8 - Geopolitics and E-Commerce

Summary

Geopolitical forces are fundamentally altering the landscape of e-commerce and digital trade. Cross-border e-commerce is increasingly fragmented along geopolitical lines, as e-commerce companies are forced to reckon with the security implications of their operations. This includes governments’ concerns about data security and sovereignty. When foreign firms collect extensive data on the behavior of the country’s customers, there is potential for those data to be exploited in shaping consumer behavior or spreading information in the country. Additionally, when a foreign firm plays an important role in the domestic economy, local governments have limited means to encourage those firms to act in the “national interest” or broader societal and economic goals beyond maximizing profits. Because of these concerns, governments have adopted policies to shape the behavior of e-commerce companies. This includes shaping market access, level playing field, investment security, and institutional alignment. E-commerce companies have adopted various strategies to manage corporate nationality and geopolitical tensions, including masking country of origin, diversifying supply chains, relocating control rights, focusing on alternate markets, and corporate diplomacy.