TWN Info Service on WTO and Trade Issues (Mar19/15)
29 March 2019
Third World Network

US and allies circulated proposals on e-com pluri-accord

Published in SUNS #8875 dated 27 March 2019

Geneva, 26 Mar (D. Ravi Kanth) – The United States and several other countries circulated informal proposals on 25 March for negotiating plurilateral market access commitments in electronic commerce at the World Trade Organization, in what would appear to be a clear violation of the existing 1998 multilateral work program on e-commerce, trade envoys told SUNS.

Even though the WTO’s 1998 work program on e-commerce has not concluded, members of the so-called informal joint statement initiative (JSI) group on e-commerce circulated proposals for negotiating comprehensive commitments in a range of e-commerce areas.

Though the JSI members had failed to secure multilateral approval at the WTO’s eleventh ministerial conference (MC11) in Buenos Aires in December 2017, they went ahead with their proposals for market access commitments in trade in goods and trade in services, as well as trade-related aspects of intellectual property rights (TRIPS) and regulatory issues among others.

Significantly, China, which had joined the JSI group in Davos in January, has not circulated any proposal.

According to a report in the Financial Times on 24 March, in ongoing bilateral trade talks, China “is refusing to budge on US demands in digital trade.”

The US wants China to agree to the removal of restrictions on cross-border data flows, data localization, cloud-computing, and web blocking among others.

Clearly, the outcome from the US-China bilateral negotiations could serve as a benchmark in the plurilateral negotiations at the WTO, said a trade envoy, who asked not to be quoted.

The US, however, has now listed all the demands that it had made in the negotiations with China, at the plurilateral level.

The four-page US proposal calls for negotiating plurilateral commitments almost on the lines of what were agreed in the failed Trans-Pacific Partnership (TPP) negotiations.

The commitments to be negotiated at the plurilateral level include:

i. “free flow of information” such as unrestricted cross-border transfer of data, removal of restrictions on mandatory storing of information in local servers and web-blocking (restrictions on cloud computing);

ii. “fair treatment of digital products” involving permanent moratorium for levying customs duties on electronic transmissions and non-discriminatory treatment of digital products;

iii. “protection of proprietary information” for barring forced transfer of technologies and discriminatory technology requirements;

iv. “digital security” for ensuring secure encryption technologies and cyber security;

v. “facilitating internet services”, including cloud computing;

vi. “competitive telecom markets”; and

vii. “trade facilitation.”

Japan, which was a member of the failed TPP agreement and later the founder of the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), has proposed issues similar to those in the US proposal.

Japan, for example, has asked the plurilateral participants to negotiate on “regulatory frameworks facilitating e-commerce/digital trade”, including cross-border data flows and prohibition of data localization such as using computing facilities, and open networks among others.

The European Union, which differs from the US on issues such as data privacy, wants a “provision ensuring that national legal systems allow contracts to be concluded by electronic means and those legal requirements for contractual processes neither create obstacles nor result in such contracts being deprived of legal effectiveness.”

The EU also wants “a set of provisions to guarantee that national legal frameworks are in place to ensure that members do not deny the legal effect and admissibility as evidence in legal proceedings of electronic authentication and trust services solely on the basis of that they are in electronic form.”

The EU has also proposed that the plurilateral members negotiate strong commitments on consumer protection.

Surprisingly, some of the developing countries – Brazil, Argentina and Colombia among others – which hitherto championed the cause of credible reforms in global farm trade, have now become the new messiahs of the digital trade, said a South American trade envoy, who asked not to be quoted.

Argentina, Colombia, and Costa Rica, for example, want the plurilateral negotiations to result in “bindings of market opening in e-commerce-related sectors of trade in goods and services” and “regulatory issues”.

Brazil, which has recently announced that it would forego special and differential flexibilities accorded to developing countries, has suggested “four negotiating pillars” that include “market access” in services and non-services sectors of e-commerce, “electronic commerce facilitation”, “development of electronic commerce,” and a “reference paper on electronic commerce.”

Several other members of the plurilateral group such as New Zealand, Singapore, Chinese Taipei, and Russia among others have also circulated proposals on various aspects covering e-commerce.

More important, the proposals did not include negotiations on security-related blanket restrictions such as the recently imposed restrictions by the US on the Chinese telecommunications companies such as Huawei.

However, the US insisted that “achieving a competitive telecommunications market is an essential first step for any country to overcome the digital divide.”

The failure to include intransigent security-related restrictions on telecommunication companies ought to have been in the forefront of the plurilateral negotiations but they are nowhere to be seen in any of the proposals.

In short, the battle lines are being drawn among countries such as India, South Africa, and a large majority of developing nations that are determined to conduct negotiations on the basis of the 1998 work program on the one side, and the informal plurilateral votaries led by the US on the other which seem determined to cause irreparable damage to the multilateral framework of the WTO, trade envoys said.

[Any plurilateral trade agreement on e-commerce that provides for conditional benefits to its members, bristles with several problems of WTO legality. Unless the parties to any such plurilateral accord on e-commerce extend its benefits “unconditionally” to all other WTO members, the accord will violate the MFN provisions.

[If its members, on reaching an agreement, seek to have it included as a plurilateral agreement in Annex IV of the WTO Treaty (so as to exclude benefits to other WTO non-members), it would require the approval of the WTO members, “exclusively by consensus”, at a Ministerial Conference (MC).

[Even this last, if agreed to at an MC, may be WTO-illegal, as such a plurilateral accord would be a colourable attempt at avoiding the requirements of the WTO treaty’s amendment provisions. SUNS]