11 March 2019
Pluri-lateral Talks on Electronic Commerce Get Underway
Electronic commerce was not addressed prior to the creation of the WTO in 1995 but on-line transactions have grown at a tremendous pace since then, with a WTO report estimating total e-commerce at US$27.7 trillion in 2016, of which nearly US$24 trillion were business-to-business transactions. By 1998, WTO members had established a moratorium on applying customs duties to electronic transmissions and this moratorium has been renewed at each WTO ministerial, most recently in Buenos Aires in 2017.
Provisions addressing e-commerce have been included in about 70 trade agreements worldwide, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the U.S.-Mexico-Canada Agreement, and the European Union-Japan Economic Partnership Agreement. The Global Services Coalition argues that e-commerce should be covered by WTO rules and that adding e-commerce to the WTO will enhance the relevance and importance of this body. However, India and South Africa argue that the moratorium on e-commerce duties has led to increasing revenue loss. Indonesia amended its tariff schedule to add “software and other digital products transmitted electronically”, although there are technical problems with determining the scope of what is covered and the amount and value of electronic transmissions that should be subject to duties.
At the conclusion of the December 2017 Buenos Aires WTO ministerial, a joint declaration from 71 members – including the United States, the EU, Japan, Canada, Russia and Hong Kong – announced an e-commerce work programme. The declaration acknowledged “the particular opportunities and challenges faced by developing countries, especially LDCs, as well as by micro, small and medium-sized enterprises, in relation to electronic commerce” while recognising “the important role of the WTO in promoting open, transparent, non-discriminatory and predictable regulatory environments in facilitating electronic commerce.” Mainland China, India and South Africa, along with many other developing country members, did not sign the statement, and India has repeatedly argued that the WTO should conclude the stalled Doha Development Round before moving into new areas.
Following several meetings of the working group, a new statement was issued at the recent annual meeting of the World Economic Forum in Davos. The statement was endorsed by virtually all of the prior signatories as well as – to the surprise of many – mainland China. The signatories welcomed the progress made toward WTO negotiations on e-commerce since the Buenos Aires ministerial and confirmed their intention to launch negotiations this month on the trade-related aspects of e-commerce (the negotiations got underway the week of 4 March). The statement indicates that the signatories “will seek to achieve a high standard outcome that builds on existing WTO agreements and frameworks with the participation of as many WTO Members as possible” and urges all WTO members to participate.
USTR Lighthizer said in a statement that the United States is seeking an “ambitious, high-standard agreement that is enforceable and has the same obligations for all participants.” According to EU Trade Commissioner Cecilia Malmström, the statement shows that “the WTO is still alive and that we can take on board one of the biggest challenges on global trade -- e-commerce.” In joining the e-commerce working group, mainland China signalled support for the initiative but said it should take into account the needs of developing countries. According to mainland China’s Ambassador to the WTO Zhang Xiangchen, there should be “full respect (to be) accorded to the reasonable requests of developing members.”
Including mainland China in the negotiations ensures that 90 percent of global e-commerce trade will be covered. However, some observers have expressed concern that Beijing will try to limit the parameters of the e-commerce agreement rather than agreeing to a high-standard deal. In particular, mainland China is seen as opposing two major U.S. priorities: the free flow of data and a ban on data localisation requirements.
In a 4 March event at the Washington, D.C.-based think tank Center for Strategic and International Studies, Rep. Suzan DelBene (Democrat-Washington) expressed concern that the inclusion of mainland China in these talks “could open the door to obstruction and a weakened agreement since their current digital regime is so radically different than our own.” DelBene, a member of the House Ways and Means Committee, represents Seattle suburbs that include the headquarters of various important high-tech companies. “Addressing these issues and creating a cohesive digital governance structure is really of the utmost importance and if China can be a constructive partner in those discussions, they definitely should participate,” she said. However, the lawmaker cautioned that “history has shown us that that may be unlikely” and instead favoured “working with like-minded countries to bring in and create a high-standard agreement and then work to bring in other countries into the fold.”