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TWN Info Service
on WTO and Trade Issues (Dec20/09) South Africa,
India call for development-oriented approach to e-com Geneva, 8 Dec (D. Ravi Kanth) - South Africa and India have stepped up their efforts at the WTO for creating multilateral momentum in "promoting an inclusive development-oriented approach to electronic commerce", in what appears to be an attempt to counter the informal plurilateral Joint Statement Initiative (JSI) talks that seek to safeguard hundreds of billions of dollars of profits of Google, Amazon, Facebook, Apple, and Microsoft among others, analysts said. Ahead of the WTO's General Council (GC) meeting on 16-17 December, South Africa and India have jointly submitted a proposal on how to go about building a strong multilateral edifice for discussing the huge revenue and industrial impacts arising from the existing moratorium on customs duties on electronic transmissions. The two countries called for reinvigorating the multilateral 1998 work programme on e-commerce. Emphasizing that "multilateralism is vital in a world facing developmental challenges," the two countries proposed "structured discussions under the 1998 work programme" in all WTO bodies as mandated by the General Council more than two decades ago. In their proposal circulated on 3 December, the two countries proposed that the General Council should direct that the "E-commerce Work Programme be a standing item in the relevant WTO bodies" as per the mandate set out in document WT/L/274. The mandate calls for sustained discussion on all aspects relating to e-commerce in four different WTO bodies such as trade in goods, trade and development, trade in services, and trade-related aspects of intellectual property rights (TRIPS). The GC must ensure that the 1998 work programme remains under "continuous review through a standing item on its (GC's) agenda and take up consideration of any trade-related issue of a cross-cutting nature (of issues) as entailed in the 1998 Work Programme." South Africa and India suggested that the "structured thematic discussions in the General Council through various platforms" may include the following items: (i) Developmental aspects of electronic commerce; (ii) Scope, definition and impact of the moratorium on customs duties on electronic transmissions; and (iii) Examination of the challenges experienced by developing countries and LDCs (least developed countries) in relation to electronic commerce and explore ways of enhancing the participation of developing countries in electronic commerce. They expressed concern that despite agreeing on structured discussions on all trade-related topics of interest brought forward by members, including LDCs on issues concerning "scope, definition and impact of the moratorium on customs duties on electronic transmissions," there has been little progress. Further, there have been few substantive discussions on issues even from a "trade policy perspective", the two countries said, suggesting that "there are also different approaches by the WTO bodies on this issue of critical importance to the membership, with some bodies having the Work Programme on electronic commerce as a standing item in the agenda, while in some it is an ad-hoc item that is only put in the agenda at the request of Members even though there is a clear Ministerial mandate on issues to be addressed by each of the WTO bodies." Given the unfolding "digital transformation of which e-commerce is integral", it is imperative to continue the exploratory discussions under the 1998 Work Programme, the two countries argued. Immediately after the WTO's 11th ministerial conference (MC11) in Buenos Aires, Argentina in December 2017, India and South Africa in 2018 called for a "re-think" on the moratorium on customs duties on electronic transmissions, focusing on several thematic areas. The areas include (1) revenue implications of the moratorium on customs duties on electronic transmissions; (2) scope and definition of electronic transmissions; (3) technical feasibility of imposing customs duties on electronic transmissions; and (4) broader impact of the moratorium on trade and industrialization and any other issue with respect to the moratorium. Subsequently, Switzerland and other co-sponsors, in their proposal WT/GC/W/779, called for the need to broaden and deepen the discussion on the moratorium on imposing customs duties on electronic transmissions. So far, issues such as the scope, definition and impact of the moratorium on customs duties on electronic transmissions remain issues "of interest to Members and are critical in determining the decision of Ministers at MC12 [scheduled to be held in Nur Sultan, Kazakhstan in June 2021] on the future of the moratorium on e-commerce," the two countries suggested. Several countries, including the LDCs, have submitted various papers and inputs to underscore the need for "a multilateral discussion that will result in deliverables that will promote an inclusive and development-oriented digital transformation agenda for consideration by Ministers at MC12," South Africa and India argued. They cautioned that "the discussion in the JSI on e-commerce narrowly focuses on the development of legally binding rules and risks further marginalization of developing countries in global trade." THE COVID-19 PANDEMIC Citing a paper by the UN Conference on Trade and Development (UNCTAD), titled "The COVID-19 Crisis: accentuating the need to bridge the digital divide", South Africa and India said "the COVID-19 pandemic has highlighted a deepening digital divide both within and between countries." "Despite the rapid uptake of digital technologies, significant divides remain, both between and within countries. Developing countries are disproportionately affected by the pandemic, both from a health and economic point of view," South Africa and India pointed out. Due to the growing disparities in access to the internet, with only "35 per cent of population in developing countries [having] internet access as compared to 87 per cent in the developed world," South Africa and India said the LDCs "are the most vulnerable to the human and economic consequences of the pandemic and lag behind in relation to digital readiness with only one in five people in LDCs using the internet." Also, the purchase of goods or services online is limited to well below 5% of the population in developing countries. "As a result, countries which are hyper-connected have been able to continue many of their economic operations online during the ongoing pandemic, but countries which are less connected were not even able to provide basic information on combating Covid-19 where it was most needed," South Africa and India argued. They said the UNCTAD eTrade Readiness Assessments have showed that "there are significant gaps and barriers in several policy areas ranging from ICT infrastructure, payment solutions, skills, legal frameworks, insufficient quality of broadband services that hamper the ability of many developing countries to leapfrog and leverage digital trade." THE DIGITAL SERVICES TAX The joint proposal by South Africa and India comes at a time when several industrialized countries, particularly France and other European countries are on the verge of imposing tens of millions of dollars of internal taxes on the huge volumes of e-commerce activities undertaken by leading e-commerce behemoths such as Google, Amazon, Facebook, and Apple among others. According to a news report in the Financial Times on 25 November, the "French tax authorities have begun demanding millions of euros from US technology groups as they push ahead with a new digital services tax that has enraged Washington." Prior to the demands raised by the French authorities to tax Facebook and Amazon, the US, which has characterized it as "an example of unfair tax", has threatened France with a billion dollars in retaliatory measures, including the prospect of starting a new trans-Atlantic trade war. Several governments are on the brink of imposing their own digital services tax as the tech companies pay little tax on their billions of dollars of profits. Surprisingly, when it comes to external taxes like customs duties, the same industrialized countries such as the European Union, Australia, New Zealand and the United States as well as Singapore and Korea fiercely oppose the termination of the moratorium on customs duties on electronic transmissions that often include large volumes of digital goods. Ms Rashmi Banga, a leading digital trade expert at UNCTAD, told the SUNS on 8 December that "it is often argued that countries are free to impose internal taxes on big tech firms/digital platforms so there is no need for applying customs duties on their exports and the moratorium on (customs duties on) electronic transmissions should continue." "However, if a small and medium-sized firm (SME) from a developing country pays the internal taxes and also faces customs duties for its exports, then why shouldn't exporters of digital products not pay both the internal taxes and customs duties? Why should the big tech firms and digital platforms get special and differential treatment?" she asked. Banga argued that "developing countries need to develop their digital capacities and for this there is a need to understand the implications of digital rules," adding that "there is already a Work Programme on E-commerce in the WTO, which is a forum where the Member States can freely discuss and negotiate these digital rules." "Instead of discussing the digital rules and improving understanding about the digital rules, however, the attention of the Member States is being diverted because of the non-mandated plurilateral JSI, where highly technical texts are being circulated, and those developing countries which have joined are being asked to negotiate," Banga said. Expressing sharp concern that the developing country participants in the JSI negotiations do not have the requisite technical capacity to negotiate on the JSI texts coupled with the unknown contours of the digital revolution in the future, Banga argued that "taking any commitments in digital products and services can therefore be counterproductive." She said "UNCTAD's Trade and Development Report (2020) has therefore argued for not multilateralizing any outcome coming from the JSI." "Also, JSI outcomes cannot be called a plurilateral agreement in the WTO, as some would like to refer, since they do not have a consensus of the member states for their negotiations," Banga said.
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