WTO makes ecommerce decision: moratorium on applying duties gets an extension

Thu 16 Jun 2022
Posted by: Noelle McElhatton
Trade News

The World Trade Organization (WTO) has extended its 24-year moratorium on applying duties to electronic transactions until the next ministerial meeting, likely to be in 2023.

The debate about maintaining the moratorium has split opinion between WTO members at the 12th WTO Ministerial Conference in Geneva this week.

The US, the UK and the European Union have been arguing in favour of retaining it, versus India and South Africa who have advocated ending it and allowing tariffs to be charged on electronic sales.

Deal reached

WTO members reached a provisional deal on Thursday (16 June).

The Washington Post reports on the role that WTO director general Ngozi Okonjo-Iweala played in seeking a consensus on the ecommerce issue as the 12th World Trade Organisation Ministerial Conference went into overtime.

Opponents

The ‘pro retention’ camp argued against the timing of lifting the moratorium amid the rising cost of living that is threatening the global recovery.

The block has been in place since a WTO declaration in 1998 that “members will continue their current practice of not imposing customs duties on electronic transmission”, and has been periodically extended ever since.

India block

However, the Register reports that some countries, including India and South Africa, were threatening to block the extension as they eyed the potential revenue to be made from taxing ecommerce.

The moratorium affects electronic goods such as ebooks, emusic, and video games, depending on how ‘electronic transmissions’ are defined, according to Medianama.

India argued that imposing import tariffs would help it recoup millions of dollars in lost tax revenue on electronic transmissions, which are otherwise retained by developed countries and Big Tech companies.

According to some estimates, developing countries could be losing out in $10bn of revenue, a figure that could increase as digital commerce evolves further.

Definition difficulties

Executives from Indian tech firms told the Economic Times that imposing customs in the absence of a clear definition of ‘electronic transmissions’ could lead to uncertainties between countries importing to India, when it comes to intellectual property and trade rights.

The likelihood of the moratorium being lifted was unlikely, with 51 developing and developed countries supporting its extension.

Outstanding issues

As well as ecommerce, the conference has still to reach agreement on a range of other issues including a new framework to expand global access to vaccines and mitigate the global food crisis, WTO reform, an agreement on fishing subsidies and work on the WTO’s agriculture rules.

Politico reports that many countries are furious at India's blocking tactics.

“India is dancing a very smart and strategic dance” at this conference, a Geneva trade diplomat said.

Blocking renewal of the ecommerce moratorium would have been a major setback for the WTO’s role in promoting free and open trade, although countries would still have to decide individually whether to impose the duties or not. 

Reuters reports that following all-night negotiations, some trade sources were hopeful that negotiations aimed at clinching deals on food security, fishing and vaccines would circumvent Indian opposition.

As previously covered in the IOE&IT Daily Update, the WTO conference sees the trade body facing up to a number of pivotal issues that have become more pressing in the shadow of the Ukraine war.