Moratorium on e-commerce customs duties

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.