Dozens of countries are in talks to regulate cross-border e-commerce

Seventy-five nations have agreed to participate in World Trade Organization talks, beginning in March, on cross-border e-commerce, one of the fastest-growing and thorniest areas of global trade.

The big picture: Consumer-facing e-commerce has become a $3.5 trillion global market, and some $700 billion of those purchases occur across borders, but there are almost no existing international rules in place for it.

Background: Most existing trade agreements were written in the pre-digital era to cover traditional flows of goods that enter countries in large containers through ports of entry. But e-commerce results in a flood of small parcels that is overwhelming customs inspectors.

By the numbers: The McKinsey Global Institute projects that the global market for cross-border, business-to-consumer e-commerce will top $1 trillion by next year.

• Cross-border business-to-business e-commerce is thought to be 4–5 times larger.
• International package delivery volumes have tripled since 2000.
• E-commerce and new technologies could boost trade in manufactured goods by 6–10% in the next decade.

What's happening: China — the world’s largest e-commerce market — recently signed on to join the United States, the EU and roughly half of the WTO membership at the table. India, Pakistan, South Africa and some other developing countries are opting out because of concerns about multinationals accessing their local markets.

What's needed: Negotiators will need to harmonize frameworks governing not only e-commerce but other types of cross-border digital flows as well.

• Many countries require that data generated within their borders must be stored on servers physically located within that country. This is a point of contention for global internet traffic and transactions, since it has forced companies to build multiple foreign data centers.
• Negotiators will also need to address the lack of international standards for consumer protections and data privacy.

The bottom line: These talks are a chance to modernize trade and to protect vulnerable players involved, like small and medium businesses and customers.

Susan Lund is a partner at the McKinsey Global Institute, McKinsey & Company’s business and economics arm.