We should join WTO e-commerce talks

Arpita Mukherjee | Updated on June 17, 2019

Big money: The flow of data now contributes more to the world’s GDP than flow of physical goods   -  Istock

Export councils feel that staying out of the plurilateral group can adversely impact trade relations with markets such as the US

E-commerce and growing protectionism were two key topics of discussions at the G20 ministerial meeting at Tsukuba, Japan, on June 8 and 9. New Delhi will soon have to take a decision on whether or not to join the WTO’s plurilateral group on trade rules in e-commerce. Earlier this year, 77 WTO member-countries came together to negotiate trade rules in e-commerce. India is negotiating an e-commerce chapter in the Regional Comprehensive Economic Partnership (RCEP) agreement. Among the 16 RCEP member-countries, 11 (including China) are a part of the plurilateral group. It is, therefore, important for the new government to review India’s stance.

In the past decade, fast growth of technology and development of different business models have led to double-digit growth of trade in e-commerce. UNCTAD estimated that the global e-commerce market was at $29 trillion in 2017. India was ranked ninth in terms of global e-commerce sales then. The flow of data now contributes more to the world’s GDP than flow of physical goods. The rise in importance of data and its intangibility have made the regulatory framework governing data flows complex.

While it is increasingly difficult for countries to regulate technology, there are concerns that growing digitalisation may increase the risks to national security and consumer privacy. To enforce government right to vigilance and consumer data protection, a number of developed and developing countries are implementing data localisation measures.

The European Union (EU) has implemented the General Data Protection Regulation (GDPR), while China’s Cybersecurity Law of 2016 prohibits or severely restricts routine cross-border transfers of information. India’s Draft National E-commerce policy is aimed at enacting a data protection regulation based on the Srikrishna Committee recommendations.

Two concerns of WTO member-countries are localisation and the growing oligopolistic powers of few global multinationals. The plurilateral group created by the WTO member countries is negotiating global trade rules in e-commerce. To understand whether India should be a part of the plurilateral group, a survey of 50 stakeholders was conducted by researchers in ICRIER. Majority of the respondents opined that India should participate in the plurilateral e-commerce negotiations so as to play a major role in decision-making.

Participation matters

Most Indian business and export promotion councils feel that taking a hard position of staying out of the negotiations can adversely impact India’ trade relations with key export markets such as the US. In this regard, a submission made by Express Industry Council of India, on the Draft National E-commerce Policy, stated that: “We encourage the GOI to embrace the concepts currently under consideration by the WTO e-commerce initiative, recognising that this plurilateral effort is a means for India, should it join the effort, to adopt policies that will facilitate the growth of India’s e-commerce market.”

Some survey participants felt that the disincentive to participate may be due to the lack of data and information and/or lack of preparedness. In this context, the government may start sponsoring research for data collection on what component of the SME businesses are through e-commerce platform, whether such platforms have helped SMEs to access the global market and integrate into global value chains, and what is the business model of the e-commerce companies and their source of funding, among others. They also suggested that India should enact the Personal Data Protection Bill based on the Srikrishna report to ensure data security.

The survey also found that barriers which adversely impact efficient business models and restrict investment in logistics infrastructure but are not able to help the domestic companies to gain global scale should be reviewed and replaced by policies which address the issues faced by domestic start-ups and SMEs.

A number of e-commerce companies and their express delivery service providers pointed out that commitments to deliver within a certain date and/or time cannot be made to customers unless e-commerce companies and/or the express delivery companies in their network have control over the inventory.

Thus, the restrictions on FDI in inventory-based model cannot be adhered to if a firm, on the one hand, has an efficient business operation which meets customer requirements and satisfaction and, on the other, has a fast-track growth strategy. Indian express delivery companies pointed out that being a part of the network of global e-commerce companies have led to 40 per cent increase in their B2C sales and 20 per cent increase in their B2B sales. Given that GST supports a single market model, if the restrictions on inventory-based models are removed, they can be a part of the most efficient inventory management system, which will reduce logistics costs.

Data security

While all survey participants agree on the need for data security and protection, they have raised concerns about the way in which the policy have been implemented and, at times, without stakeholders’ consultations. For example, they cite the RBI notification in April 2018 on storage of payment data. The RBI said that the entire data relating to payment systems should be stored in a system “only” in India. While the payment companies had no objection to share the data real-time with the RBI, they are concerned about their ability to do risk management and fraud in the context of international trade-related payments if data mirroring/sharing is not allowed.

Localisation of data has been a key component of the Draft National E-commerce Policy, but the policy fails to define key terminology like community data and sensitive data. Lawyers are also divided as to what are the constitutional rights of citizens in a democratic country and how that is ensured under the proposed policy. While the policy is drawn with the objective of creating infrastructure and jobs in the country, there are no studies on how much infrastructure is needed, do we have the capacity to manufacture to meet the requirements, can we meet the requirements in three years as proposed, and what would be the impact on trade balance and imports.

Given these policy gaps, the high-level trade committee may review the current regime, look at global best practices, examine the inputs given by different stakeholders and then develop India’s e-commerce policies and negotiating strategies at the WTO.

The writer is Professor at ICRIER. Views expressed are personal

Published on June 17, 2019

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