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Report: Digital Global Trade Surges, Brings Profound Changes

FILE: Employees of, an Indian online discount shopping website, work inside their company office in New Delhi, March 1, 2012.

The flow of digital goods and services across borders is surging globally, while trade in traditional goods and the flow of international finance has stopped growing.

That's the conclusion of a new study by the McKinsey Global Institute, which said this huge change offers both opportunities and risks for companies and countries, particularly small ones.

At a presentation at the New America Foundation in Washington, McKinsey experts said the destination of trade, as well as the content, is changing. For the first time in history, emerging economies participate in more than half of global trade. The study also shows that trade between southern hemisphere developing nations is the fastest-growing connection.

Some 900 million people have international connections on social media and 360 million take part in cross-border e-commerce.

The report says small businesses around the world can now use platforms like eBay, Amazon, Alibaba, and Facebook to connect with customers and suppliers in other nations, becoming "micro-multinationals."

FILE - Workers collect customer orders at an Amazon fulfilment center in Hemel Hempstead, Britain, Nov. 25, 2015.
FILE - Workers collect customer orders at an Amazon fulfilment center in Hemel Hempstead, Britain, Nov. 25, 2015.

Digitalization is cutting the cost and complexity of international transactions, allowing small and medium-sized firms to reach customers and reap profits that were once the province of huge firms from developed nations.

The authors argue that companies and nations cannot afford to ignore the opportunities beyond their own borders.

Threats exist

Experts at the presentation also warned that the flow of digital goods and information that brings these benefits faces threats as some nations try to censor content, demand that data be stored locally, or otherwise block the flow of information, searches, video, and other communications.

This disruptive technology has a downside for established companies that may see new types of competitors emerge quickly from anywhere in the world. And companies that enter new markets hunting for customers and profit are also exposed to aggressive global competition, pressures to cut prices, and threats from cybercrime.

The same digital communications that help companies sell products also make it easier for extremists to offer their ideologies to audiences around the world.