According to a research published by the International Monetary Fund (IMF), the value of trade in digitally delivered goods increased to $3.82 trillion in 2022, representing a record 54% of trade in services. It has surpassed other categories, such as products, with an average annual growth rate of 8.1 percent for over 20 years.
The global economy is reliant more than ever on digital trade, ranging from the selling of software to the streaming of movies. However, given that many developing nations find it difficult to engage fully in digital commerce, the IMF believes it is now necessary to implement policy changes that encourage participation, beginning with the maintenance of the existing tariff-free environment.
Trade in digital media, such as subscriptions to foreign journals, promotes interconnectivity, communication, and the transmission of knowledge and innovation. IMF said that digital marketplaces, such as app stores or freelance programming websites, will foster inclusion by reducing trade barriers for small firms and women-led businesses.
According to the IMF, despite these opportunities, many developing economies, in particular low-income countries, risk falling behind. Reasons include gaps in connectivity, information and communication technology infrastructure and digital skills, as well as the lack of a predictable and transparent legal and regulatory environment.
The WTO moratorium, in place since 1998 and periodically extended, prevents customs duties on electronic transmissions, fostering a stable environment for digital trade. The upcoming WTO Ministerial Conference in February will address the extension of this moratorium.
Concerns about fiscal implications center on potential revenue loss, but studies indicate a minimal impact (0.01 percent -0.33 percent of government revenue).
Research suggests that existing domestic consumption taxes, like value-added tax (VAT), are more effective in generating government revenue from digitized products, with a potential 2.5 times higher yield globally compared to tariffs.
