E-commerce: Is a regulator really needed?

December 15, 2020 6:40 AM

An alternative is a policy that creates a new sectoral development agency

While India is part of a non-binding Work Programme on E-Commerce at the WTO, it is not part of this new initiative, which may culminate into plurilateral rules.Amazon India, which has 7 lakh sellers, recently surpassed the U.K. and Germany marketplaces to become the second-largest marketplace in terms of the number of sellers for Amazon,

By Vivan Sharan & Mohit Chawdhry
In November, the DPIIT reportedly restarted interdepartmental consultations on its draft e-commerce policy. The policymaking process has spanned over two years and is fraught with issues like pathways to ease logistics and methods to control data. The timeline has followed a Joint Initiative on E-Commerce initiated on the sidelines of the Eleventh WTO Ministerial Conference in Buenos Aires in 2017. While India is part of a non-binding Work Programme on E-Commerce at the WTO, it is not part of this new initiative, which may culminate into plurilateral rules.

India hopes to adopt a domestic policy framework before it binds itself to any international protocols on e-commerce. The country’s insistence on a sequenced approach stems from the fear that domestic retailers, especially small businesses, are underprepared to compete with large global e-commerce companies. Until 2017, India was able to drive a hard bargain through the WTO Work Programme, to make its case with help from several developing countries that constitute the G-77. However, the Joint Initiative threatens to break this consensus.

Negotiations within the Joint Initiative have gained momentum. At Buenos Aires, more than 70 nations came together to create it. Its membership has grown to 86 countries committed to issue a consolidated progress report before end-2020. A key feature is the participation of G-77 nations. Like India, they were opposed to formalisation of talks on any form of an international treaty prior to the resolution of cross-cutting issues such as the digital divide between developed and developing nations.

The willingness of other developing nations to not only participate in but also in the case of Singapore to lead Joint Initiative discussions despite India’ reluctance is cause for circumspection. It signals that some of these countries are in a state of readiness to welcome international rules and, therefore, global competition. This can perhaps be correlated to the enhanced level of digital adoption by small businesses in many such countries. For instance, Singapore, Malaysia and Thailand target key capacity deficits faced by small enterprises in the adoption of digital technologies, through well-designed state support. Singapore (3), Malaysia (34) and Thailand (48) outperform India (73) on the UNCTAD B2C E-Commerce Index. Proactive state support has also allowed their local businesses such as Lazada and FashionValet to compete globally.

In a forthcoming report for the Esya Centre, we explore the role of specialised sectoral development agencies in the progress of other G-77 countries that are part of the Joint Initiative. Many such countries have established sectoral agencies that are executive bodies with a broad mandate to undertake a range of developmental interventions to enable local e-commerce.

These agencies tend to function outside their traditional bureaucratic fold, which allows them the agility needed for private sector engagements. Further, the inclusion of private sector professionals within such organisations enables the kind of technical competency that traditional government set-ups lack. Singapore’s Infocomm Media Development Authority, for example, works under the guidance of a Board of Directors that comprises both public and private sector experts.

The willingness of other G-77 countries to participate in international negotiations on e-commerce indicates that a developmental approach is superior to a regulatory one, to foster competitiveness in new markets. The renewed momentum in domestic policy process is also an opportunity for India to recalibrate its command-and-control ethos. For instance, the previous draft policy sought government access to source codes of e-commerce companies, to ensure lack of algorithmic bias.

Conversely, nations such as Singapore, Malaysia and Thailand are signatories to the TPP, which prohibits access to source codes as a requirement for market entry. Instead, they are focused on setting national technical standards to engender accountability and trust in the digital economy. A focus on standards rather than state control is also a better fit for globalisation.

India has ready templates of sectoral development bodies such as the National Film Development Corporation or the National Health Authority to replicate. It must not forgo the chance to address capacity deficits of small retailers through meaningful policy support that can enable them to compete and scale.

Authors are public policy experts with the Esya Centre, a think tank

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