E-comm talks: India must stand firm

Despite the freezing weather at Davos, recent developments in this Swiss town have turned the heat on India. In a show of strength, on the last day of the annual World Economic Forum meeting, nearly 70 countries, including China, issued a joint statement confirming their intention to commence WTO negotiations on trade-related aspects of electronic commerce.

Speaking at the same platform a day earlier, Shinzo Abe, Japan’s Prime Minister, announced that he would “set in train a new track for looking at data governance — call it the Osaka Track — under the roof of the WTO”. What are the implications of these developments for India, one of the largest economies that chose to stay away from the joint statement on electronic commerce?

At the outset, it is important to understand what the oligarchs of the digital world are seeking through the WTO negotiations on digital economy and e-commerce. First, they want to have access to free and unrestricted flow of data — the raw material that fuels their business. Their principal targets are large developing countries, such as China, India, Indonesia, Nigeria and South Africa, which generate large volumes of digital data.

Second, they seek to curtail the role of governments in regulating almost all key aspects of the digital economy. Third, they want to leverage the negotiation to reduce their cost of doing business and enhance their incomes, including, by prohibiting countries from imposing taxes on them and on their products.

On e-commerce, what exactly is happening at the WTO? Over the past three years, there has been an aggressive push by the developed countries to initiate negotiations aimed at finalising binding rules on different dimensions of the digital economy. The digital giants have managed to disguise their deep commercial interests and have succeeded in projecting these negotiations as being beneficial for developing countries.

Swayed by their narrative of “e-commerce for development”, many developing countries have joined the chorus for seeking negotiations on this issue.

However, prominent countries including India, Indonesia and most of the countries in Africa are firmly opposed to these negotiations, especially on the issue of cross-border data flows.

Plurilateral negotiations

On account of the stiff opposition from some developing countries, the proponents have failed to secure a mandate to negotiate multilateral rules on e-commerce at the WTO. Consequently, they have changed track and are now actively seeking to initiate negotiations among a group of willing countries — commonly referred to as plurilateral negotiations.

However, even for a plurilateral agreement on e-commerce to become a part of the WTO, it would require consensus of the entire membership, including countries not part of the plurilateral group.

Why has India wisely chosen not to align itself with the proponents of e-commerce? At the core of India’s approach on this issue lies the reality that the country would be one of the largest creators of data in the world. This advantage can be leveraged to nurture its domestic digital economy so that it acquires a share in the digital economy commensurate with its status as a significant global source of data.

On the other hand, if India is compelled by any future agreement at the WTO to allow unrestricted free flow of data across borders, then its ambition in the high-value digital segment would take a hit. In such a scenario, the country would be unable to monetise the raw material of the digital economy and would be reduced to becoming merely a consumer of digital products.

Moving ahead from Davos, what challenges would India face in respect of e-commerce negotiations at the WTO?

With the weight of more than 70 countries behind the plurilateral initiative and the joint statement at Davos, India is likely to come under intense pressure from different directions to join the e-commerce negotiations.

Given Abe’s statement about Osaka Track on data governance, negotiations on e-commerce at the WTO is likely to be the foremost item on the agenda of the leaders, when they meet later this year, during the last week of June, in Osaka for the G20 Summit. At this meeting, Abe and leaders of some developed countries would seek to persuade India’s Prime Minister to join the WTO negotiations.

As part of the preparations for this important meeting, various ministries in India, including the Ministry of Commerce and Industry, Department of Economic Affairs, Ministry of Electronics and Information Technology and the Ministry of External Affairs need to work in tandem. The country must not feel apologetic during the G20 leaders’ summit in defending its interest in the digital economy by refusing to sign on to WTO negotiations on this issue.

Pressure from domestic lobbies

Domestically, we are likely to see lobby groups and experts lament that by staying out of the negotiations on e-commerce, India is missing out an opportunity to influence the rules that may get finalised. This commonly heard sentiment totally ignores the reality, and past experience, at the negotiating table. On issues of their deep interest, it is the developed countries that inevitably write the core rules. The influence of developing countries has been limited to fighting for some exceptions. Even if we do not like it, this stark reality needs to be acknowledged.

Further, there is hardly any issue in e-commerce negotiations, on which India may stand to gain. Instead, its participation would be more about limiting the damage that might arise from binding rules in this area. Given the mood of the proponents, it is unlikely that they will accommodate any development concerns of India. In short, even if the country is inside the negotiating room, it is unlikely to wield any meaningful influence on the final rules.

Some lobby groups in India, with one foot in the developed world, are seeking to create a narrative that prospects of exports of IT and IT-enabled services would improve on account of e-commerce negotiation at the WTO. Without any detailed examination, some in the government appear to have accepted this narrative. If the text of e-commerce provisions in some of the existing free trade agreements are an indicator, then there is unlikely to be any gain for India’s IT and ITES exports from e-commerce rules at the WTO.

In conclusion, let us bear in mind that no nation can prosper if it hands over its raw material to other countries for free. This is precisely what would be required of India if it becomes a party to an agreement on e-commerce at the WTO. If the country has to benefit from opportunities in the digital world, then the entire government must speak in one voice and act coherently at multiple international platforms and protect national interest. Failure to do so would compromise our digital future.

The writer is Head Centre for WTO Studies, IIFT. Views expressed are personal

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