TWN Info Service on WTO and Trade Issues (Apr19/24)
30 April 2019
Third World Network

China to push back on e-com demands by US and allies in pluri-talks

Published in SUNS #8896 dated 29 April 2019

Geneva, 26 Apr (D. Ravi Kanth) – China is expected to push back against the maximalist demands raised by the United States, Japan, and Australia in the ongoing plurilateral negotiations for electronic commerce rules at the World Trade Organization. Beijing would oppose the removal of restrictions on data flows, elimination of mandatory requirements for storing data in local servers, and doing away with the curbs on web services and cloud-computing, trade envoys told the SUNS.

China wants to squarely focus on “developmental opportunities” that are beneficial for inclusive trade in electronic commerce for developing and least-developed countries, a senior Chinese trade official told the SUNS on Thursday (25 April).

Issues such as the removal of restrictions on data flows and prohibitions against regulations requiring data storage on local servers, web services and/or cloud-computing cannot be part of the negotiations launched by members of the Joint Statement Initiative (JSI) group on 25 January on the margins of the World Economic Forum meeting in Davos, the official said.

Even in the ongoing bilateral negotiations with the United States, China has made it very clear that areas such as data flows, removal of prohibitions for storing data on local servers, and cloud computing are red lines, the official said.

China has apparently indicated its willingness to consider a few areas in electronic services, but not web services that include cloud-computing, in which the American e-commerce behemoth Amazon has now emerged as the world’s largest provider of cloud-computing services with sales increasing up to $7.7 billion as per the latest quarterly figures.

Amazon’s “biggest and brightest cash cow – the cloud-computing arm called Amazon Web Services – continues to churn out profits,” says the Wall Street Journal in a news report on 26 April.

Elaborating on China’s communication on the joint statement proposal on electronic commerce circulated at the WTO on 23 April, the senior Chinese official said the WTO negotiations must help developing members and LDCs (least-developed countries) to bridge the “digital divide, seize development opportunities and benefit from inclusive trade.”

China wants to establish a firm link between the plurilateral joint group negotiations on e-commerce and the ongoing negotiations under the 1998 work program on e-commerce.

“The negotiation [conducted under the auspices of the joint initiative group] should be complementary to the electronic commerce discussion in relevant subsidiary bodies of the WTO,” China said in its proposal.

“The aforesaid bodies should be informed of negotiation progress periodically,” and “meanwhile, the negotiation should be conducive to supporting the multilateral trading system, contribute to the revitalization of the WTO negotiating function, respond to the industry, keep WTO rules relevant and ultimately achieve a multilateral outcome,” China has argued.

China says the joint initiative should remain “open, inclusive and transparent, ensuring the participation of interested Members in the overall process through well-designed frameworks and flexible approaches on the implementation of negotiation outcomes.”

More important, the joint initiative group must target for a balanced outcome by setting “a reasonable level of ambition with full consideration of rights of Members to regulate, strike a balance among technological advancement, business development and legitimate public policy objectives of Members, such as internet sovereignty, data security, privacy protection, etc., and reach a balanced, pragmatic outcome reflecting all Members’ interests through equal consultation.”

It is highly unlikely that China will be able to stop the US, Japan, and Australia among others who seem determined to bring in some dozen rules concluded in the failed Trans-Pacific Partnership (TPP) negotiations, several trade envoys told the SUNS.

In fact, China could not even make changes in the joint ministerial statement that was issued in Davos on 25 January after Japan, Australia, and Singapore, who are driving the plurilateral e-commerce negotiations, made it clear to China that its suggestions cannot be incorporated, a trade envoy from an industrialized country told the SUNS, on the condition of anonymity.

Though China wants the JSI group to focus largely on the “development dimension” by taking into account “the difficulties and challenges faced by developing Members, including those who have not joined the negotiation by now, especially LDCs,” the drivers of the plurilateral negotiations are seeking more ambitious outcomes on the maximalist demands advanced by the US.

In its proposal re-circulated in March this year as part of the JSI group negotiations, the US has sought:

i. “free flow of information” such as unrestricted cross-border transfer of data, removal of restrictions on mandatory storing of information in local servers and web-blocking (restrictions on cloud computing).

ii. “fair treatment of digital products” involving permanent moratorium for levying customs duties on electronic transmissions and non-discriminatory treatment of digital products;

iii. “protection of proprietary information” for barring forced transfer of technologies and discriminatory technology requirements;

iv. “digital security” for ensuring secure encryption technologies and cyber security;

v. “facilitating internet services”, including cloud computing;

vi. “competitive telecom markets”; and

vii. “trade facilitation.”

Against this backdrop, China has insisted that “the negotiation should focus on the discussion of cross-border trade in goods enabled by the internet, together with relevant payment and logistics services while paying attention to the digitalization trend of trade in services, and explore the way to develop international rules for electronic commerce centering on a sound transaction environment and a safe and trust-worthy market environment.”

According to the Chinese proposal, the participants of the plurilateral negotiations must (a) clarify the definition of trade-related aspects of electronic commerce and the scope and application of future rules; (b) establish a sound environment for electronic commerce transactions such as paperless trading in goods, e-signatures and authentication; (c) electronic contracts; and (d) extending the current moratorium for not imposing customs duties on electronic transmissions until the WTO’s 12th ministerial conference in Astana, Kazakhstan, next year.

Like the European Union, China also wants (i) online consumer protection, (ii) protection of personal information, (iii) restrictions on spam and unsolicited e-commercial messages, (iv) cyber security, and (v) transparency.

At a time when the US and other major industrialized countries are reluctant to address the digital divide and inclusive cooperation, China has called for “promoting pragmatic and inclusive development cooperation” that would bridge the digital divide.

China has emphasized the need to tackle “unprecedented security risks and regulatory challenges to Members.”

Emphasizing that the JSI group of signatories to the Davos Joint Statement “include not only developed Members, but also developing Members and LDCs,” China has reminded that there are vast differences in “national conditions and development stages” of the participating countries.

“When it comes to the entire WTO membership, the interests [of members in e-commerce] are even more diversified,” China has maintained.

In short, “to advance the negotiation, differences in Members’ respective industry development conditions, historical and cultural traditions as well as legal systems need to be fully understood,” China has argued.

Against the backdrop of differences in developing e-commerce industries among the participating countries, China wants the JSI members to “respect each other’s design of the electronic commerce development paths, and the legitimate right to adopt regulatory measures in order to achieve reasonable public policy objectives.”

Here again, China’s wishful thinking on a developmental outcome from the plurilateral e-commerce negotiations seems somewhat misplaced, several trade envoys said.

China has acknowledged the difficulties it is going to face in the plurilateral negotiations when some members like the US had called for digital trade rules covering “issues such as data flow, data storage, treatment of digital products, etc.”

It wants more “exploratory discussions” before considering rules on complex issues such as data flows.

“More importantly, the data flow should be subject to the precondition of security, which concerns each and every Member’s core interests,” China has maintained, arguing that “it is necessary that the data flow orderly in compliance with Members’ respective laws and regulations.”

Even before the start of the joint group’s plurilateral electronic commerce negotiations, the US, the EU, Japan, Australia, Brazil and New Zealand among others re-circulated their earlier proposals that called for ambitious market access commitments in a range of areas.

In conclusion, China faces a Herculean task in ensuring that the JSI negotiations for crafting rules in e-commerce proceed according to its demands.

More so, at a time when the US is single-handedly disrupting the processes at the WTO in all areas to accomplish its hegemonic goals in global trade, it remains to be seen to what extent China can make an impact on the multilaterally-inconsistent e-commerce negotiations being conducted by the JSI members.