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TWN
Info Service on WTO and Trade Issues (Nov17/27)
The first camp is of those who want to advance the global digital business and economy model with unhindered data flows and little or no technology and data regulation. This model was shaped in and by the US, and its key tenets are represented in the Digital Dozen document of the United States, and in the Trans-Pacific Partnership (TPP) accord's e-commerce chapter. At the WTO, however, it is currently entities like the EU and Japan that are its leading proponents. [The US position under the Trump administration appears rather ambiguous, and it is not clear whether it is in favour, promoting it, opposing it, or keeping quiet and allowing others to push, but benefit. SUNS] The second camp is of most African countries (as the Africa group) and India. This group want a standstill on e-commerce at MC 11. They seek to continue e-commerce discussions as per the existing 1998 mandate within relevant WTO bodies with a view to examine its nexus with existing agreements in areas of trade in goods, trade in services and IP, and its relationship with development. The third camp is a group of some developing countries like Malaysia, Thailand, Nigeria and Bangladesh who are keen to explore how the WTO can help them with the "global digital trade opportunity". Although perhaps without being quite clear what the opportunity is, or what the WTO can do to help them with it, these countries want a faster movement on e-commerce, but without yet opting directly for a working party that can begin laying grounds for negotiations of trade rules - the demand made by the EU and others. This "middle camp" seeks elevation of e-commerce discussion from the relevant subsidiary bodies to a horizontal level, in the General Council, and also a likely special mandate for the DG for proactive movements in this area. Implicit in these positions is recognition of e-commerce as a special new area, or a "new issue" in WTO parlance, beyond its location vis-a-vis existing agreements. Such a speeding up of e-commerce-related processes in the WTO will then set up the condition for commencing trade negotiations in this area. (China is supporting this "middle position" but its context and reasons are unique and not discussed in this article.) The danger is in the "middle position." Every MC tries for some substantial outcomes, with the WTO DG and the host country having a special interest in it, along with those with actual stakes in particular outcomes. There is a fear that, in these closing days of efforts towards concrete outcomes at MC 11, acceptance of the above "middle position" will be sought as a compromise from those currently resisting it. There is some danger that those now resisting may give in because (1) developing countries already have internal divisions on this issue, and (2) unlike issues like agriculture and fisheries related ones, there is no immediate concrete problem that will be faced by anyone in agreeing to the "middle position." It is therefore important to understand fully the immense problems that are contained in this "middle position," and that will face developing countries and hobble them and their future. Countries promoting this middle position are those that have some existing strength in IT/software space. Most of them also have emerging digital start-ups that promise openings towards a strong digital economy. (India is similarly placed but has been wise to see through the trap that such self-image may lead one towards. However, this also makes India relatively more susceptible to making a last-minute compromise towards the "middle position", and this needs to be guarded against.) Two things are important to understand for these developing countries that are championing e-commerce at the WTO. First is that digital industry is fundamentally different from the IT and software industry. These countries have been participating in global value chains of the IT/ software industry, or aspire to do so. IT and software are core technical services, that follow global templates. Digital services, on the other hand, are data-based services of a non-technical kind, though they employ software as their infrastructure. And data, unlike software templates, is essentially local, as arising from real people, social interactions, machines and other artefacts and natural environment. These data-based digital services cater to "physical" traditional sectors, from shopping and transportation to education, health and agriculture. Comparative advantages and business models in IT and digital areas are very different from one another. WTO e-commerce discussions have very little to do with IT/software industry and global technology flows. It has entirely to do with digital industry, and data flows - data being the central resource of the digital industry. Some limited data flows that may be involved in traditional IT/software services (or traditional Business Process Outsourcing) are such data whose ownership is never in question. But new age digital companies collect data from "outside" sources, which they do not own, and often transport them beyond national borders. This renders the ownership of such data, and the economic value arising from it, very unclear. This data and value outflow is happening as much from these "middle position" countries as from other developing ones. In fact, due to relatively greater digital maturity of some of them, outflow of data and digital value is much more in their case than for lesser digitally mature countries. What triggers the interest of these countries in getting on with e-commerce discussions at WTO is the fact that they have a budding "digital start-up" industry, that they set great score by. However, the second important point that these "middle position" countries need to note is that precisely because they already have a budding digital industry, with a potentially bright future, they have most to lose from WTO-based digital trade liberalisation. Any movement to ease the entry in, and domination of, their markets by global digital business will simply destroy their nascent digital industry. Those who simply do not have such a domestic industry yet are actually correspondingly less endangered at the current juncture. There is nothing that global discussions, negotiations or agreements can do to strengthen the budding digital industry (of this "middle group" of countries). On the other hand, the fear of considerable harm is much more real. What these countries need are sound digital industrial policies that can lead to the building of a strong domestic digital industry, employing their native strengths (strengths which wrongly pulls them towards WTO based e-commerce discussions). They can also explore regional markets based on such strengths. But if indeed a Thailand or Nigeria is thinking that its companies will outdo an Uber or Alibaba globally, in third country turfs, it really needs to do a detailed examination of the global digital industry and its business models. It will be well enough for now if their digital start-ups can compete with US and Chinese digital corporations even within their own borders. They should really be focussing on this more immediate problem, paying heed to the ominous writing on the wall that is emerging in this respect. THE WRITING ON THE WALL We are in the early days of a digital start-up chimera. But it won't take long to realise that domestic digital start-ups in all these countries are going to require some level of protection and support locally, rather than trade agreements that ensure that US and Chinese digital corporations are enabled to come marching in and take over all the digital space. India has as good a position in terms of a digital industry as any of these countries, if not better. Indian digital companies, many of them with plus one billion USD valuation, recently got together to form a lobbying group to advocate for policy support to ensure that home-grown digital companies dominate the local Internet market. This is a sector that till very recently has been a big proponent of liberalisation and globalisation. Such a drastic shift on their part is extremely instructive. These very new developments in India are a screaming warning to other developing countries that have built some mass of a domestic digital industry, or aspire to do so. The
CEO of an Indian e-commerce company in competition with Amazon observed:
"A significant amount of capital is being dumped in India to
win market share. We should create a digital economy. But not by creating
an unfair playing field for local companies against those companies
coming from other countries." (See http://www.moneycontrol.com/news/business/startup/founders- And
the CEO of the Indian competitor to Uber has this to add: "What's
happening in ... our industries (is that) there is narrative of innovation
that non-Indian companies espouse but the real fight is on capital,
not innovation. The markets are being distorted by capital."
(See http://economictimes.indiatimes.com/articleshow/558 This may be taken as an advance notice for other developing countries trying to further digital industrialisation, and support its digital start-ups. If this is happening in India, which has one of the most advanced domestic digital industries in the developing world outside China, it is easy to see it coming for others as well. Promoting e-commerce at the WTO would simply bring that apocalypse closer, and render the damage irreversible. Delegates often mention the homily that there can be no harm in talking things over, and that applies to e-commerce at the WTO as well. However, initiating discussion on e-commerce as a new issue under horizontal arrangements, and with possible new mandates for the WTO staff, would simply take developing countries towards traps that they should in retrospect have been very familiar with. Whether it is trade in agriculture goods, or trade-related IP, or almost any other area, the North was allowed to develop the initial frameworks and concepts when Southern countries could yet not properly articulate their interests, and frameworks that would represent them. Once the initial vocabulary and ground rules are set, they are difficult to change in any fundamental ways. Post facto "development agendas" have not helped much, because they have to manoeuvre in the limited space that is available within entrenched dominant frameworks. We are now in the same situation with e-commerce, and in great danger of repeating the problematic history of ceding the initial framework-making to the North. The digital leaders know their digital business game well. They have charted out the digital geo-economic future and have assiduously been working on global concepts and frameworks that anchor these. In this regard, developing countries are still groping in the dark. It is vain to hope that it is WTO discussions that will provide developing countries further clarity in this area. Trade governance venues like the WTO are for hard-nosed bargains. Developing countries will need to develop their understanding of digital business, its geo-economics and different possible governance frameworks, at other fora. And then come well-prepared to the WTO. UNCTAD has recently become active on e-commerce and development connection, though it needs to nuance its understanding and frameworks in this regard. But that is the right kind of space to do such initial work. Meanwhile, a standstill must be ensured at the WTO. The existing mandate gives enough space for all the initial discussion that may be necessary in this area. We need not get into new processes and new definitions at the WTO. To repeat, they are even more dangerous to those countries that have already commenced digital industrialisation, some of which ironically are the ones that are promoting such elevation of e-commerce agenda at the WTO. E-transaction infrastructures is a different matter. These "middle position" countries apparently look to possible gains like improved and easier e-transactions across the borders that could help their digital industry. First of all, as argued, they really need to assess the competitiveness of their digital companies outside their borders vis-a-vis US and Chinese global corporations. We have seen little positive evidence from India, for instance, in this regard. Domestic digital companies are increasingly being nudged out even within India's borders. Same is the case in the countries pushing the "middle position", which they should take a note of. Their global competitiveness will not improve by improved global e-transactions, and reduced digital regulatory space for nations. It will improve if their domestic industry can first develop sufficient strength within their borders. This is the model that China followed, as the only challenger to the US's global digital hegemony. Northern countries like to speak of "evidence" - this is the only evidence we have of a successful digital industrialisation other than the first mover US's. Developing countries (other than China) should therefore not be trying to aid global digital corporations further decimate their incipient digital industry by promoting e-commerce at the WTO. They should first develop infrastructures for e-transanctions, and other digital infrastructures, within their borders. This has to be done as private as well as public infrastructures, as India has been doing. Such infrastructure in developed countries is in any case very good, if the plan is to improve e-trade with them (for which, as discussed, favourable conditions do not exist for developing country businesses). And for promoting such trade with peer developing countries, this has to be done by building a strong domestic industry, and then promoting regional markets that can provide some space and good prospects for developing country digital businesses. The EU is promoting its regional Digital Single Market. Exchanging best practices on e-transactions infrastructure, including the role of the public sector in its development, among developing countries and with Northern countries, is the way to go. These arguments have been made with respect to the currently limited global prospects of developing countries' digital industry - one which centres on data to provide new digital services. And if some countries promoting e-commerce at the WTO think that it will transform their manufacturing, trading or other services sectors, the outlook is as doubtful. These countries need first to have digital industrial policies to develop a robust domestic digital sector serving its manufacturing, services, trade and other sectors. Promoting e-commerce at the WTO is a disastrous recipe that will decimate the digital gains that these countries have been making, and enable global corporations from the two global digital leaders to take control of all the aspects of their economy. It is strange that e-commerce is sold in the name of MSMEs and small traders, mostly even without asking them. Major associations of small businesses in India like the Bhartiya Udyog Vyapar Mandal, which is an apex body of around 1,700 associations, have opposed global liberalisation of e-commerce through the WTO. Let us not repeat history, and be ruing in a few decades that around 2017-18 a few digital leaders, North plus China, shaped the e-commerce agenda and frameworks at the WTO, and developing countries were too un-informed at that time to protect their interests. As is advised in the game of cricket, if you do not know the pitch conditions, play defence. It would not help to analyse the game and the conditions after you get out. Developing countries have often found themselves in such a position. With regard to e-commerce, they can still avoid this fate. [* Parminder Jeet Singh, who contributed this article, is an Indian civil society activist working with "IT For Change", and an expert on information technology and digital/internet governance issues, and can be reached at: Parminder.js@itforchange.net]
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