WTO Moratorium on Customs Duties on Electronic Transmissions

WTO Moratorium on Customs Duties on Electronic Transmissions

Why in the news?

India is set to firmly oppose any further extension of a moratorium on the imposition of customs duties on electronic transmission at WTO’s 12th ministerial conference (MC12).

Opposed by Whom?

Recently, a small number of countries—such as India, Indonesia and South Africa—have indicated a desire to end the moratorium and to begin unilaterally imposing tariffs on cross-border data flows.

Why?

• Favours developed countries- Though lacking standard definition, electronic transmission generally refers to a “digital good”. As digital trade at present is dominated by big tech and developed countries, duty exemption benefits developed countries more.
• Loss of revenue for developing countries-as being the net importer of digital goods. In one of the joint statements by India and SA, it was argued that the percentage of customs revenue lost for developing nations is 4.35% while that of the developed countries is a mere 0.24%.
• Increasing technology-Especially 3D printing and others have a potential of increasing trade in digital goods.

Concept:

Electronic Transmission:

The WTO Work Programme on Electronic Commerce defines “electronic commerce” as the “production, distribution, marketing, sale or delivery of goods and services by electronic means.” While the term is not defined uniformly, it is commonly held to encompass anything from software, emails, and text messages to digital music, movies and videogames.

It is any form of communication that does not directly involve the physical transmission of paper that creates a record that may be retained, retrieved and reviewed by a recipient thereof and that may be directly reproduced in paper form by such a recipient through an automated process.

WTO Moratorium on Customs Duties on Electronic Transmissions:

The WTO e-commerce moratorium, which bans countries from imposing customs duties on electronic transmissions, dates back to 1998 when ministers at the Second Ministerial Conference adopted the Declaration on Global Electronic Commerce, calling for the establishment of a work programme on e-commerce, which was adopted later that year. Since then, at every Ministerial Conference, WTO members have agreed “to maintain the current practice of not imposing customs duties on electronic transmissions.” Every two years governments agree to extend the moratorium at the biennial WTO Ministerial Conference.

Due to an aberration in the WTO Ministerial Conference scheduling, the moratorium is due to lapse on 31 December 2019—unless a decision is taken at a WTO General Council meeting in December to extend the moratorium until the 12th WTO Ministerial Conference in Nur-Sultan, Kazakhstan in June 2020.

Impact?

The moratorium has enabled exponential growth in use of the Internet and the flourishing of the digital economy. 

If Lapses?

There is a significant risk that the moratorium will not be renewed this December, leaving governments free to experiment with applying damaging tariffs to cross-border data flows. 

However a number of recent papers have shown that the unilateral imposition of customs duties on electronic transmissions will:

•  have distortive effects on growth of the digital economy
•  be cost-prohibitive and technologically unfeasible
•  likely fall foul of several existing free trade agreements under the most favoured nation  principle