TWN Info Service on WTO and Trade Issues (Jul20/07)
7 July 2020
Third World Network

JSI group voices differing views on moratorium on e-com duties
Published in SUNS #9154 dated 7 July 2020

Geneva, 6 Jul (D. Ravi Kanth) – Members of the Joint Statement Initiative (JSI) group on electronic commerce have adopted differing positions on whether to make permanent the moratorium for not levying customs duties on electronic transmissions or to continue with the current practice of a two-year extension of the moratorium, participants told the SUNS.

At a stocktaking meeting convened by the JSI group coordinators on 3 July, China, Indonesia, Thailand, and Malaysia among others argued that as per current practice, the moratorium for not levying customs duties on electronic transmissions must be renewed every two years at the biennial WTO ministerial meeting, said a participant, who asked not to be quoted.

In sharp opposition, the United States, Canada, Mexico, Japan, Brazil, and the European Union among others said the moratorium must be made permanent once and for all, the participant said, adding that the majority of the JSI group barring several ASEAN (Association of South East Asian Nations) members and China want a permanent moratorium.

The three coordinators of the JSI group on e-commerce – Australia, Japan, and Singapore – sought members’ views on the way forward, particularly on process-related issues for accelerating the negotiations.

The next major hybrid meeting of the JSI group is scheduled to be held on 27 July, the participant said.

At the meeting on 3 July, members raised transparency concerns suggesting that the small group discussions within the JSI group must be properly shared, said another participant, who asked not to be quoted.

Also at the meeting, the US along with Canada, Mexico, Japan, Chinese Taipei, and Ukraine spoke on their latest textual proposal on “source code”, which has been merged from their earlier proposals.

In the restricted textual proposal (INF/ECOM/54) on source code, the six countries defined “algorithm” as “a defined sequence of steps taken to solve a problem or obtain a result.”

On source code, the six countries introduced a specific article demanding that: “No [Party/ Member] shall require the transfer of, or access to, source code of software owned by a person of another [Party/Member], or the transfer of, or access to, an algorithm expressed in that source code, as a condition for the import, distribution, sale, or use of that software, or of products containing that software, in its territory.”

Second, the six members said that “this Article [X] does not preclude a regulatory body or judicial authority of a [Party/Member] from requiring a person of another [Party/Member] to preserve and make available the source code of software, or an algorithm expressed in that source code, for a specific investigation, inspection, examination, enforcement action, or judicial proceeding, subject to safeguards against unauthorized disclosure.”

Several JSI members such as the European Union, Korea, Singapore, and China among others had spoken about their specific concerns about the source code, the JSI participant said.

The EU, for example, had adopted a nuanced position on source code in which it calls for no prohibitions for sharing source code but had demanded stronger privacy provisions in line with its Global Data Privacy Regulations.

In its proposal on 26 April 2019 for WTO disciplines and commitments relating to e-commerce, the EU had stated that “members shall not require the transfer of, or access to, the source code of software owned by a natural or juridical person of other Members.”

Several studies by data scientists in the US and other countries have shown that software with complex source code could contain certain hidden algorithms that facilitate dark data flows without the consent of the countries and help tech-companies in monetizing that dark data.

In the past, Russia had said that without credible security and other guarantees, it is incumbent on the suppliers of software to provide the source code.

Moscow said it would need to understand “source code” before permitting a supplier to export or distribute that software because of growing threats from certain algorithms and hidden flows of dark data, a JSI participant said.

China had also suggested the need for sharing source code, suggesting that members would need to know the built-in algorithms.

Singapore and Korea had argued about the appropriate remedies while emphasizing the importance of source code, particularly their use in the critical infrastructure.

Besides, several developing countries, including India, who are not members of the JSI group, had on 3 May 2019 expressed fears about the new plurilateral e-commerce rules, saying that “both the GATT (General Agreement on Tariffs and Trade (GATT) & GATS (General Agreement on Trade in Services) could wither away due to the onslaught of the so-called “high standard” e-commerce elements” due to the JSI negotiations.

According to a digital trade analyst, who asked not to be quoted, “source code is required by the Governments not only for checking vulnerability to hacking and tax evasion but also for digital technology transfers from foreign firms.”

“There are attempts to protect source code as trade secrets. However, one of the reasons for attracting foreign direct investments for developing countries is technology transfer and technology spillovers,” the analyst argued.

“If sharing of source code is banned then developing countries will never be able to bridge the digital technology divide,” the analyst emphasized.

In her book “The Age of Surveillance Capitalism,” Shoshana Zuboff argued succinctly that tech companies such as Google, Facebook, Amazon, and Microsoft among others, while insisting that their technology is too complex to be legislated, spend billions of dollars lobbying against any oversight.

Further, the tech companies “while building empires on publicly funded data and the details of our private lives, have repeatedly rejected established norms of societal responsibility and accountability,” she argued.

Zuboff said that the tech companies prefer lawlessness to continue without any hurdles for their “new form of exploitation and exceptionalism”- for monetizing data on an unprecedented scale.