TWN Info Service on WTO and Trade Issues (Aug20/05)
6 August 2020
Third World Network

Renewed JSI efforts to extend e-com duties moratorium to services
Published in SUNS #9174 dated 6 August 2020

Geneva, 5 Aug (D. Ravi Kanth) – The facilitators of the plurilateral Joint Statement Initiative (JSI) group on electronic commerce have stepped up their efforts to “parachute” into the World Trade Organization an agreement on extending the current moratorium on customs duties on electronic transmissions to services.

The JSI agreement, as and when it is concluded, risks being used as a fait accompli at the WTO to restrict the flexibilities available in the General Agreement on Trade in Services (GATS) for developing countries to regulate their imports of services.

It would strike a big blow to the developing countries by denying them the “policy space” to regulate imports of electronic transmissions in the digital era so as to ensure that developing countries will not be able to digitally industrialize and will forever remain dependent on imports of digital products, said an analyst, who asked not to be quoted.

In a restricted proposal (INF/ECOM/55) on “Services Market Access” circulated on 23 July, the three JSI facilitators – Japan, Australia, and Singapore – argued that various JSI participants (particularly the European Union) “mentioned the need for greater clarity in relation to proposals on Services Market Access.”

The facilitators suggested that “the objective of the consultations (among JSI members) was to clarify the areas of interest so as to facilitate discussions with the broader group.”

The JSI proponents agreed that they wanted to limit the scope to only those services that were directly relevant to e-commerce.

The JSI members are also simultaneously engaged in a discussion on the value of distinguishing between service sectors that are “core” and “ancillary” to e-commerce.

The list of relevant sectors and possible commitments for market access would include:

(1) computer and related services, advertising services, technical testing and analysis services;

(2) communication services, courier services, telecommunication services in which there are several ancillary services such as voice telephone services and packet-switched data transmission services, electronic mail among others;

(3) distribution services;

(4) financial services (banking and other financial services excluding insurance);

(5) transport services, including maritime transport services, air transport services, rail transport services, road transport services; and

(6) services auxiliary to all modes of transport such as cargo-handling services, storage and warehouse services, and freight transport agency services.

Commenting on the “relevant sectors and possible commitments”, the analyst said that “the Joint Statement on Electronic Transmissions is an attempt to parachute the JSI outcome into the WTO and further restrict the flexibilities available in the GATS to the developing countries in regulating their imports of services.”

According to the analyst, “including services under the scope of the moratorium on electronic transmissions, increases the trade coverage of the moratorium manifolds for developing countries, making it impossible for the countries to agree on extending the moratorium.”

The analyst further warned that “while developed countries may use this as a bargaining chip, developing countries should be aware that extending the moratorium now will set the ball rolling and it will only gather speed later.”

The developing countries must “fiercely protect their policy space to regulate the imports of electronic transmissions in the digital era, otherwise they will not be able to digitally industrialize and will forever become dependent on imports of digital products,” the analyst argued.

“The moratorium (on customs duties on electronic transmissions) needs to be removed permanently,” said the analyst, arguing that this latest proposal by the JSI group only vindicated the studies done by various scholars on the e-commerce moratorium.

In their recently published study on the moratorium on customs duties on electronic transmissions, two scholars – Manuel Montes and Jane Kelsey – had argued that there will be severe non-tariff development impacts in addition to the loss of fiscal revenue for developing countries due to the 1998 e-commerce moratorium (see SUNS #9169 dated 28 July 2020).

Meanwhile, the JSI facilitators issued on 22 July a revised streamlined bracketed text on customs duties, effectively moving the goalposts on what would constitute electronic transmissions.

On customs duties on electronic transmissions, Japan proposed that “Customs duty includes any duty or charge of any kind subject to Articles I and II and other relevant provisions of the GATT 1994 to the WTO Agreement, but does not include any duty, fee or charge referred to in subparagraphs 2(a) to 2(c) in Article II of GATT 1994 (schedule of concessions).”

The United States and Canada tabled an alternative proposal that “customs duty” includes a duty or charge of any kind imposed on or in connection with the importation of a good, and any surtax or surcharge imposed in connection with such importation, but does not include any:

(a) charge equivalent to an internal tax imposed consistently with Article III:2 of GATT 1994;

(b) fee or other charge in connection with the importation commensurate with the cost of services rendered; or

(c) anti-dumping or countervailing duty;

Japan, Brazil, Korea, the US and Canada proposed that “electronic transmission” or “transmitted electronically” means a transmission made using any electromagnetic means.

In another heavily bracketed proposal on customs duties on electronic transmissions, Japan, the US, Singapore, Hong Kong-China, Brazil, Korea, New Zealand, Canada, and the European Union proposed that: “[No [Party/Member] shall/[Parties/Members] shall not] impose customs duties [, fees or charges] on electronic transmissions [, including/which include] the content transmitted electronically [between a person of one [Party/Member] and a person of another [Party/Member].]”

However, Indonesia proposed that “[Parties/Members] agree to maintain the current practice of not imposing duties on electronic transmissions, not including content transmitted electronically. [Parties/Members] may adjust their practice referred to in paragraph 1 in light of any further WTO Ministerial Decisions or Agreements in relation to the Work Programme on Electronic Commerce.]”

Further, Singapore, Hong Kong-China, Korea, New Zealand, and Canada suggested imposing international taxes on electronic transmissions.

The five countries suggested that “[for greater certainty, paragraph 3 (on customs duties) shall not preclude a [Party/Member] from imposing internal taxes [, fees] or other [internal] charges on [electronic transmissions/content transmitted electronically] [or revenue and profit generated from digital trade], provided that such taxes [, fees] or charges are imposed in a manner consistent with [other WTO Agreements/the WTO Agreement/this Agreement] [and on a non-discriminatory basis.]]”

On the other hand, Indonesia proposed that “[for greater certainty, the above shall not preclude a Member to apply custom procedures for public policy purposes or from imposing internal taxes, fees or other charges on electronic transmission, provided that such taxes, fees or charges are imposed in a manner consistent with the WTO Agreement.]”