can play an active and important role in supporting economic activity in times of confinement and in launching the wider economic recovery. This note investigates several areas which may deserve further attention by policy makers:

  • Promoting affordable access to digital networks

  • Ensuring the flow of devices through which we access the Internet

  • Promoting cross-border trade in digitally ordered parcels

  • Enabling more efficient movement of goods across borders by adopting digital technologies at the border.

  • Facilitating the digital delivery of services across borders

  • Bridging the digital divide

The ability to telework, shop online and to maintain remote social contact during confinement depends on access to affordable and reliable digital networks. However, as highlighted in the recent OECD brief “Keeping the Internet up and running in times of crisis(OECD, 2020[7]), Internet infrastructure is facing unprecedented demand as operators increase the capacity of their networks to help individuals remain connected (Figure 3). Trade policy has a role to play in enabling access to ICT services (telecoms and computer and related services) and goods (network equipment such as cables, wires and hardware) that form the backbone of broadband networks and support growing bandwidth needs and use.

Reliable connectivity helps businesses maintain key operations and communicate with employees and clients while adhering to physical distancing requirements. For digital solutions to operate effectively, access to high-quality telecommunications services is indispensable. In order to help firms enjoy greater access to higher quality services at lower prices, there is scope to foster greater competition in the telecommunication sector through lowering trade barriers (Figure 4).

Network equipment such as fibre-optic cables, routers and switching apparatus underpin the broadband networks on which the Internet relies.3 Access to these goods enables countries to maintain, repair or build the infrastructure needed for communication networks to function. The global supply of network equipment is relatively concentrated, with the People’s Republic of China (hereafter “China”), Germany and the United States representing about 40% of global exports. By contrast, import shares are far less concentrated. However, despite the importance of these goods in underpinning digital networks, they remain subject to tariffs, especially in developing countries (Figure 5). This can inflate costs, affecting affordable access to communication networks, especially in more remote areas.

Another feature of the current crisis is a growing demand for devices and related goods that enable access to and use of the Internet. Indeed, as countries applied lockdown measures during the months of March and April, the number of global Internet searches on Google for items such as “computer monitors” or “smartphones” peaked (Figure 6).

The production of these devices and related goods involves complex and internationalised value chains (see the example of the iPhone value chain (OECD-WTO, 2011[8]))4. Indeed, on average, the foreign content of final demand in computer, electronic and optical products is just below 80% (Figure 7), making this one of the most internationalised sectors globally and highlighting the essential role of trade in ensuring the affordable supply of these products.

Laptops, printers, monitors, storage units and other computer accessories underpin many online economic and social activities.5 Trade in these products represented according to latest available data USD 544 billion in 2018, and, despite the high degree of internationalisation, the supply of finished products is concentrated, with China accounting for 46% of global exports.6 At the same time, the United States was the largest importer representing nearly 25% of imports. Trade in these products goes hand-in-hand with teleworking, with causation likely running both ways (Figure 8).

Communication equipment, which includes fixed telephone sets and mobile phones, are also key enablers of online or remote activities, enabling voice and video calls as well as Internet access. Here too, trade in finished communication equipment, although also the product of highly internationalised value chains, tends to be relatively concentrated with China representing nearly 50% of global gross exports in 2018 (followed by Viet Nam, which represents 11% of global exports). Here too there is a correlation between access to imports for these devices and the share of mobile subscriptions per inhabitant, also highlighting links between access to both goods and services (Figure 9).

Tariffs on such digital enablers are relatively low, although there are important differences across product categories and country groupings (Figure 10). Indeed, as for network equipment, tariffs are highest in countries outside the OECD and G20, meaning that people and businesses in some developing countries may face higher costs for the goods critical for accessing digital networks. Tariff differences are, in part, affected by participation in the WTO Information Technology Agreement (ITA I and ITA II) which liberalised trade across most of these product categories. Those countries not currently participating in the ITA may wish to consider doing so with a view to reducing the costs of going digital.

Physical distancing and confinement measures have accelerated already growing trends in online shopping, raising the importance of cross-border trade in parcels. Today, many people are ordering online and receiving items at home instead of going to the shops. This has led to a 50% increase in e-commerce orders in Europe, 70% in Asia - Pacific and a 120% increase in the United States year-on year (Figure 11), helping firms – including micro, small and medium enterprises (MSMEs) – access more customers across a wider set of markets. While the majority of goods ordered online are dispatched domestically, evidence suggests that cross-border trade in parcels is growing nearly twice as fast as domestic trade in parcel (Universal Postal Union, 2016[9]), (DHL, 2017[10]); (eMarketer, 2018[11])).

According to recent data for the European Union, during the early stage of the COVID-19 crisis, followed by the gradual introduction of confinement measures, the highest growth rates in terms of the goods crossing borders through parcels were: computers and related accessories; medical goods (pharmaceuticals); and leisure items such as books or games (OECD, 2020 forthcoming[12]).

Cross-border trade in parcels involves a complex network of interlinked actors and policies. Ensuring that parcels get to where they are needed requires policy action along a diverse set of issues. Digital platforms are, nowadays, one of the main gateways through which parcel trade is facilitated, connecting consumers with different businesses and providing the “plug-and-play” infrastructure that enables a streamlined shopping experience, including reviews, comparisons across products and the ability to make electronic payments (OECD, 2019[13]). Once digitally ordered goods are ready to be dispatched, logistics providers, including express delivery companies, postal services, and freight forwarders take over (although increasingly the digital platforms are moving into this space). When parcels cross borders, it is the role of Customs authorities and other border agencies to manage traffic. This means enforcing trade rules, such as tariffs, but also undertaking health and safety, security and quality checks.

Barriers affecting the effective operation of any of these stages can hinder the wider enabling environment for parcel trade and thus the ability of firms to maintain economic activity during the COVID-19 crisis. Supply side challenges, related to reduced worker mobility, can be exacerbated by issues affecting the logistics supply chain. In this area, service capacity restrictions, delays associated with specific controls and new protocols, and last mile restrictions on specific routes are proving most challenging (OECD, 2020 forthcoming[12]). Challenges also arise at the border. Customs authorities and other border agencies can become overburdened due to the growing number of parcels crossing borders and the need to manage risks over a more numerous and diverse set of consignments (including also in the context of infringement of copyrights, trademarks, design rights and patents), including against the backdrop of staff shortages linked to COVID-19.

The smooth operation of logistics chains in the midst of the COVID-19 outbreak depends on reconciling the fast and efficient movement of goods, including parcels, with increased control measures and new protocols at border posts, temporary disruptions to staffing, and restrictions on human contact to contain the spread of the virus (OECD, 2020[14]). Digital technologies can play an important role by enabling more efficient trade facilitation, in particular for ensuring the movement of essential medical and food supplies and digitally ordered parcels. Digital technologies can be leveraged to ensure that border processes are transparent and accessible to traders; that they can be expedited; and that processes at the border require less physical contact. This can be particularly important for the micro- and small- and medium-sized enterprises (MSMEs) which are hit hardest by the crisis.

Many mechanisms limiting physical interaction – such as electronically lodging documents in advance, electronic payment of trade-related taxes, digital certificates and signatures, or 24/7 automated processing of trade declarations – are already available in regions such as Europe and Central Asia, North America, Asia-Pacific, and Latin America and the Caribbean. However, countries in the Middle East and North Africa and Sub-Saharan African regions have faced more challenges in introducing such measures, but can also capitalise on some of the tools they already have in place (OECD, 2020[14]).

As part of their response to the challenges arising from COVID-19, many economies have been making increased use of digital tools to implement measures aimed at streamlining processes and documentary requirements at the border (Figure 12). Examples of such trade facilitation measures introduced include establishing specific COVID-19 online information portals, acceptance of digital trade-related documents in place of physical copies (including sanitary and phytosanitary certificates),7 or increases in the number of procedures benefitting from electronic pre-arrival processing. These are complementary to the introduction of measures such as “green lanes” or “corridors” for fast clearance of certain products.

With lower availability of personnel due to confinement and physical distancing measures, agencies increasingly need to rely on their interconnected or shared computer systems and real-time data availability. This allows them to share relevant data among themselves in order to facilitate cross-border data exchange or clearing of export and import declarations electronically (OECD, 2020[14]). Given the global nature of the crisis, enhanced international co-operation in border risk management will be increasingly important in the recovery period, for example, through the use of digital technologies in the sharing of inspection and control results among border agencies. The difference in capacities among countries will also require continued investments in ICT infrastructure at borders.

While trade in some service sectors has slowed as a result of transport and travel restrictions put in place to fight COVID-19, others have been more robust, due to their capacity to use digital technologies. Access to telecommunications networks, cloud processing and digital communication is helping businesses maintain key operations and communicate with employees and clients, while adhering to physical distancing requirements. Indeed, estimates suggest that the ability to connect remotely could lower trade costs by as much as 3.5% in services that can be partially supplied at a distance, such as professional services (Benz, Gonzales and Mourougane, 2020[15]).

Barriers to digitally enabled services create obstacles to firms’ ability to source digital solutions, affecting the cost of access to key functions such as cloud computing, communication and business management solutions. Barriers at home can also affect the ability to export, and the cost of exporting, digitally enabled services. Evidence shows that, across many countries, most barriers to trade in services affect infrastructure and connectivity (including cross-border data connectivity), electronic transactions, and online payment systems (Figure 13). These barriers can make it more difficult for companies to engage in commercial transactions when physical distancing is required. Further policy action, domestically and internationally, could be aimed at broadening the scope for recognition of electronic signatures, implementation of international standards for electronic contracts, and lifting unnecessary obstacles to online payment solutions.

Physical distancing and lockdowns have also made some services more important during the crisis. For instance, online retail services are essential for acquiring protective equipment, foodstuffs, ICT equipment for teleworking, and other household essentials. Mobile and contactless payments also play a key role in enabling online transactions and can facilitate physical distancing. For instance, raising the limit on contactless payments helps consumers purchase more while reducing exposure to the virus. The ability of firms to offer many of these services will rely on the underlying regulatory environment and the degree of competition in the market.

Similarly, the crisis increased the importance of entertainment services, as people spend their free time at home browsing the Internet, watching or streaming media, or playing video games (Box 1). On the one hand, the increased volume of data traffic further highlights the importance of high quality telecommunications networks and services to keep people connected and keep them at home. On the other hand, trade barriers affecting downloading and streaming (e.g., discriminatory restrictions towards foreign content), intellectual property rights and electronic payments may limit access to media services.

Already prior to the COVID-19 crisis, the global regulatory environment in which digital trade operates was becoming increasingly restrictive (Figure 15). Over the period 2014 to 2019, the average Digital STRI across all countries increased by 11%, with a tightening of measures in infrastructure connectivity, including interoperability of regulations related to cross-border data flows, as well as online payment services, and localisation requirements (OECD, 2020[16]). These measures can hamper firms’ ability to provide and receive world-class digital services at competitive prices during a global crisis where digital solutions are key to keep businesses running.

While digital trade offers a range of opportunities to overcome some of the challenges arising from COVID-19, significant divides in the ability to leverage these digital trade opportunities remain (both within and between countries). Often, it is those that are most vulnerable to the human and economic consequences of the pandemic that tend to lag behind in terms of digital access and preparedness. Access to the Internet is much lower in developing countries than in developed countries (Figure 16). This not only affects the ability to telework and to purchase items online, but also limits the possibilities for children to be connected if schools are closed (UNCTAD, 2020[17]).

Gaps across a range of policy areas need to be overcome to enable greater participation in the digital economy – from digital skills, to access to ICT goods and services, to the affordability and reliability of Internet connections (OECD, 2019[5]). More attention should be given to bridging existing and emerging digital divides to allow more people to take advantage of digitalisation to help manage existing restrictions on movement and also ensure that the gains from digitalisation can be realised and more widely shared across countries and societies. This can also help achieve recovery that is more inclusive and sustainable (OECD, 2019[18]).

The current crisis has highlighted the need to enable more trade in the digital era with a view to tackling the most immediate issues arising from the pandemic. These could include:

  • Easing restrictions on goods and services underpinning digital networks to address growing bandwidth demands and adjustment to virtual working conditions;

  • Temporarily lowering tariffs on ICT goods to facilitate greater access to the products that enable teleworking and communicating with others;

  • Promoting further logistics services liberalisation and streamlining and digitising processes and procedures at the border to ensure that trade, including digitally ordered parcels, gets to where it is needed;

  • Reducing barriers to digitally enabled services to promote more digital trade in both goods and services. This includes facilitating electronic transactions through e-signatures, e-contracts, and e-payments to help foster continuity in business operations, while meeting necessary safety requirements and physical distancing.

  • Promoting policies that tackle the digital divide with a view to ensuring that more people can access the tools they need to adjust to changing circumstances and enable greater benefits from digital trade.

These steps will also help countries support and sustain economic recovery as they emerge from the COVID-19 crisis. However, unilateral action will need to be complemented with greater international discussions. Digital trade rules and regulations remain fragmented across borders and regulatory divergences can result in additional costs for firms, notably for MSMEs which are least able to cope with the patchwork of different regulation as they attempt to access global markets. Discussions on digital trade, including under the Joint Statement Initiative (JSI) at the WTO are ongoing. Today, they are more important than ever, not just to ensure that countries can respond to these immediate issues but also to enable an inclusive recovery to be underway as soon as possible.

References

[15] Benz, S., F. Gonzales and A. Mourougane (2020), “The Impact of COVID-19 international travel restrictions on services-trade costs”, OECD Trade Policy Papers, No. 237, OECD Publishing, Paris, https://dx.doi.org/10.1787/e443fc6b-en.

[10] DHL (2017), The 21st Century Spice Trade: A Guide to the Cross-border E-commerce Opportunity.

[4] Dingel, J. and B. Neiman (2020), “How Many Jobs Can be Done at Home?”, Working Paper, No. 26948, National Bureau of Economic Research (NBER), https://www.nber.org/papers/w26948.

[11] eMarketer (2018), Worldwide Retail and Ecommerce Sales: EMarketer’s Updated Forecast and New M-commerce Estimates for 2016-21.

[1] López González, J. and J. Ferencz (2018), “Digital Trade and Market Openness”, OECD Trade Policy Papers, No. 217, OECD Publishing, Paris, https://dx.doi.org/10.1787/1bd89c9a-en.

[19] López González, J. and M. Jouanjean (2017), “Digital Trade: Developing a Framework for Analysis”, OECD Trade Policy Papers, No. 205, OECD Publishing, Paris, https://dx.doi.org/10.1787/524c8c83-en.

[7] OECD (2020), “Keeping the Internet Up and Running in Times of Crisis”, OECD Policy Responses to Coronavirus (COVID-19), Organisation for Economic Co-operation and Development, Paris, https://read.oecd-ilibrary.org/view/?ref=130_130768-5vgoglwswy&title=Keeping-the-Internet-up-and-running-in_times-of-crisis.

[6] OECD (2020), “Productivity gains from teleworking in the post COVID-19 era: How can public policies make it happen?”, OECD Policy Responses to Coronavirus (COVID-19), Organisation for Economic Cooperation and Development, Paris, https://read.oecd-ilibrary.org/view/?ref=135_135250-u15liwp4jd&title=Productivity-gains-from-teleworking-in-the-post-COVID-19-era.

[3] OECD (2020), “Supporting People and Companies to deal with the COVID-19 virus: Options for an immediate employment and social-policy response”, OECD Policy Responses to Coronavirus (COVID-19), Organisation for Economic Cooperation and Development, Paris, https://read.oecd-ilibrary.org/view/?ref=119_119686-962r78x4do&title=Supporting_people_and_companies_to_deal_with_the_Covid-19_virus.

[16] OECD (2020), The OECD Services Trade Restrictiveness Index: Policy Trends up to 2020, https://www.oecd.org/trade/topics/services-trade/documents/oecd-stri-policy-trends-up-to-2020.pdf.

[14] OECD (2020), Trade Facilitation and the COVID-19 Pandemic, http://www.oecd.org/coronavirus/policy-responses/trade-facilitation-and-the-covid-19-pandemic-094306d2/.

[5] OECD (2019), Going Digital: Shaping Policies, Improving Lives, https://doi.org/10.1787/9789264312012-en.

[18] OECD (2019), Measuring the Digital Transformation: A Roadmap for the Future, https://doi.org/10.1787/9789264311992-en.

[13] OECD (2019), Unpacking E-Commerce: Business Models, Trends and Policies, https://doi.org/10.1787/23561431-en.

[12] OECD (2020 forthcoming), Connecting Businesses and Consumers During COVID-19 Through Cross-Border Trade in Parcels, OECD Publishing, Paris.

[8] OECD-WTO (2011), Trade in Value Added: Concepts, Methodologies and Challenges, https://www.oecd.org/sti/ind/49894138.pdf.

[17] UNCTAD (2020), The Covid-19 Crisis: Accentuating the Need to Bridge Digital Divides, http://dx.doi.org/UNCTAD/DTL/INF/2020/1.

[9] Universal Postal Union (2016), Trends and drivers for international letter mail, parcels and express mail services.

[2] WTO (2020), E-Commerce, Trade and the COVID-19 Pandemic, https://www.wto.org/english/tratop_e/covid19_e/ecommerce_report_e.pdf.

Contact

Javier LOPEZ-GONZALEZ (✉ javier.lopezgonzalez@oecd.org)

Andrea ANDRENELLI (✉ andrea.andrenelli@oecd.org)

Janos FERENCZ (✉ janos.ferencz@oecd.org)

Silvia SORESCU (✉ silvia.sorescu@oecd.org)

Notes

← 1. This note uses the term physical distancing instead of the more commonly used social distancing. This is to reflect that digital technologies enable people to socialise while maintaining physical distancing.

← 2. See (López González and Jouanjean, 2017[19]) for a brief overview of the concept of digital enablers, and footnotes 3 and 4 for a definition of the goods that fall within this category.

← 3. Network equipment is defined using a list of 12 HS 6 digits codes from chapters 85 and 90 of the harmonised system of classification. It includes telecommunications equipment as well as some electronic apparatus. See Table A A.1.

← 4. Intangible assets are another key element in the complexity of ICT value chains, as investments in knowledge and capabilities play an increasingly important role https://www.oecd.org/sti/inno/46349020.pdf

← 5. Computers and peripheral equipment and communication equipment (below) are identified using the ICT goods definition developed by the OECD's Working Party on Indicators for the Information Society (WPIIS), now called the OECD Working Party on Measurement and Analysis of the Digital Economy (WPMADE), and updated by UNCTAD in the context of the Partnership on Measuring ICT for Development. The full list is available at https://unctadstat.unctad.org/en/Classifications/DimHS2017Products_Ict_Hierarchy.pdf

← 6. Note, however, that these gross trade statistics may not fully reflect the ultimate origin of value added embodied in these products (OECD-WTO, 2011[8]).

← 7. In some cases, on a temporary basis.

Disclaimer

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