Info Service on WTO and Trade Issues (Apr19/08)
Geneva, 9 Apr (Chakravarthi Raghavan*) – The plurilateral talks for e-commerce rules at the WTO, mooted by 76 countries, is a reality, though 88 other members cannot or will not participate, and “it is my hope that those holding out are not blackmailing the system but have legitimate issues that can be brought on board,” UNCTAD Secretary-General Dr Mukhisa Kituyi has said.
Dr Kituyi was speaking at a panel discussion on 5 April jointly organised by the UN Conference on Trade and Development (UNCTAD) and the Commonwealth Secretariat during UNCTAD’s eCommerce Week.
The panel discussion was on the development implications of the proposed WTO plurilateral negotiations on electronic commerce.
Chaired by Ambassador Xiangchen Zhang of the People’s Republic of China, six of the seven invited panelists were drawn from those supporting the negotiations, and one against. There were two others from the private sector listed, whose presentations were available and were invited to speak from the floor (but only one was present and spoke).
There were also two non-pre-arranged floor interventions, one by a former International Telecommunication Union (ITU) official and now Swiss civil society participant, questioning the claims that the rules will promote development, and opposing the WTO venue for the talks.
The other intervener, a World Bank person, said in his experience development issues always got pushed to the end of negotiations and wound up not really being taken into account.
The panel discussion appears to have given rise to sharp, negative comments from a coalition of over 300 global and national civil society organisations (CSOs) from 90 countries (developed and developing) from across the world, including international organisations of workers and national organisations of MSMEs (micro, small and medium sized enterprises).
This coalition, grouped under the Our World is Not For Sale (OWINFS) network, has been opposed to and campaigning against the e-com negotiations and the WTO as the venue.
These CSOs have generally been very supportive hitherto of UNCTAD and its work, and quite effective in their own countries against the consistent efforts of the US, EU and others, right from UNCTAD’s founding, to sideline, if not abolish UNCTAD.
These comments and exchanges got wide circulation over their list servers, “tweets” and the like. The CSOs voiced “outrage” at the “lop-sided” composition of the panel, and the UNCTAD Secretary-General for seemingly advocating developing country participation in the WTO e-com talks.
Dr Kituyi responded sharply to these comments and said that to claim UNCTAD’s position as supporting the e-commerce negotiations at the WTO was “cheap and nonsensical”, and critics should read what UNCTAD has said consistently.
It remains to be seen whether the presentations and comments and exchanges have converted any side to the other’s views.
As chair and moderator of the panel discussion, Ambassador Xiangchen Zhang noted at the start that a group of 76 (counting the 28 EU member States individually) out of 164 WTO members representing over 90 per cent of world trade had agreed at Davos, Switzerland, on 25 January 2019 to launch plurilateral negotiations on trade-related aspects of electronic commerce (e-commerce), aimed at facilitating e-commerce and digital trade.
(Ironically, while the US, as early as the 1982 GATT Ministerial, had been advocating trade-weightage of nations to prevail over consensus, this view never prevailed. In promoting the e-com talks and referring to trade-weights of Davos statement signatories, China is now seemingly advocating it.)
The Chinese envoy added that although the exact scope of negotiations has not been determined, they are likely to cover a wide range of specific issues in e-commerce, such as the moratorium on customs duties on e-commerce, e-commerce and digital trade facilitation, issues related to data and the development dimension of the negotiations.
Speakers at the panel, he said, would discuss systemic implications of the negotiations, risk of regulatory fragmentation through plurilateral accords and how the majority of developing countries, and most LDCs, that are outside the negotiations should respond to the outcomes.
Though the Chinese envoy raised the issue of systemic implications, neither he nor any of the other invited speakers addressed the fundamental systemic issue of how any outcome would find its way into the WTO rule-book or its legality outside the WTO framework.
(In response to a question from the floor, it was subsequently stated that it was not yet clear whether any agreement would include MFN provisions.)
Participating in the panel as a speaker, UNCTAD Secretary-General Kituyi injected a note of caution, pointing to the “unique circumstances and the possible ramifications.”
It’s too late, he said, to talk about whether there are going to be e-com negotiations at the WTO. Due to the failure to launch them multilaterally, there are going to be plurilateral negotiations. It is a reality. But there are 88 countries at the WTO that cannot or will not participate in the process.
Dr Kituyi said the last time when there was a stand-off of a similar nature, on whether they should harvest the Doha progress before launching New Issues, he was Minister of Trade for Kenya.
“I think we were wrong (then in saying) that unless we have our way, you can’t have your way. We set our resistance to what we did not want. Today that tactic will not work. It plays to those who want to succumb to opposition to multilateralism. Therefore, it is my hope that those holding out are not blackmailing the system but have legitimate issues that can be brought on board.”
Previously, there were drivers of multilateralism who bent over backwards to bring everyone in. Now it’s different. The whole multilateral experiment is in a crisis and the solution has to come from within. The crisis in multilateral ism cannot be cured by plurilaterals. They can make certain rules, but not cure the challenges to multilateralism. So, while proceeding on the plurilateral track, one must be aware that it is taking energy from the revival of multilateralism, and not solving the crisis, said Dr Kituyi.
The plurilateral talks are starting with a spaghetti bowl of regulatory regimes. So to move from there to an ambitious outcome is a big challenge. And some power is outside the group (not participating) but their interests will be implicated in the rules that are negotiated.
No one should fear negotiations, but no one should negotiate out of fear, Dr Kituyi said.
He hoped that those staying out of the talks would see the value of moving forward with the process. If they are staying out because they have issues to interpret their concerns and readiness to move forward, “we at UNCTAD are ready to work with you on capacity, first to be ready for e-commerce and next to be ready to negotiate.”
Australian Ambassador Ms. Frances Lisson said that digital trade is a critical driver of global economic growth, growing 32% faster and creating jobs more quickly. While e-commerce has been a long-standing element in the WTO’s work since May 1998, discussions on it have not progressed, while e-com provisions in FTAs are more common. It is hence clear that the WTO needs to engage or fall behind in relevance.
Since the January 2019 statement of the 76 countries, a schedule has been set, and the text proposals on the first tranche are due for discussion in mid-May. Hopefully it will allow for developing the inclusive potential of digital trade for women and MSMEs.
Half of the signatories are developing countries, including LDCs. All meetings are open to all WTO members, signatories or not to the Davos statement (but not to civil society). The documents are available to all members, and reports go to the WTO membership, said Ambassador Lisson.
Ambassador Kham-Inh Khitchadeth of Laos, from Asia and Ambassador Eloi Laourou of Benin from Africa, both LDCs, also spoke at the event, both underscoring the special disabilities of the LDCs, and the need for space for all developing countries, and specially the LDCs, to take on all commitments.
The Laos envoy noted that of the three LDCs who signed on to the e-com talk s at Buenos Aires in 2017, two signed on to the Davos statement. Laos, with little bargaining power, limited negotiating capacity, scarce finance and e-technology, has joined the process to have a seat at the table. The interests and concerns of the LDCs should be reflected in the negotiations.
He said Laos is optimistic that the WTO could deliver not only on e-com but also on the DDA.
Ambassador J. S. Deepak of India, the only invited panellist opposed to the e-com talks, said India felt that the talks must take place multilaterally for inclusive and balanced outcomes. India well understood the benefits of e-com; it has a (thriving) e-com ecosystem with growth, large number of users of social media, platforms, and applications. India understood the benefits that the changes would bring about.
While there are clear benefits in developing e-com and applications for business and consumers, “the negotiations on e-com at the WTO is an idea whose time has not yet come.”
There are three reasons why it is premature to have binding rules, he pointed out.
The Rules-based WTO system worked on the basis of mandates and priorities on multilateral rules. At the Buenos Aires Ministerial, there was a clear mandate and Work Programme (WP) multilaterally agreed by Ministers of 164 countries.
It provides that “we should continue the 1998 WP discussions …”. In spite of this, some members are moving forward with negotiations.
“We are watching but it’s not time to join them. Before jumping into rules, we need to understand the implications. This is a rapidly evolving technology. How do emerging technologies impact on existing rules? For example, Kenya took binding commitments on Road Transport in Mode 1 under GATS. But the technology did not exist for Uber at the time. While Kenya may have agreed to full commitments in Mode 1, does it imply that they gave away the space to have special provisions for domestic operators vis-a-vis foreign operators? What are the potential impacts of proposed rules on existing commitments in GATS and GATT?”
“Do we have a policy on data flows? Do we have a policy on managing and locating digital infrastructure? Data servers? Clouds? Digital industrialization and impacts on jobs in the era of changing technology?”
Drawing attention to a McKinsey study, the Indian envoy to the WTO said that many developing countries are leaders in business processing and call centers. With automation/mechanization, 50% of the jobs will disappear in countries like Thailand, Mexico, India etc.
“Do we need to look for good high-tech jobs or do we need to live with the current job loss?”
E-com pre-supposes affordable access to broadband. Only 1 in 3 of our population has high enough connectivity to leverage benefits. For the LDCs, it is one in 6 or 7. How do you leverage the great benefits without connectivity and affordable access?
And what are some of the proposals: Soft elements like spam, e-signature, authentication of documents, and hard elements like in CPTPP, XBDT, free flow of data, bans on data localization and permanent moratorium on duties for e-com transactions.
Data is the new oil is a cliche. Data is our competitive advantage. It is a new commodity which we can leverage for our development. Most data is created in developing countries but it is captured and processed and mined by TNCs in developed countries, said Ambassador Deepak.
If it’s like the new oil, do we have rules on benefit sharing, use, development like we do for oil? It’s not just about privacy but about using the economic values of data for community development. If we do not have servers and cloud computing, we cannot have jobs in the developing countries. Yes, cloud computing without boundaries will have efficiencies – but at whose cost? Should all costs be borne by developing countries?
At the time the moratorium on customs duties on e-transmissions came into being, e-transmissions were insignificant. Now they are a significant portion of trade flows, he said.
According to a recent UNCTAD study, countries will forego US$10 billion in revenues due to the moratorium, of which 97% will be in developing countries. Tariff losses by LDCs are US$1.5 billion.
According to the UNCTAD paper, it would be almost US$2 billion for Mexico and Thailand, US$0.5 billion for China, India, and Nigeria.
For small LDCs, this is a big issue. Tariffs are 12% of revenue. As more products can be digitally printed, the tariff schedules will be eroded.
So, the moratorium on e-transmissions has the potential of making domestic industry less competitive. It would greatly harm the revenue base of developing countries and would take away their ability to have special dispensation for domestic suppliers. Under GATS, you can have exceptions in the WTO. But if you agree to non-discriminatory treatment for foreign service providers, yo u cannot give special treatment for your domestic suppliers. This has huge implications for development in developing countries and LDCs especially.
Without adequate preparation, we are going to have a very difficult time ma king rules. We need to be prepared, we need to develop digitalization. We are in need of policy space and we are populating it with our national data policy. India’s data should be used for India’s development, said the Indian envoy.
Those who generate data should not become products to be used by others but should benefit from it.
What could be the role of UNCTAD? It’s important that we do not leap in the dark. We have to understand the situation now, engage in the exploratory Work Programme in the WTO, explore elements of high ambition. UNCTAD can help understand a bottom-up approach to digitalization and e-commerce with all the stakeholders taken into account.
Enlightened engagement rather than one based on ignorance may be the way to go forward, even if an idea is the fashionable idea of the season, said Ambassador Deepak.
(The Indian ambassador’s remarks drew a sustained round of applause.)
The EU representative, Ambassador Paolo Garzotti, said that the issue is of systemic importance, but the negotiations are taking place only among certain members on the most dynamic areas of trade, demonstrating the resilience of the WTO system. The EU had joined the negotiations for the same reasons that Ambassador Deepak had mentioned for not joining.
“We don’t want to go back home and come back in ten years … It’s a resounding yes to multilateralism and a no to paralysis” at the WTO. The EU priorities in the negotiations are “comprehensive and ambitious” rules, supported by as many WTO members as possible, in the limited amount of time.
This, he said, is the classical trilemma: “a dynamics approach to provide flexibility to negotiating outcome.” It was not realistic to have all rules accepted by all members. The outcome will be difficult to say before the start.
“We would expect: enhancing global e-commerce; facilitating MSMEs in foreign markets; “softer measures” like e-signatures; and enhancing consumer trust.”
What are the development implications and systemic implications?
The negotiations “are open to everyone and transparent, everyone is welcome to join; it is already a good step for development … in the exploratory talks in 2018, two elements came out as relevant for developing countries: create an enabling environment that facilitates consumer trust.”
E-signatures and payments to protect consumers are basic and crucial and necessary elements to bring benefits. This is good for all members but especially those from the developing world. If these discussions take place at national and global level, that would be great, he said.
As for regulatory infrastructure, “We should upgrade the rules on telecom services, that we put forward last year, which will ensure a transparent regulatory environment and effective competition, higher level of legal certainty and interoperability for services providers and consumers … The outcome should provide benefits in expanding e-com through sound global rules and principles; a more predictable and transparent online environment; positive impacts on MSMEs; create new avenues of trade for land-locked countries. Also for all to be part of the global digital trade standard-setting and overcome digital trade challenges.”
Creating artificial divisions between developed and developing members is not conducive to success. These rules are going to be written anyway. If we don’t do them in the WTO, they will be done elsewhere; in fact they are already being done in FTAs, even FTAs where LDCs are members, said the EU envoy.
It’s a risk of finding the global environment set by others instead of here . That’s why all members, and developing countries in particular, have an interest in joining the club rather than letting the rules being set without them. If you set traffic rules while everyone is still in the street, you risk a lot of crashes. Better to do it multilaterally in a rules-based system, he added.
Ambassador Eloi Laourou of Benin said the digital economy and e-trade was part of daily life. “We purchase online, we sell online, we are people, a society, government, MSMEs, enterprises that are using ICTs, for health, education, telecommunications, agriculture. We have to take into account an assessment of the work in front of us … the needs and concerns of developing countries and particularly LDCs. In aspects that are linked with e-commerce, LDCs need to have policy space. The specific areas we should touch on relate to data flows, data localization, revenue sharing, start-ups or enterprises in general. For the LDCs, these are constraints, and we cannot take the same commitments on regulation.
“It is also necessary to take note and consider the moratorium on e-transmission duties in the light of what the Ambassador of India has commented on; scrutinize the research of UNCTAD to make sure we have scope for policy space for developing countries particularly LDCs.”
For all LDCs to benefit from this exercise, he would like all LDCs to join the initiative. Developing countries and LDCs have a lot of constraints; their digital infrastructure and cybersecurity have to be enhanced, and they need schemes to promote this readiness.
The Commonwealth Secretariat representative, Teddy Soobramanien, posed the question whether e-commerce can bring benefits and promote social welfare. He had heard the case of land-locked countries, but not on remote small island states who probably stand to get more from e-commerce to reach more markets and reduce trade costs, increase efficiency and reduce barriers.
Richard Hill from a Geneva-based Swiss civil society organisation complained that the panel was unbalanced and thanked Ambassador Deepak for providing some balance. He said that he had been involved in e-commerce issues since 1987, when it was called Electronic Data Interchange (EDI). EDI has been working well since then, and “there is no reason to think that new binding rules are needed now.”
For example, the e-signature issue was sorted out way back in the 1990s by UNCITRAL, and there is no reason to consider new provisions.
Despite the statements to the effect that it was too early to foresee the outcome of the plurilateral negotiations, in fact the outcome is pre-ordained: several of the proponents have already agreed on e-commerce provisions in TPP and USMCA. In fact, the outcome will surely be based on USMCA, because that corresponds to what industry has quite openly said they want.
Key industry demands are to constrain national regulation so as to obtain: free flow of data; no data localization; no source code disclosure requirements (this may prevent governments from procuring open source software and/or from examining source code to determine whether it complies with regulatory requirements regarding safety, pollution, etc.); permanent prohibition of import duties on digital products (which can be a serious problem for developing countries, who might not have any other practical means to raise revenue, in particular in light of the fact that many Internet companies optimize their operations so as to avoid paying income taxes in any jurisdiction).
Hill supported Ambassador Deepak’s statement to the effect that the pre-requisites for ecommerce negotiations are not there. These include: affordable Internet access (which is not available in many developing countries); national data policies; global taxation policies that avoid current tax avoidance; national and global anti-trust policies and enforcement; and methods to distribute equitably the value-added of data monetization.
The WTO e-commerce proposals seek to enshrine the current business model, which has been referred to as Surveillance Capitalism by respected Harvard Business School professor Shoshana Zuboff. She has written a 500-page book (The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power) explaining in detail why that system is evil.
Hill stated that since the EU representative mentioned that the e-commerce negotiations will include the telecommunications issue, he was obliged to recall his previous capacity as a senior official at the International Telecommunication Union (ITU) and to express his astonishment that the very same countries that refused to discuss proposals made by developing countries in the ITU in 201 2 are now making in the WTO the very same proposals that they refused in the ITU.
In another question/intervention from the floor, a representative of the World Bank stated that, in his experience, development issues always got pushed to the end of negotiations and wound up not really being taken into account.
In response to Mr. Hill’s question, the EU representative reiterated that the outcome was not pre-ordained and stated that he was not aware of the 2012 discussions in the ITU.
On the second question, the panelists reiterated that they would put development at the center of the negotiations.
Mr. Hill later told SUNS, “if you believe that, then you probably believe in the tooth fairy! …. Look at the hypocrisy of these developed countries who claim they are undertaking these negotiations in the interest of developing countries, while in fact promoting the interests of big tech monopolies.”
That hypocrisy, he noted, was publicly visible during the negotiations on Friday 5 April at the Intergovernmental Group of Experts (IGE), where developed countries blocked inclusion, in non-binding recommendations, key proposals from developing countries, including refusal to accept any references to “data ownership”, “economic value of data”, or “data policies”. As a result, no recommendations whatsoever were agreed by the IGE.
In concluding the panel, the Chinese envoy as chair reminded everyone of the old adage: “If you are not at the table, then you will be on the menu.”
Perhaps more appropriate for developing countries would have been: “We must, indeed, all hang together or, most assuredly, we shall all hang separately”.
[* Chakravarthi Raghavan is the Editor-Emeritus of the SUNS. The above is based on presentations posted at UNCTAD website (https://eweek2019.unctad.org/meetings/975063), and notes on the proceedings shared with SUNS by some participants. See also “Beware Trojan horse of proposed E-commerce rules” in SUNS #8840 dated 6 February 2019.]