Developing countries are showing a clear interest in the transition to the digital economy despite challenges like lack of necessary infrastructure, it says.

The flagship publication, launched in an online event on Monday, also identifies opportunities for developing economies related to the digitization of manufacturing production, inclusion in the new digital services supply chain and lower costs of reaching international markets through the Internet.

The report maps out the use of government policies in the digital era and underlines the importance of countries working together to encourage positive global outcomes while minimizing negative spill-overs.

"In very recent years, spurring innovation in the digital field, whether new in the world or new in the country, is at the core of many new government policies, which have been adopted in countries at all levels of development," WTO Deputy Director-General Yi Xiaozhun said at the launch.

"Openness and access to larger markets and increased competition lead companies to innovate. Thus, trade and trade policies have contributed to innovation."

Since the 2008-09 financial crisis, some 115 countries have instituted "new industrial policies" aimed at advancing their economies towards digitally enabled production processes and services. The report finds that some of the policy instruments being employed to this aim are relatively new.

They include policies aimed at addressing access to data, research and development support such as tax breaks to assist digital innovation, knowledge diffusion through the agglomeration of talents and skills, and technological hubs to maximize knowledge spill-overs.

The report notes that while there is no one-size-fits-all approach, government interventions should be aligned with the countries' comparative advantage.

It adds that open trade can make innovation policies more effective at achieving their stated goals.

The WTO has already supported innovation in many ways like elimination of tariffs on internet and telecomm infrastructure products and liberalizing internet services through the Information Technology Agreement (ITA). The global trade body also stimulated e-commerce with the moratorium on duties on cross-border digital flows, the WTO report points out.

The WTO will continue to have an important role to play in reducing uncertainty in markets for digital goods and services, it says, asking members to share benefits of innovation policies and support domestic digital innovation.

The mobility of skilled workers, data flows and privacy concerns, and anti-competitive behaviour in the digital industry will be of high concern as well, the report adds.

International cooperation to foster shared understandings about these policies would help forestall trade tensions — and thus lay a firmer foundation for innovation, investment, and cross-border activity to flourish.