With the news that five years of trade negotiations under the World Trade Organization (WTO) Joint Statement Initiative on Electronic Commerce reached a milestone Friday (July 26) — with participants agreeing to a two-year extension of a moratorium on taxation of cross-border electronic transmissions — mitigating the fragmentation that businesses face when transacting internationally is top of mind for global enterprises.
The 91 WTO members participating in the discussions account for over 90% of global trade, and the joint statement’s co-conveners, Australia, Japan and Singapore, were able to pass an agreement banning the imposition of “customs duties on electronic transmissions between a person of one Party and a person of another Party.”
The 25-page agreement aims to harmonize the regulatory environment for eCommerce and facilitate smoother cross-border transactions, ensuring that the digital economy remains open and accessible, fostering innovation and growth.
And as businesses increasingly operate in a digital-first world, the implications of these new norms could be far-reaching, particularly for cross-border payments and commerce.
Read more: Could ISO 20022’s Data-Rich Messaging Fuel AI Innovation?
Crucially, within the text of the WTO agreement, are the hints of a slow-but-sure reimagining of cross-border commerce’s digital transformation — both around international e-invoicing and paperless global trade.
“The Parties recognize that electronic invoicing frameworks can help improve the cost effectiveness, efficiency, accuracy, and reliability of electronic commerce transactions. To the extent that a Party develops a measure related to electronic invoicing frameworks, it shall endeavour to design the measure to support cross-border interoperability, including by taking into account relevant international standards, guidelines, or recommendations, where they exist,” the agreement states.
As PYMNTS has covered, the move toward e-invoicing is not merely about converting a paper invoice into a digital format; it’s about reimagining the entire business-to-business (B2B) invoicing process to be more streamlined and better integrated into digital business ecosystems. The workflow transformation promises to reduce errors, lower costs, and speed up B2B payment processes, offering benefits to companies of all sizes.
Already, more than 80 countries have put in place a mandate for e-invoicing or continuous transaction control (CTC) requirements as governments around the world look to prioritize tax reform and real-time reporting.
PYMNTS Intelligence data has found that nearly half (45%) of small and medium-sized businesses (SMBs) cited manual invoice review as a problem when making payments, with 19% saying it was their top issue.
Read more: Capturing the $250 Trillion Cross-Border Payments Opportunity
For businesses, particularly in the technology and eCommerce sectors, the continued absence of tariffs on electronic transmissions per the WTO agreement means reduced costs and barriers to entry in foreign markets. This can encourage more companies to engage in cross-border trade, expanding their customer base and revenue streams.
“With a view to creating a paperless border environment for trade in goods, the Parties recognize the importance of eliminating paper forms and documents required for importation, exportation, or transit of goods … each Party is encouraged to eliminate paper forms and documents, as appropriate, and transition towards using forms and documents in data-based formats,” states the WTO agreement.
Cross-border payments often involve multiple intermediaries, resulting in high fees and long processing times. By promoting interoperability, the new norms aim to streamline these processes, making it easier and cheaper for businesses to transact across borders. This is important for SMBs, which often face barriers when trying to enter foreign markets.
“If you do a $10 transaction today, you’ll probably spend a very significant part of that $10 as fees. And we need to get to a point where that base fee is something that you don’t have to think about, so that you can do low-value transactions at scale — that could change the landscape of cross-border payments,” Ram Sundaram, COO at TerraPay, explained to PYMNTS during a discussion for the series “What’s Next in Payments: The Halftime Report.”
Read more: 5 Ideas to Transform Cross-Border Commerce With Blockchain Solutions
At the same time, compliance is an ever-present issue, with local anti-money laundering (AML), know your customer (KYC) policies and sanctions screenings needing to be addressed for each individual region — and there are over 19,000 tax jurisdictions worldwide. Businesses must navigate a patchwork of regulations when conducting cross-border eCommerce, including varying standards for data protection, consumer rights and taxation. This complexity not only increases compliance costs but also creates uncertainty, which can deter companies from expanding internationally.
“Everything’s going more cross-border and getting regulated, so tax compliance regulation is huge for new business models in new markets,” Sovos CEO Kevin Akeroyd told PYMNTS in an April interview.
According to a recent PYMNTS Intelligence survey, the failure rate for cross-border payments approaches 11%, accounting for $3.8 billion in lost sales in 2023 alone.
As the global digital economy continues to grow, the hope is that the norms established by the WTO agreement can play a role in shaping the future of cross-border commerce. By fostering a more predictable and streamlined regulatory environment, the agreement aims help unlock the full potential of eCommerce, driving economic growth and innovation.
The post WTO Agreement Looks to Pave Way for Paperless Cross-Border Commerce appeared first on PYMNTS.com.
