TWN Info Service on WTO and Trade Issues (Dec20/19)
18 December 2020
Third World Network

Sharp differences between e-com WP proponents & JSI group on e-com
Published in SUNS #9257 dated 18 December 2020

Geneva, 17 Dec (D. Ravi Kanth) -  Sharp differences have come to the fore between the developing-country proponents of the multilateral 1998 work programme (WP) on electronic commerce, and the opponents who are participants of the non-mandated Joint Statement Initiative (JSI) group on e-commerce, trade envoys said.

At a General Council (GC) meeting on 16 December, the non-mandated JSI participants opposed a request from a large majority of developing countries that the 1998 e-commerce work programme be placed as a regular standing item on the GC agenda, so as to enable the GC to play a central role in addressing the core concerns about the scope and definition of electronic transmissions, and the adverse role played by the moratorium on customs duties on electronic transmissions on developing countries, several participants told the SUNS.

During the GC meeting, India and South Africa called for the GC to oversee the work on the multilateral 1998 e-commerce work programme from all trade-related dimensions.

Speaking on the joint proposal by South Africa and India (see SUNS #9250 dated 9 December 2020), India's trade envoy Ambassador Brajendra Navnit said that it is important to understand the unfolding digital revolution, from the complex and multi-faceted dimensions of e-commerce.

He said the effects of e-commerce on competition and market structure, and issues related to transfer of technology and data storage and automation among others need to be explored, according to the participants present at the meeting.

Ambassador Navnit said continuing work on the multilateral 1998 work programme is more important now in the face of the new challenges emerging from e-commerce, arguing that the impact of customs duties, including scope and impact of the moratorium must be properly assessed, the participant said.

Issues concerning the scope and identification of products must be explored, suggesting that the work on the 1998 work programme has not moved despite the continued efforts by India and South Africa.

The extension of the moratorium from December 2019 to the WTO's 12th ministerial conference (MC12) means an extension of almost 24 months due to the delay in the convening of MC12, the Indian envoy suggested.

It is important to address issues such as scope, and definition, and identification of the products, Ambassador Navnit said, drawing attention to the joint proposal submitted by South Africa and India on 3 December.

The joint proposal calls on the GC to ensure that the 1998 work programme should remain under "continuous review through a standing item on its (GC's) agenda and take up consideration of any trade-related issue of a cross-cutting nature (of issues) as entailed in the 1998 Work Programme."

In their joint proposal, South Africa and India called for "structured thematic discussions in the General Council through various platforms".

The discussions must focus on:

(i) Developmental aspects of electronic commerce;

(ii) Scope, definition and impact of the moratorium on customs duties on electronic transmissions; and

(iii) Examination of the challenges experienced by developing countries and LDCs in relation to electronic commerce and explore ways of enhancing the participation of developing countries in electronic commerce.

Speaking on the reinvigoration of the 1998 e-commerce work programme at the GC meeting, South Africa said the moratorium on customs duties on electronic transmissions "was agreed in 1998 without clarity on how the scope, definition and implications of the moratorium would unfold with the digital revolution."

The South African trade counsellor Mr Mustaqeem Da Gama said "countries therefore agreed to a discipline (on) ET (electronic transmissions) without a clear indication of the fiscal and industrial developmental implications."

"The lack of clarity makes the continuation of the moratorium difficult as it amounts to unlimited market access in perpetuity for a few members that are dominant in digital trade," he said.

The current moratorium on customs duties on electronic transmissions, said Mr Da Gama, "will not only negatively impact the efforts of many developing countries to industrialize digitally but could also undermine their existing industries."

"This is due to the fact that physical exports are subject to duties, while digitized products in which many developing countries are net importers, are not subject to tariffs thus creating an un-level playing field," he argued.

"Even from a trade policy perspective, issues have not been adequately explored, and where further discussions were held, these discussions barely scratched the surface," the South African official said.

Mr Da Gama suggested that the GC should consider the following work programme:

* Direct that the 1998 E-commerce Work Programme be a standing item in the relevant WTO bodies given a mandate as set out in WT/L/274.

* Play a central role in the discussions and keep the work programme under continuous review through a standing item on its agenda and take up consideration of any trade-related issue of a cross-cutting nature as entailed in the 1998 Work Programme.

* Continue structured thematic discussions in the General Council through informal open-ended sessions. Some of the topics, as previously suggested may include:

(i) Developmental aspects of electronic commerce.

(ii) Scope, definition and impact of the moratorium on customs duties on electronic transmissions.

(iii) Examination of the challenges experienced by developing countries and LDCs in relation to electronic commerce and explore ways to enhance the participation of developing countries in electronic commerce.

Indonesia's trade envoy Ambassador Syamsul Bahri Siregar stressed that members need to make progress in the 1998 work programme, suggesting that it is an important tool for economic development.

Ambassador Siregar said there is an urgent need to clarify the scope of the electronic transmissions, and also the impact of the moratorium on fiscal revenues, competition, and work creation.

Indonesia, he said, reaffirmed its view that electronic transactions shall not apply to electronically transmitted goods and services, suggesting that the moratorium for not imposing customs duties on electronic transmissions should be ended.

The African Group said that some countries have used policy tools such as data localization requirements, internet filtering, and technology transfer requirements (i.e. disclosure of source code) to promote domestic digital firms and allow them to catch-up with the leading multinational firms.

The African Group highlighted the glaring need to bridge the digital divide. COVID has led to more concentration in the digital marketplace. "If left unchecked, this concentration will make the digital divide permanent," the African Group argued.

"There is a need for new policies and regulations to ensure a fair distribution of gains from the digital economy, with a focus on technology transfer, capacity building and targeted aid for trade measures," the African Group said.

In its intervention, Jamaica, on behalf of the ACP (Africa, Caribbean, and Pacific) group, said that it "takes the 1998 E-commerce Work Programme seriously and expresses appreciation of all Members having not only contributed to the work in the General Council, but also the other Bodies charged with examining the issue."

The ACP group called for deepening members' "engagement and understanding of a wider range of issues - not only the question of the customs duties moratorium - as we progressively move toward MC12."

"We are ever weary that by MC12, we will again face the expiry of the work programme along with the moratorium," the ACP group said, suggesting that "the current situation has also underscored much of what we have been saying for some time now in the various bodies of this organization."

The ACP group called for addressing the "digital divide," reiterating the group's support to the elements highlighted by the LDC Group in their submission to the General Council in December last year and to welcome the proposal by South Africa and India which are before us today.

"In conducting our diagnosis of the moratorium, we recognized that some of the other areas of interest to our countries include the costs to developing country and LDC consumers and businesses and discrepancies between traditional goods or products and electronic equivalents, and the application of internal taxes on electronic transmissions," the ACP group said.

The ACP group, which represents the developing and least developed countries, called for structured discussions on the Work Programme, arguing that such discussions must go beyond discussions on the moratorium.

Other pertinent issues, according to the group, "are the extent of coverage of digital or internal taxes."

Noting that a number of issues raised in the work programme are under negotiation in the JSI group, the ACP group said "it is important that the work programme yield a result that does not create a subterranean set of rules under one roof."

The ACP group urged members to "take a pragmatic approach to discussing within the context of the existing 1998 work programme the issues of source code, [data] localization and the impact on data flows, as well as consumer protection."

Calling for prioritization of these issues, the ACP group said these issues "will begin to not only match, or exceed, the perceived impact the moratorium may have on our regimes but to treat our ability to make greater use of e-commerce to earn revenue, become producers of higher level technological advancements and to improve the basic way of life for our people."

In the face of massive support for placing the 1998 work programme under the direct review of the General Council, the sponsors of the JSI negotiations on e-commerce chose to cast doubts on the progress that could be made in the 1998 work programme, and called for the moratorium to be made permanent, participants said.

Australia, Canada, and the European Union among others did not accept the request for a standing item on the General Council agenda to accelerate work on the 1998 work programme. The EU argued that the moratorium provided predictability in e-commerce.

Responding to the points raised by India and South Africa, the US trade envoy Ambassador Dennis Shea said the discussions must "continue on the same basis that they have to date."

"We do not see a need to establish any new standing agenda items for the General Council or in the sub-bodies," Ambassador Shea said, suggesting that the moratorium on customs duties on electronic transmissions has supported the rapid growth of digital trade.

In a concluding statement, India asked the JSI proponents "whether they are willing to promote competition or destroy competition."

"Any rule-making process by the existing players will obstruct the level playing field and it will undermine successful innovators," the Indian envoy Ambassador Brajendra Navnit stated.

India said that while it is surprising to see some of the JSI proponents on e-commerce raise questions on special and differential treatment (S&DT) for developing countries in the fisheries subsidies negotiations, they want to continue with the S&DT in e-commerce.

"The same proponents are in favour of S&DT in digital trade vis-a-vis physical and conventional trade of goods," the Indian envoy argued.

"It would be interesting to know how long in a fast and developing digital trade sector, the proponents would need S&DT or crutches of the moratorium on customs duties," Ambassador Navnit asked.

He urged members to agree on a standing item in all WTO committees to explore the issues and enable the GC to play a central role in accelerating work relating to the 1998 e-commerce work programme.