DIGITAL TRADE AND CROSS-BORDER E-COMMERCE: EMERGING CHALLENGES IN INTERNATIONAL LAW

ABSTRACT

Digital trade and cross-border e-commerce have emerged as defining features of the 21st-century economy, transforming the way goods, services, and data traverse borders. While digitalisation creates unprecedented opportunities for innovation and inclusivity, it also poses profound legal challenges. International trade law, rooted in an analogue era, struggles to address questions of jurisdiction, data governance, intellectual property, and consumer protection in the digital marketplace. This article analyses the evolution of digital trade regulation under the WTO, UNCITRAL, and regional frameworks, explores key challenges such as data protection and cybersecurity, and examines pathways for harmonisation. It argues that international law must adapt to strike a balance between sovereignty, consumer rights, innovation, and the free flow of information. The article concludes with proposals for inclusive, adaptive governance capable of underpinning a resilient digital economy.

INTRODUCTION

The twenty-first century is marked by an unprecedented digital revolution that has reshaped the very foundations of international commerce. Digital trade, broadly understood as trade enabled by digital technologies including the cross-border exchange of goods, services, and data now constitutes a significant and rapidly growing component of the global economy. According to the United Nations Conference on Trade and Development (UNCTAD), global e-commerce sales exceeded USD 27 trillion in 2021, with cross-border flows contributing substantially to this figure.¹ This represents not just a quantitative expansion of trade, but also a qualitative transformation of how value is created, distributed, and regulated.

The rise of platforms such as Amazon, Alibaba, and Mercado Libre has disrupted traditional supply chains, allowing small and medium-sized enterprises (SMEs) to participate in international trade with unprecedented ease. Digital services from streaming platforms to cloud computing further blur the boundary between goods and services, challenging existing trade categories.

Yet, while economic practices evolve, international legal frameworks remain rooted in paradigms designed for tangible goods and traditional services. The World Trade Organization (WTO), long regarded as the backbone of the multilateral trading system, was not designed to address the unique challenges of a digitised marketplace. National regulations on privacy, consumer protection, and content moderation further complicate the global picture, creating tensions between sovereignty and interoperability.

This tension underscores a pressing reality: international law must evolve to provide certainty, fairness, and inclusivity in the governance of digital trade. Without coherent rules, the digital economy risks fragmentation, exclusion, and diminished trust.

EVOLUTION OF DIGITAL TRADE IN INTERNATIONAL LAW

WTO Framework

The WTO remains central to any discussion of international trade governance. Its General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) are applicable to aspects of digital trade. However, these instruments were drafted in the mid-1990s, before the explosive growth of the internet economy.

One of the earliest WTO initiatives was the 1998 moratorium on customs duties on electronic transmissions. While it facilitated the growth of e-commerce by ensuring tariff-free data flows, its repeated renewal has become contentious. Developing countries argue that the moratorium disproportionately benefits developed economies by restricting their ability to generate tariff revenue, while advanced economies see it as essential for a predictable trading environment.²

More ambitious was the Joint Statement Initiative (JSI) on E-Commerce, launched in 2017 by a coalition of WTO members.³ The JSI aims to establish baseline rules on issues such as cross-border data flows, paperless trading, and source code protection. However, because it is plurilateral rather than multilateral, it raises concerns about inclusivity and the erosion of the WTO’s consensus-based ethos.

UNCITRAL and Model Laws

The United Nations Commission on International Trade Law (UNCITRAL) has been a pioneer in harmonising electronic commerce law. Its Model Law on Electronic Commerce (1996) and Model Law on Electronic Signatures (2001) provided templates that many states have adopted.⁴ These instruments enhance legal certainty for e-transactions by recognising the validity of digital signatures and electronic contracts.

Nonetheless, UNCITRAL’s texts are soft law instruments, lacking binding force. Their value lies in providing reference points, but they cannot overcome the fragmentation that results from divergent national implementation.

Regional and Bilateral Approaches

Recognising the slow progress at the WTO, states have increasingly turned to regional and bilateral agreements to regulate digital trade. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Digital Economy Partnership Agreement (DEPA), and the Regional Comprehensive Economic Partnership (RCEP) all contain innovative provisions.⁵

For instance, CPTPP members commit to the free flow of data across borders, while DEPA introduces pioneering frameworks for artificial intelligence governance, open government data, and fintech regulation. Such agreements show that regulatory experimentation is occurring at the regional level, but they also risk creating a patchwork of regimes that complicates global trade.

EMERGING CHALLENGES IN CROSS-BORDER E-COMMERCE

Jurisdiction and Applicable Law

Digital transactions are inherently transnational, making it difficult to determine which courts have jurisdiction and which laws apply. For example, a consumer in Kenya purchasing goods from an online marketplace in China hosted on servers in the United States raises complex jurisdictional questions.

Courts often resort to traditional doctrines, but these provide limited clarity, leading to forum shopping and enforcement gaps. As Burri observes, digital trade law is “piecemeal and reactive,” requiring systemic reform.⁶ The absence of a coherent framework undermines predictability and deters investment.

Data Protection and Privacy

Data is the lifeblood of digital trade, enabling personalised services, targeted advertising, and global logistics. Yet, national approaches to data governance diverge sharply:

• The European Union’s GDPR treats data protection as a fundamental right, imposing stringent requirements on firms.
• The United States favours a market-driven, sector-specific approach.
• China asserts strong data sovereignty, restricting cross-border transfers to maintain control.⁷

This has created “data realms,” regulatory zones that fragment global digital trade. Aaronson and Leblond argue that these divergent models complicate multilateral rulemaking and create new forms of digital inequality.⁸

Consumer Protection and E-Contracts

Cross-border e-commerce exposes consumers to unfamiliar jurisdictions, deceptive practices, and weak remedies. UNCITRAL’s texts attempt to provide legal certainty for e-signatures and online contracts, yet enforcement remains problematic. Issues of unfair terms, dispute resolution, and digital identity verification persist.

Intellectual Property Rights in Digital Trade

Digital platforms have transformed intellectual property (IP) distribution. Piracy, unauthorised streaming, and challenges to traditional copyright frameworks have increased. WTO’s TRIPS provides the foundation, but it struggles to adapt to emerging questions such as AI-generated creativity and cross-border enforcement of IP rights.⁹

Cybersecurity and Trust

Trust is central to digital transactions. Cybersecurity breaches undermine confidence in online trade, raising legal questions of liability, state responsibility, and international cooperation. Existing international law lacks a comprehensive framework to regulate state and non-state actors in cyberspace.

INTERNATIONAL INSTITUTIONAL RESPONSES

WTO and Plurilateralism

The WTO’s JSI on e-commerce represents an important, though limited, step towards multilateral governance. Wu highlights that digital provisions in FTAs increasingly shape WTO negotiations, creating a bottom-up influence from regional to global frameworks.¹⁰ However, participation remains uneven, and some developing states fear exclusion.

UNCITRAL’s Soft Law Role

UNCITRAL’s model laws continue to serve as reference points for states crafting e-commerce legislation. Ziegler and Jevglevskaja note that these texts, while useful, fall short of providing enforceable commitments necessary for cross-border uniformity.¹¹

OECD and Regional Frameworks

The Organisation for Economic Co-operation and Development (OECD) has issued guidelines on digital taxation, while agreements such as DEPA pioneer rules for AI, fintech, and open government data.¹² These efforts are innovative but risk entrenching regulatory pluralism.

FUTURE PROSPECTS AND RECOMMENDATIONS

To address these challenges, international law must evolve along several dimensions:

1. Harmonisation of Digital Trade Rules: A binding multilateral agreement within the WTO could create a baseline of rules on data flows, consumer protection, and cybersecurity.
2. Balancing Sovereignty with Free Flows of Data: Mechanisms for cross-border data transfer that respect national regulatory autonomy while enabling interoperability are essential.
3. Inclusivity for Developing Economies: Many developing countries lack digital infrastructure and fear marginalisation. Special and differential treatment provisions should ensure digital trade benefits are equitably distributed.
4. Strengthening Dispute Resolution Mechanisms: The development of specialised digital trade arbitration or inclusion of e-commerce panels within existing institutions could enhance legal certainty.
5. Building Global Trust Frameworks: International cooperation on cybersecurity, digital identity standards, and privacy certification mechanisms could foster confidence in online trade.

CONCLUSION

Digital trade represents both an opportunity and a challenge. Its expansion has outpaced international law, creating regulatory fragmentation and uncertainty. While initiatives by the WTO, UNCITRAL, and regional trade agreements offer partial solutions, the absence of a coherent global framework hampers legal certainty.

As commerce becomes increasingly digital, international law must adapt to balance state sovereignty, consumer protection, innovation, and free flows of data. A multilateral, inclusive, and adaptive legal framework is essential to harness digital trade’s potential while mitigating its risks.

REFERENCES

1. UNCTAD, Global E-commerce Sales Surpass $27 Trillion (2021) https://unctad.org accessed 10 September 2025.
2. Mira Burri, ‘Understanding digital trade law: Past, present and future’ (2021) 24 Journal of International Economic Law 353.
3. Henry Gao, ‘Digital trade negotiations at the WTO: Understanding the Joint Statement Initiative’ (2021) 54 Journal of World Trade 383.
4. UNCITRAL, Model Law on Electronic Commerce (1996).
5. Deborah Elms, E-commerce and trade policy: WTO and beyond (APEC Studies 2023).
6. Burri (n 2).
7. Anupam Chander, ‘Data nationalism: A challenge to global digital trade’ (2019) 128 Yale Law Journal Forum 724.
8. Susan Aaronson and Patrick Leblond, ‘Another digital divide: The rise of data realms and its implications for the WTO’ (2018) 21 Journal of International Economic Law 245.
9. Graeme Dinwoodie, ‘The international intellectual property system and digital trade’ (2020) 53 Vanderbilt Journal of Transnational Law 901.
10. Mark Wu, ‘Digital trade-related provisions in free trade agreements’ (2022) 21 World Trade Review 489.
11. Andreas Ziegler and Natalia Jevglevskaja, ‘Digital Trade and Data Flows in International Economic Law’ (2020) 30 Swiss Rev Intl & Eur L 157.
12. OECD, Going Digital: Shaping Policies, Improving Lives (OECD Publishing 2019).