The four WTO bodies dealing with different aspects of the work programme on e-commerce, will take up further work and identify cross-sectoral issues and report to the General Council at its next regular meeting.

by Chakravarthi Raghavan

Geneva 17 July 2000 -- Putting aside for the present the question of status of the ‘moratorium’ on E-Commerce tariffs and duties, the General Council of the WTO Monday asked the four WTO bodies dealing with different aspects of the work programme, to take up further work and identify cross-sectoral issues and report back to the General Council at its regular meeting in December.

Meanwhile, the Chairman of the General Council is to hold further informal consultations on whether or not an Ad Hoc task force on E-Commerce is to be set up, and whether this could be done at the next October session of the General Council, or wait for the December meeting when the reports on e-commerce work from the WTO bodies would also be there.

As far as the issue of moratorium on customs duties and other fees on e-commerce, set at the Geneva Ministerial Conference in 1998 and remaining in place till the Seattle Ministerial Conference in 1999, the US assertions about the moratorium being a political declaration and commitment continued in force has been challenged at the General Council by a number of delegations.

After the collapse of the 3rd Ministerial Conference at Seattle, and the way it ended without any procedural or substantive decisions on the issues before that meeting, the US administration had tried to get others to agree to its view that the moratorium was in effect, and held up further work on the issues in WTO bodies.

It also wanted a General Council task force or working group to tackle the issues, rather than in the various WTO bodies and the technical-level discussions it involves. This US stand is in contrast to the US (and EU) view to send the “implementation issues” to WTO bodies for technical level consideration (that would enable them to bottle up the issues there).

Several developing countries, with small delegations, have also favoured the work on e-commerce being done at the General Council level. Others have opposed this, including for the reason that while the e-commerce ad hoc task force consideration was being brought on fast track, there had been no consultations initiated to establish separate working groups on trade and technology, trade and finance and trade and debt, that had been proposed by them for Seattle.

On the moratorium issue, Pakistan, India and a number of other developing countries did not accept the US view of the legal position after the collapse of the Seattle meeting, though they were agreeable to continuing the work programme. In their view, the Geneva declaration’s moratorium was to last only till the Seattle meeting and required a consensus decision there to continue it.

But the US tried to link a decision on the moratorium to the continuation of the work programme on e-commerce in various WTO bodies, resulting in a stalemate.

Till recently, the US administration has been using the WTO ‘moratorium’ to get the US Congress to continue the present moratorium on state and local taxes (sales taxes mostly) on e-commerce and to enact law to eschew any such taxes within the US, and has been using the US Congressional moves to persuade its trading partners to continue the international moratorium. The US House of Representatives has adopted legislation to continue the moratorium internally (on levies by states and local authorities), but the proposition has now run into trouble in the Senate. Retail stores across the country, and various shopping malls and others, who have to collect and pay sales taxes on transactions to the state and local authorities, and see their business going away to distant enterprises who can undercut on the tax and deliver goods at less cost inside the country, have successfully lobbied senators to rethink the issue, and have held up the law.

The issues of unfair competition that the US senators have been faced with, apply even more across the world, particularly in the developing countries. Some trade diplomats, in the work programme last year, found the US giving equivocal replies on whether the moratorium on taxes and duties on e-commerce products deliverable via internet, would involve (on the basis of the GATT theory of like products) no duties on physical goods ordered by e-commerce, but delivered physically.

In several of the major developing countries, the economic implications of the no-duty on e-commerce (which principally benefits the upper middle classes in their luxury consumptions) and how to tax it and augment revenues has been under study. Thus, they don’t want to be locked into a zero-duty formula.

In view of the differences on e-commerce taxation within the US, the Bill Clinton administration has been trying to back off, holding to its position internationally that the moratorium was in force as a political commitment, but meanwhile wanting an ad hoc General Council level consideration of the issue.

The statement on e-commerce of the General Council chair, Kare Bryn of Norway, drawn up after two lengthy informal consultations where to some extent the views hardened, said there was a consensus to get back to work on e-commerce, but said there was an “unwritten understanding” that there continued to be differences among members “about the status of the 1998 Declaration”, and a pragmatic approach was needed. Since the Geneva declaration was a political one, “without prejudice to the rights and obligations of Members,” this was the only basis for further actions:

*        work on e-commerce on a practical basis is to be pursued at the WTO, without prejudice to any delegation’s position on the status of the 1998 Declaration;

*        the four subsidiary bodies seized of the issues - the Councils on Goods, Services and TRIPS, and the Committee on Trade and Development -will resume their work, identify cross-sectoral issues and report to the General Council at its regular meeting in December; and

*        The General Council will consider how best to organize its own work in the light of the work of subsidiary bodies, including setting up an ad hoc task force to facilitate its work. The Chairman is to hold further consultations on this.

Separately, Bryn also said he would hold consultations on the issue of working groups on issues mooted by developing countries - trade and finance, trade and technology transfer, trade and debt - and one proposed by Canada for a working group on coherence (which would bring in labour and social issues by the backdoor).

The US, EC and other industrialized countries are opposed to the first three, and developing countries oppose the Canadian proposal. Further consultations may result in either all four working groups to be set up (with the developing world swallowing the Canadian proposal), or droping all four. There is some talk among some developing countries that they would bottle up the ad hoc task force on e-commerce too.-SUNS4711

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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