WTO decision on time-bound, limited "no-tax" on electronic commerce

by Chakravarthi Raghavan

GENEVA: The 2nd Ministerial Conference of the WTO adopted on 20 May a declaration on electronic commerce for a work programme and continued "no customs duties" on such commerce, with the standstill renewable only by consensus by the WTO General Council before the 3rd Ministerial.

After some protracted "consultations", it was agreed at an informal heads of delegation meet on 19 May that a plurilateral declaration will be allowed to be introduced at the Ministerial working session, with a gentleman's agreement that the political declaration would not be objected to, but that it would be adopted as a Ministerial Declaration without any binding legal effect.

The text of the declaration mandated the General Council, at its next meeting in special session (set for September), to establish a comprehensive work programme "to examine all trade-related issues relating to global electronic commerce including those issues identified by Members."

The work programme, the text said, will involve the relevant WTO bodies, "take into account the economic, financial and development needs of developing countries, and recognize that work is also being undertaken in other international fora."

The General Council is asked to produce a report on the progress of the work programme and any recommendations for action to be submitted at the third session.

Without prejudice to the outcome of the work programme or the rights and obligations of Members under the WTO Agreements, "we also declare that Members will continue their current practice of not imposing customs duties on electronic transmissions."

"When reporting to our third session, the General Council will review this declaration, the extension of which will be decided by consensus, taking into account the progress of the work programme."

The US and its supporters had to give up their earlier formulation, which could have meant the standstill on no duties would continue indefinitely unless revoked by consensus.

Several Third World delegations said that while they now had no "duties", the high profile accorded to the issue has set their revenue departments thinking, in their perpetual need to get revenues.

And no one is ready to give up or bind this into the WTO, unless the US has something to offer in return by way of tariff reductions and bindings in other areas of interest to other countries.

At the WTO final plenary, after the declaration was adopted, Pakistan entered its reservations, both on its right to levy a tax, on the basis of adequate economic analysis, nationally and through relevant international organizations, and on its stand that the way the declaration was adopted should not be made a precedent to bring new issues into the WTO. (Third World Economics No. 184/185, 1-31 May 1998)

Chakravarthi Raghavan is the Chief Editor of the South-North Development Monitor (SUNS).