South countries shoot down proposals for e-commerce negotiations

A large number of developing countries have opposed moves at the WTO to launch negotiations aimed at drawing up new rules on electronic commerce.

by D. Ravi Kanth

GENEVA: A large majority of developing and least-developed countries shot down on 16 October proposals from major industrialized and some developing countries for establishing a “working party” or “working group” on electronic commerce at the World Trade Organization’s eleventh Ministerial Conference (MC11) in Buenos Aires this December, several trade envoys told the South-North Development Monitor (SUNS).

The proposals for a working party or working group are disguised efforts at starting negotiations for WTO e-commerce rules.

India, the African Group, Uganda on behalf of the least-developed countries (LDCs) and several other members severely questioned the underlying motives of the proponents seeking negotiations to craft rules in e-commerce without concluding the Doha Development Agenda (DDA) trade negotiations.

They said that the proposals are aimed at undermining the WTO’s existing e-commerce work programme so as to deny the “developmental space” for industrialization.

Presenting the strongest statement issued by the African Group yet, Rwanda described the attempts by the proponents to confuse members through a slew of proposals as grotesque and diabolical, according to trade envoys who asked not to be identified.

Rwanda accused the e-commerce proponents of undermining the DDA negotiations so that they can start negotiations on e-commerce at Buenos Aires.

South Africa’s Trade Minister Rob Davies, during a dinner held on 9 October on the occasion of a mini-ministerial meeting in Marrakesh, had told his counterparts that his country will fight tooth and nail against the proposals for launching e-commerce negotiations, according to a trade minister who asked not to be quoted. At the meeting itself, WTO Director-General Roberto Azevedo said there are too many wide gaps over e-commerce which are difficult to bridge at this juncture. (See the article “Consensus eludes trade ministers at Marrakesh” in this issue.)

E-commerce proposals

The 16 October meeting at the WTO was convened by the chair of the WTO General Council, Ambassador Xavier Carim of South Africa, to prepare the mandate on e-commerce, particularly for exploring the level of acceptability of proposals to launch negotiations as well as the extension of the current moratorium on the imposition of customs duties on e-commerce transmissions.

Several proponents – the European Union, Canada, Australia, Chile, Korea, Norway and Paraguay – put forward a proposal calling for the establishment of “a Working Party” at the Buenos Aires Ministerial Conference that “shall conduct preparations for and carry out negotiations on trade-related aspects of electronic commerce on the basis of proposal by Members.”

The proponents maintained that “the Working Party shall establish its own procedures and shall report periodically to the General Council.”

They demanded continuance of the current practice of not imposing customs duties on electronic transmissions until the next Ministerial Conference in 2019, according to the draft proposal obtained by SUNS.

Prior to this proposal, two other demandeurs of e-commerce negotiations – Japan and Russia – had circulated their own respective proposals that called for establishing a “Working Group.”

Japan suggested that “existing WTO Agreements apply to electronic commerce.” Japan indicated that issues such as the free flow of data without data localization requirements, permanent moratorium on customs duties, non-disclosure of source code, and prohibition of forced technology transfer will also come under the purview of future negotiations as and when they are launched.

Russia, in its proposal, suggested the possibility of developing rules in the Working Group, indicating that it could act as a negotiating group.

In addition, Costa Rica circulated a proposal on “e-commerce for development agenda” even though the issues it raised as part of e-commerce and development are currently examined in the WTO’s Committee on Trade and Development.

“A top-down approach”

At the 16 October meeting, India said it “wants continuation of the existing [1998 e-commerce] work pro-gramme” that provides an exploratory and non-negotiating mandate.

Proposals to establish a new Working Group at Buenos Aires are clearly aimed at imposing “a top-down approach” as opposed to the “bottom-up approach” in the 1998 work programme, India said.

India’s trade envoy, Ambassador J.S. Deepak, argued that “gains from e-commerce should not be confused with the likely benefits of rulemaking in e-commerce,” according to a source familiar with the meeting.

Deepak said “negotiations on rules and disciplines in e-commerce would be highly premature at this stage,” according to the source who spoke to SUNS.

India also linked the extension of the two-year moratorium for not imposing customs duties on e-commerce transmissions with the moratorium on TRIPS non-violation and situation complaints.

Rwanda, on behalf of the African Group, severely demolished the proposals circulated by the e-commerce proponents.

The African Group said it “can agree to continue the exploration of issues under the 1998 work programme.” “However, we will not agree to change the current structure or institutional arrangement of the work programme.”

Referring to the argument by Japan and other members that existing WTO agreements apply to electronic commerce, the African Group asked whether the proponents are saying that “our Schedules of Commitments negotiated in the Uruguay Round automatically apply to new technologies such as 3D printing, robotics, drone delivery and Artificial Intelligence, to name a few”.

The African Group said it “objects to this erroneous assumption by Japan et al, because it has no legal basis in the WTO’s framework.”

Further, such an approach “goes against the basic principle of progressive liberalization”, the African Group said, arguing that “new business models, new services and new technologies that did not exist at the time Members’ Schedules were negotiated do not apply post-hoc.”

Rwanda reminded members at the meeting that “there still remains a long paper trail in the WTO of 19 years of unresolved issues pertaining to e-commerce.”

The African Group said the e-commerce issue had thrown up divergent views on “the technological neutrality of the GATS [the WTO’s General Agreement on Trade in Services], the distinction between, and application of GATS Modes 1 and 2 in e-commerce, whether products delivered electronically are services or goods or both, and the classification of ‘new services’.”

Without resolving these issues which were swept under the carpet, the proponents are now “advocating for new multilateral rules on new issues such as e-commerce”, the African Group pointed out.

Rwanda warned that “a Working Group will not replace these systemic divergences”, and said that “these discussions, as per the Work Programme, are required to take place in the bodies responsible for administering the relevant Agreement.”

By suggesting a “false narrative”, the proponents for e-commerce are primarily aiming at “kicking away the development ladder” as set out in the Doha Development Agenda, said the African Group. “In our view, the Work Programme has not been tested to warrant a change in its structure.”

The African Group said Costa Rica had tabled a proposal on “e-commerce for development agenda” when the 1998 work programme clearly mandates members “to examine all trade-related issues relating to global electronic commerce, taking into account the economic, financial, and development needs of developing countries.” The Costa Rican proposal, it maintained, is saying erroneously that the Committee on Trade and Development does not have a mandate to deal with these development aspects.

The African Group urged the chair to “ensure that the draft MC11 text on e-commerce is agreed in Geneva.” It asked the chair to place all its concerns in his report.

Nigeria supported the proposals from the proponents, breaking ranks with the African Group, according to participants present at the 16 October meeting.

The chair Carim urged the proponents to not only consult among themselves for harmonizing their proposals but also discuss with their critics so as to bridge the wide gaps between the two sides.

In short, the developing and least-developed countries have exposed graphically the continued attempts by major industrialized countries and their allies in the developing world to bury the DDA work programme through “new issues” such as e-commerce, investment facilitation, and disciplines for small and medium enterprises.

The moot issue, however, is whether the large majority of developing and poorest countries will stand united at Buenos Aires, or yield meekly as they did at the last Ministerial Conference in Nairobi. (SUNS8555)                              

Third World Economics, Issue No. 648, 1-15 September 2017, pp2-3