Moratorium on e-commerce customs duties

  • December 14, 2023
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Moratorium on e-commerce customs duties

Subject : Economy

Section: External Sector

Background:

  • The WTO is addressing the extension of the moratorium on e-commerce customs duties.
  • The moratorium prevents countries from imposing customs duties on electronic transmissions.
  • Introduced in 1998, it faces potential expiration at the Ministerial Conference in February 2024.

Divergent Views:

  • US Position:
    • Supports extending the moratorium.
    • Emphasizes the importance of advancing the WTO work program on e-commerce.
    • Aims to maintain the moratorium to allow robust exploration within the work program.
  • Developing Nations’ Position:
    • Led by India, Indonesia, Sri Lanka, and South Africa.
    • Favors ending the moratorium.
    • Believes it is crucial to preserve policy space for digital advancement, import regulation, and revenue generation through customs duties.

Previous Extension:

  • Extended previously at WTO MC 12 with arguments favoring post-COVID recovery.
  • Several members, including the US, the UK, and the EU, supported the extension.

Economic Impact:

  • A UNCTAD study reveals a $55 billion loss in customs revenue in 2020 due to the moratorium.

Developing Nations’ Concerns:

  • Argue that the moratorium disproportionately favors developed nations.
  • Digital trade is dominated by industries in wealthier countries.

WTO Director-General’s Perspective:

  • Ngozi Okonjo-Iweala emphasizes the need for clarity on the moratorium.
  • Members consider reaching an agreement on this matter vital in the lead-up to MC13.

Future Outlook:

  • Ongoing discussions highlight the evolving dynamics and relevance of digital economy and trade issues on the global stage.

E-transmission Moratorium:

  • Implemented since 1998, members agreed not to impose customs duties on electronic transmissions.
  • Periodically extended at successive Ministerial Conferences (MC).
  • Covers digitizable products like photographic films, cinematographic films, printed matter, music, media, software, and video games.
  • Emerged from the Declaration on Global Electronic Commerce at the Second Ministerial Conference in 1998.
  • Work program established to examine global e-commerce-related issues comprehensively.

India’s Stance:

  • Opposition to Extension:
    • India opposes the continuation of the moratorium, stressing its adverse impact on developing nations.
    • Seeks an end to the moratorium to preserve policy space for digital advancement, import regulation, and revenue generation.
  • Work Program Intensification:
    • Calls for an intensified work program on the e-commerce sector at the WTO.
    • Advocates discussions in various councils like Trade in Goods, Trade in Services, TRIPS, and Trade and Development.

Challenges and Concerns:

  • Tariff Revenue Loss:
    • India experiences a surge in imports of electronic transmissions.
    • Potential tariff revenue loss estimated at USD 10 billion annually for developing countries.
  • Impact on Industrialization:
    • Lapse of the moratorium affects industrialization and the use of digital technologies like 3D printing.
    • Limits governments’ ability to generate additional tariff revenues.

Way Forward:

  • Preserving Flexibility:
    • Developing countries need flexibility to implement policies for digital catch-up.
    • Emphasizes improving domestic physical and digital infrastructure.
  • Regulating Luxury Imports:
    • Urges regulating luxury imports of movies, music, and video games.
    • Removal of the moratorium provides policy space for governments in this regard.

World Trade Organisation (WTO):

  • Intergovernmental organization regulating and facilitating international trade.
  • Used by governments to establish, revise, and enforce rules governing global trade.
  • Officially started operations on January 1, 1995.
  • Established under the 1994 Marrakesh Agreement, replacing the General Agreement on Tariffs and Trade (GATT) from 1948.
  • World’s largest international economic organization.
  • 164-member states, representing over 98% of global trade and GDP.
  • Located in Geneva, Switzerland.
  • Ministerial Conference:
    • Top decision-making body.
    • Composed of all member states.
    • Typically convenes biennially, with an emphasis on consensus in decision-making.
  • General Council:
    • Handles day-to-day functions.
    • Includes representatives from all member states.

India’s Participation:

  • India is a founding member since January 1, 1995.
  • Also, a member of GATT since July 8, 1948.
economy Moratorium on e-commerce customs duties