TWN Info Service on WTO and Trade Issues (Mar20/13)
26 March 2020
Third World Network

Dear friends and colleagues,

We are pleased to share with you three articles from SUNS (south-north development monitor) in Geneva.

(1)        WTO consultations on when and where of MC12

(2)        Ecommerce tariff moratorium workshop being postponed

(3)        WTO members to submit written inputs on India & LDC fisheries subsidies proposals

With best wishes,

Third World Network

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(1)        WTO consultations on when and where of MC12

Geneva, 23 Mar (D. Ravi Kanth) — The World Trade Organization General Council chair Ambassador David Walker and the WTO Director General Roberto Azevedo are holding telephone consultations with members Monday (23 March) regarding “the most appropriate moment in time” as well as the venue to hold 12th ministerial conference (MC12) in the face of the worsening COVID-19 pandemic.

The GC chair and the DG informed members on 12 March that the Kazakhstan government is not going to host the MC12 because of the COVID-19 pandemic. Despite pressure from certain quarters to stick to the MC12 schedule from 8 June, the Kazakhstan government categorically conveyed that it is unable to convene the meeting, said sources familiar with the consultations.

Subsequently, the GC chair and the DG sent an email on 19 March to delegations that they will be available for consultations with individual members in time slots of 10 minutes on Monday (March 23).

Given the extreme COVID-19 measures, including complete ban on visitors from affected countries as well unprecedented quarantine measures, it remains to be seen when and where the MC12 could be convened, said people familiar with the negotiations.

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(2)        Ecommerce tariff moratorium workshop being postponed

Geneva, 23 Mar (D. Ravi Kanth) —  The WTO Secretariat has informed members that the e-commerce workshop on the moratorium on customs duties that was scheduled for March 23 is being postponed.

During the WTO GC meeting back in December, members  had adopted a decision to reinvigorate the Work Program to examine different aspects of the moratorium as well as to have structured discussions on all trade-related topics of interest, including on scope, definition, and impact of the moratorium on customs duties on electronic transmissions.

Ahead of the e-commerce moratorium workshop, India and South Africa had circulated a comprehensive document on 11 March on issues concerning the “scope of the moratorium”, “impact of the moratorium,” “impact on industrialization due to the loss of the use of tariffs as a critical trade policy instrument,” “tariff revenue losses” “loss of other duties and charges,” and whether the developing countries are enjoying the benefits of the digital economy among others.

In their 7-page proposal WT/GC/W/798, India and South Africa maintained that the 1998 Declaration on Global Electronic Commerce (WT/MIN(98)/Dec/2) maintained unambiguously that members will “continue their current practice of not imposing customs duties on electronic transmissions”.

Pointing to the discussions on what would constitute electronic transmissions at the WTO’s eleventh ministerial conference in Buenos Aires, Argentina, in December 2017, India and South Africa drew attention to the specific clarification sought by Indonesia. Indonesia had said at the Buenos Aires meeting that the scope of the moratorium is limited only to the “transmission” but not the content of the transmission.

Indonesia said at the MC11 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, the extension of the moratorium applies only to the electronic transmissions and not to products or contents which are submitted electronically”

“The Indonesian Head of Delegation shared this understanding with the Director-General and his team yesterday and today, in which they responded with a positive confirmation.”

“For this reason, we would like to insert a footnote in the outcome document which states “it is understood that such moratorium shall not apply to electronically transmitted goods”, Indonesia had said.

Indonesia further maintained that the “implication of this interpretation” is that since the moratorium is only applicable to the transmission, Members would be able to put customs duties on the transmitted content.

“The prohibition of customs duties therefore only refers to the ‘transmission’ – the bits and bytes. Any possible revenue implications will be limited in nature given the scope of the moratorium,” Indonesia suggested.

Indonesia has also expanded its HS code (Chapter 99) to include goods which can be digitized i.e. intangible goods.

Subsequently, a number of studies, according to India and South Africa, suggested that the moratorium on customs duties on electronic transmissions as applicable to physical goods which have become digitized, or which are digitizable, India and South Africa argued.

But several other studies on the impact of the moratorium since 1998 have focused on the tariff revenue losses resulting from the digitization of physical goods.

Against this backdrop, India and South Africa argued that “due to technological developments, there is a rapid rise in the growth of online trade of digitizable goods.:

“This explains the concern around the impact of digitization of goods on tariff revenue,” India and South Africa argued.

India and South Africa argued that “the moratorium will be equivalent to developing countries giving the digitally-advanced countries duty-free access to our markets.”

At a time when countries are trying to catch up with digitally-advanced countries , and given the asymmetries in digital trade, full liberalization could consign many developing countries to be only consumers. “This will be catastrophic for economic growth, jobs, and the attainment of SDGs( United Nations Sustainable Development Goals),” India and South Africa maintained.

As regards the impact of the moratorium, according to India and South Africa, “there was no clarity how the economy would be transformed by the digital advancements” in 1998.

Given the rapid and radical changes in the digital economy, particularly with the advent of the new technologies such as 3D printing which is a game changer, Big Data Analytics, Artificial Intelligence, the main impact “is the loss of the use of tariffs as a trade policy,” India and South Africa maintained.

“Tariffs are a tried and tested policy tool for supporting infant and even mature industries” and “all successful economies have arrived at higher levels of development because they started off first giving domestic industries the protection through tariffs to grow and gain competitiveness,” India and South Africa pointed.

Without naming the United States, which had resorted to unilateral imposition of higher tariffs over the past three years, India and South Africa said “oftentimes and even up till today, tariffs are still being implemented to support industries that may not be so competitive (including in developed countries, for example in agriculture, or the steel and aluminium sectors) as there are other policy imperatives such as employment and ensuring that the economy does not lose productive capacities.”.

“If tariffs are important to developed countries, what about developing economies?” India and South Africa pointedly asked.

Small wonder that “the loss of the use of tariffs for the digitized goods as a result of the moratorium therefore poses very profound challenges for developing countries including:

–         Impact on Industrialisation due to the Loss of the Use of Tariffs as a Critical Trade Policy Instrument

–         Tariff Revenue Losses

–         Loss of other duties and charges.

Further, “the vast majority of developing countries are net importers of digital products.”

If developing and the least-developed countries “are to develop, and make progress on the Sustainable Development Goals (SDGs), these countries require the implementation of active industrial policies to get some benefits of E-commerce, including the use of tariff policies for the digital sector.”

“However, the moratorium will exactly prohibit countries from putting in place these needed tariffs, India and South Africa suggested,  pointing that the advent of industry 4.0 and the advance of 3D printing technologies in the near future, will undermine “carefully negotiated GATT bound rates which are typically higher in developing countries, and will be brought to zero for their digitized counterparts,” India and South Africa maintained.

Undoubtedly, “with zero tariffs, the moratorium is likely to make developing countries even more dependent on imports of digital products from developed countries, India and South Africa argued.

“This will have huge negative impacts on industrialization, particularly digital industrialization and trade competitiveness” for developing countries, while inhibiting “the ability of developing countries to protect their nascent domestic digital industries resulting in loss of jobs and increasing poverty.” India and South Africa argued.

” All in all, this will have catastrophic effects on industrial development and the attainment of SDGs,” India and South Africa persuasively argued.

In short, “the removal of the Moratorium by no way means that Members will necessarily impose customs duties across the board.”

“The key is policy space and to use such policy space appropriately for domestic digital industrialization and the generation of local jobs in the era of Industry 4.0,” India and South Africa emphasized.

Further, “the importance of tariffs as a trade policy instrument for building domestic industries and the catastrophic effects when tariffs can no longer be used can be seen in the example of India and the Information Technology Agreement I (of 1996),” India and South Africa maintained.

In conclusion, India and South Africa said “today Members are only waking up to the weighty impact of the moratorium assuming the scope of the moratorium is centered on digitized and digitizable goods”

While countries are “still at the cusp of the digital revolution” and facing challenges stemming from the digital revolution, “developing countries need even more ,” support to industrialise including access to technology, infrastructure (including related to the digital divide), education of the labour force, and of course policy space and the use of tried and tested instruments to build production capacities including trade policies such as tariffs,” India and South Africa maintained.

Consequently, the 1998 moratorium for not imposing customs duties on electronic transmission “will be equivalent to developing countries giving the digitally advanced countries duty-free access to our markets.””

As all countries are trying to catch up and would need time for their industries to become competitive before full liberalisation can be optimal, India and South Africa maintained.

“To do so whilst industries are still struggling will consign many developing countries to be only consumers” and “this s will be catastrophic for economic growth, jobs, and the attainment of SDGs,” the two developing countries said emphatically.

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(3)        WTO members to submit written inputs on India & LDC fisheries subsidies proposals

Geneva, 23 Mar (D. Ravi Kanth):  The chair for the Doha rules negotiating body, Ambassador Santiago Wills, cancelled his “virtual meeting” on Friday (20 March) because of the “implementation of increasingly strict COVID- related measures.”

The chair had convened the meeting on 20 March to discuss separate proposals from India and the Least Developed Countries (LDC) Group on their respective demands incorporating special and differential treatment in the proposed disciplines for illegal, unreported, and unregulated (IUU) fishing and overcapacity and overfishing.

In his first draft text on overcapacity and overfishing issued on 9 March, the chair had not included special and differential treatment as demanded by India, the ACP (Africa, Caribbean, and Pacific) group, and the LDC Group.

The depletion of global fish stocks is caused by countries through their industrial-scale fishing in high seas outside their exclusive economic zones. China, the European Union, the United States, Japan, Korea, and Taipei among others are engaged in industrial-scale fishing in high seas, according to several studies.

Several developing countries privately told the chair that his draft text on overcapacity and overfishing is heavily tilted against their interests while providing special carve-outs to the countries that have caused the problem through their industrial-scale fishing in high seas and territories of others.

Against this backdrop, the chair informed members in his email on 19 March that “since I distributed that text, I have received feedback from a number of delegations which I will take into account when putting together the first single basic consolidated text.”

In his email, Ambassador Wills said it is his intention “to prepare and distribute, as soon as is feasible, a first single basic consolidated text containing provisions on the three main pillars: IUU fishing, overfished stocks, and overcapacity and overfishing, including pillar-specific provisions on S&DT (special and differential treatment).”

The chair who is operating under the mandate of the Doha work program said it is “important for the (negotiating group) on Rules to exchange views on the new proposals from India  and the LDC Group  which were received at the end of the last cluster of meetings.”

“Given the continued urgency of our work, driven not only by the deadline of MC12 (the WTO’s 12th ministerial conference originally to start on June 8 in Nur Sultan, Kazakhstan and is postponed)  but also by the Ministerial Decision from MC11 (the WTO’s eleventh ministerial conference in Buenos Aires, Argentina, in December 2017) and SDG target 14.6, and even more by the state of global fish stocks, it remains important to maintain our momentum,” the chair emphasized.

[Sustainable Development Goal (SDG) target 14.6: “By 2020, prohibit certain forms of fisheries subsidies which contribute to overcapacity and overfishing, eliminate subsidies that contribute to illegal, unreported and unregulated fishing and refrain from introducing new such subsidies, recognizing that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the World Trade Organization fisheries subsidies negotiation.”]

As a necessary next step in the absence of “either face-to-face or virtual meetings,” the chair urged members to conduct the exchange of views on the Indian and LDC proposal in writing through questions by 26 March. Subsequently, the chair will compile inputs provided by members to be distributed to all delegations.

The proponents – India and the LDC group – “are invited then to respond in writing to the comments and questions received, again through the Secretariat, by close of business on Friday 3 April.”  Following this, the WTO Secretariat will compile the replies into a single document to be distributed on 6 April.+