India, South Africa adopt tough stand on e-commerce moratorium

India and South Africa have adopted a tough stand against the current moratorium on levying customs duties on electronic transmissions at the World Trade Organization, forcing the US to come to the negotiating table for the first time, said trade envoys.

The existing moratorium will expire at the end of next month, unless it is extended for another six months. The moratorium has been extended since 1998 on a biennial basis at every WTO trade ministerial conference.

At a meeting of the WTO’s informal General Council on Monday, the US offered a quid pro quo for extending the e-commerce moratorium by six months until the World Trade Organization’s twelfth ministerial conference in Nur Sultan, Kazakhstan, in June 2020.

In return, the US has indicated that it will agree to organise a workshop early next year, as demanded by India and South Africa, for assessing the scope and potential revenue implications of electronic transmissions, said a trade envoy, who asked not to be quoted.

Previously, the US had vehemently opposed a proposal from India and South Africa for organising a workshop by experts drawn from the UNCTAD (United Nations Conference on Trade and Development), the ECIPE (European Center for International Political Economy) and the Paris-Based OECD (Organization for Economic Cooperation and Development) to present their conflicting assessments on what would constitute the e-commerce transmission and their potential revenue implications.

Last year, India and South Africa had demanded a “rethink” on the e-commerce moratorium on grounds that there is no clarity on what would constitute the electronic transmissions.

Study by UNCTAD

Further, they maintained that a study conducted by the UNCTAD (United Nations Conference on Trade and Development) showed that the developing countries had suffered a huge loss of revenue to the tune of $10 billion due to the moratorium.

But, the US and other major developed countries repeatedly rejected the demand for a “re-think” on the moratorium saying the evidence provided by the two developing countries is inaccurate.

Against this backdrop, the US said that it would agree to organise a workshop as demanded by India and South Africa in January or February provided the two developing countries agree to extend the e-commerce moratorium until June, 2020, said a trade envoy, who preferred not to be quoted.

The US and other major developed countries appear to be panicking over the tough stand adopted by India and South Africa, fearing the prospect of the termination of the moratorium by the end of the next month, the envoy suggested.

In response to the demand for extending the moratorium by six more months, India’s trade envoy Ambassador JS Deepak said the “most critical issues relating to the definition and scope of electronic transmissions” must be addressed without delay.

“Despite a recent spate of research papers on this issue, with the latest being a report by the OECD (Organization for Economic Cooperation and Development, a rich country thinktank) publicly released last week, there is still no common understanding amongst the membership [on the scope of the moratorium],” Deepak maintained.

He provided an account of various developments on definition and scope of e-transmissions with conflicting estimates and implications since 2003. Deepak reminded members that there is no clarity “whether ET [electronic transmissions] includes only digital products or digitisable products or whether it includes services as well” due to conflicting studies prepared by different organisation and thinktanks.

“If services are to be part of electronic transmissions, which services should be covered or whether all services should be treated as electronic transmissions?” India asked. “The WTO membership need to come to a common understanding on the definition and scope of electronic transmissions,” India said. New Delhi cautioned that “the impact of digital technologies like 3D printing, robotics and artificial intelligence etc on members’ GATT tariff schedules and built-in GATS flexibilities need to be specifically examined.”

Loss of revenue

South Africa’s trade envoy Ambassador Xolelwa Mlumbi-Peter expressed sharp concern about the loss of revenue “due to rapidly increasing products [from]digitalisation.” She said there is an urgent need to rethink the further extension of the moratorium and thoroughly examine the implications of the moratorium under the work programme.

Sri Lanka supported India and South Africa by arguing that it is important to have clarity first before posing the issue to the trade ministers.

China has apparently said while the moratorium on customs duties is important, sufficient “policy space is also necessary” because of the rapidity and unpredictability of technological development.

India and South Africa, however, did not indicate what they would do in response to the US’ offer.

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