Info Service on WTO and Trade Issues (Jul18/17)
24 July 2018
Third World Network
India-South Africa call for re-examination of e-com tax moratorium
Published in SUNS #8727 dated 23 July 2018
Geneva, 20 Jul (D. Ravi Kanth) - India and South Africa have called
for "re-examining" the implications of the current temporary
moratorium on electronic transmissions from a "development"
perspective at the World Trade Organization because of the changed
realities in electronic commerce during the last two decades and the
staggering revenue loss for the developing countries, trade envoys
Ahead of the General Council meeting next week, India and South Africa
raised fundamental concerns about the continuation of the temporary
moratorium due to various implications on the rule-making and fiscal
side, particularly for developing countries.
In their proposal (WT/GC/W/747) circulated on 12 July, the two major
developing countries said the temporary moratorium since 1998 needs
to be reassessed in the context of rapid changes concerning "electronic
transmissions" and other changes.
"These changes necessitate a re-examination of the implications
of the temp orary moratorium, particularly from the development perspective,"
India and South Africa argued.
They maintained that there is no "definitive estimate of the
volume of cross-border electronic transmissions" until now.
But, "it is likely that the volume of such transmissions has
increased manifold over the past two decades," according to India
and South Africa.
Moreover, electronic transmissions "were mainly used to deliver
digitalized products, such as e-books, music and a variety of services,"
until a few years ago.
In the current context of "increasing diffusion of additive manufacturing
technology through 3-D printing, electronic transmissions have now
acquired an additional salience in manufacturing physical products,"
India and South Africa maintained.
These trends in electronic commerce "are likely to become more
prominent in the near future, thereby bringing electronic transmissions
closer to the center-stage of national economies," the two sponsors
In short, the rapid changes, according to India and South Africa,
compel WTO members to "rethink the role of the temporary moratorium
on customs duties on electronic transmissions."
With "more products, which are presently traded in physical form,
get digitalized and delivered through electronic transmissions,"
the moratorium on customs duties "would result in higher revenue
loss," India and South Africa argued .
The two sponsors cited analysis conducted by UNCTAD that pointed to
the loss in customs revenue that would be suffered by developing countries
if the temporary moratorium is made permanent.
Besides, "a moratorium on customs duties on electronic transmissions
could imply that customs duties are not imposed on products exported
in digitalized form, even if the bound rate on the same product, if
it is delivered in the physical form, is not zero."
Consequently, "a moratorium on customs duties on electronic transmissions
could in effect undermine the existing schedule of tariff concessions
of WTO Members," India and South Africa pointed out.
Also, with the developing countries having average bound tariffs well
above that of the developed countries, "a moratorium on customs
duties on electronic transmissions could significantly alter the negotiated
balance of rights and obligations," the two sponsors argued.
Further, there is no clarity about the e-commerce moratorium despite
a demand from Indonesia during the eleventh ministerial conference
(MC11) in Buenos Aires in December last year.
Indonesia had said on 11 December 2017, that "in regards to the
discussion on the moratorium on customs duties on electronic transmissions,
it is our understanding that such moratorium shall not apply to electronically
transmitted goods and services."
"In other words," Indonesia maintained, "the extension
of the moratorium applies only to the electronic transmissions and
not to the products or contents which are submitted electronically."
Indonesia further said "we would like to insert a footnote in
the outcome document which states "it is understood that such
[a] moratorium shall not apply to electronically transmitted goods"."
Against this backdrop, India and South Africa said a related issue
which "merits careful consideration is the scope of the e-commerce
Besides, "there is no agreed definition nor common understanding
amongst the Membership of what is covered under "electronic transmissions","
the two developing countries maintained.
Also, the issue of electronic commerce has assumed considerable importance
to "most, if not all developing countries, given the role of
development and industrial policies in the digital age," India
and South Africa maintained.
In a nutshell, it is imperative that members "re-examine",
at the General Council, the gamut of issues ranging from the scope,
definition, and the likely violation of bound tariffs on goods that
can be electronically shared in a digitalized format, the two developing
The proposal is likely to face a firestorm of opposition from a large
majority of developed countries led by the United States and the European
Union among others along with several developing countries who had
repeatedly called for making the temporary moratorium permanent.
On 12 April 2018, the US had already proposed a maximalist agenda
covering all areas of electronic commerce, including on the permanent
moratorium on customs duties on "digital products and services."
In its proposal on the joint statement on electronic commerce, the
US said: "WTO members have long recognized the importance of
ensuring fair, non-discriminatory, duty-free treatment of digital
products and services."
"Digital products like apps, songs, books, games, and videos
are created disproportionately by small businesses, individual artists,
and entrepreneurs - who are generally least able to overcome trade
barriers," the US said.
The US urged WTO members to "protect these creators from unfair
treatment and guarantee that they can sell their products on a level
playing field around the world through the continued application of
free trade principles to digital products."
These principles, according to the US, include "duty-free treatment
of digital products" and "non-discriminatory treatment of
Under "duty-free treatment of digital products," the US
wants "WTO Members [who] have agreed not to impose customs duties
on electronic transmissions" to agree for "tariff-free treatment
of digital products."
"Trade rules can ensure that governments continue and make permanent
the practice of eschewing customs duties on digital products,"
the US maintained.
The US wants members to adhere to the "non-discriminatory treatment
of digital products", saying it is the core of "the global
"Trade rules can ensure that these protections against discrimination
apply when products are digitized and distributed electronically,"
the US had maintained.
This US stance on e-commerce customs duty moratorium, is at a time
when the US is flagrantly violating the principle of non-discrimination
through the Section 232 measures on steel and aluminum, and tariffs
on imports of autos and auto products.
The US wants the WTO members to apply the principle of non-discrimination
to electronic goods.
Even the WTO director-general Roberto Azevedo wants a new round of
negotiations on electronic commerce in utter disregard to the 1998
In an interview to CNN on Thursday (19 July), he said the best way
to answer President Donald Trump's ire on the US$5.1 billion fine
on Google is to launch a comprehensive round of negotiations on electronic
commerce for framing new rules.
[Presumably in Azevedo's logic, if Google or other Silicon Valley
techno near-monopolies violate rules and data privacy of citizens
of other nations , and are fined (as has been done in this case by
the EU), rules must be altered to enable Google etc to have the right
to violate! Apparently Azevedo is WTO DG for the US, and not for the
entire membership of the WTO. SUNS]
Azevedo also said that President Trump is justified in launching the
unilateral trade measures that violated the most-favored-nation principle
and non-discrimination principle during the interview.
In conclusion, the developing and poorest countries face the biggest
threat and opposition to their demands on "development"
from the US and the WTO chief Azevedo, said several trade envoys who
asked not to be quoted.