The future of the WTO E-Commerce Moratorium hangs in the balance in Geneva this week at the Twelfth WTO Ministerial Conference, with India and South Africa, plus, possibly, Indonesia, aiming to end the agreement which prevents tariffs on cross-border electronic transmissions. If this happens, the result can only be harder and costlier trading conditions, perversely resulting from action by the WTO itself.
It is doubly odd for Indonesia to be potentially supporting such a move, given its role as G20 Chair and its stated goal of promoting the digital economy.
The India/South Africa argument is ostensibly simple: why not be free to raise revenue by putting duties on digital inflows, as a growing area of imports?
But other WTO members recognise this is simplistic, and prefer to keep the moratorium – among them developed WTO members like Japan, the US, and the EU, but also big developing countries like China, Brazil, Nigeria, the Philippines, and Malaysia, and smaller WTO members like Costa Rica, Thailand, and Kazakhstan. Backing them is a huge range of global business interests (see statements attached).
A WTO decision to let members start imposing new digital tariffs would have many damaging effects:
- Import duties are a tax on importing businesses and consumers. So countries imposing them would engage in self-harm, with a direct hit to their local SMEs - many of them women-owned - and their consumers
- There would be a follow-on, indirect hit to those countries’ own digital innovation, export competitiveness and access to global digital value chain opportunities.
- Endanger the agreement on a global minimum digital services tax reached last year by over 130 countries
- End the 25-year-old WTO e-commerce work programme – a cornerstone of current WTO work.
- Disrupt the WTO’s wider work on digital trade (a key forward-leaning area of trade, where the WTO’s developed and developing members are not always aligned).
And there is no shortage of economic research pointing to these areas of damage. An OECD study estimated that governments that imposed tariffs on electronic transmissions would lose more in consumer welfare and export competitiveness than they would gain in tariff revenues.
There are also civil society benefits if incoming digital transmissions are duty-free. Imagine if your government routinely inspects cross-border digital traffic, including to check whether a tariff is payable, with all the disconcerting and intrusive government surveillance that would be involved.
WTO Ministers are at a tipping point on digital trade. They must get India and South Africa and their followers to realise that the track they are on will carry costs and forfeit global digital economic growth.
There is a right course – and a simple one. WTO members should agree a joint package renewing the existing moratorium agreement and the E-Commerce Work Programme, while adding strong disciplines for progress-tracking by ministers, plus a major study of the impact of the moratorium, particularly on developing economies. That would respect the views of developed and developing countries alike, while avoiding serious economic damage.
It’s urgent. Digital trade is on a precipice in the WTO. Ministers must act before it’s too late.