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Info Service on WTO and Trade Issues (Aug21/07) Geneva, 12 Aug (D. Ravi Kanth) – The developing and least-developed countries could face a moment of truth at the World Trade Organization when they return from their summer recess at the beginning of September. Due to fierce opposition from a handful of developed countries and some developing countries, the developmental issues being raised by many developing and least-developed countries over the past four years seem unlikely to result in a successful outcome at the WTO’s 12th ministerial conference (MC12), which is scheduled to begin on 28 November in Geneva, said people familiar with the developments. The developing and least-developed countries have consistently raised around 10 developmental issues in the run-up to MC12. The issues include: (1) the temporary TRIPS waiver to combat the COVID-19 pandemic; (2) the permanent solution for public stockholding programs for food security purposes in developing countries; (3) the multilateral work program on electronic commerce; (4) the WTO’s contribution to the COVID-19 pandemic; (5) trade-related challenges of the least-developed countries; (6) core developmental concerns in the proposed fisheries subsidies agreement; (7) the G-90’s ten Agreement-specific proposals for making special and differential treatment (S&DT) simple and effective; (8) the legal status of the plurilateral Joint Statement Initiatives (JSIs); (9) strengthening the multilateral character of the WTO; and (10) the developmental and inclusive agenda on reforming the WTO. Major developed countries such as the United States, the European Union, Japan, Canada (which coordinates the Ottawa Group of some 13 countries), Australia, Norway, and Switzerland seem to be coalescing around their own issues that risks turning the multilateral trading system, particularly the WTO, into a “us” and “them” plurilateral organization. Australia, which is one of the core proponents for advancing the plurilateral JSIs such as on electronic commerce and domestic regulation in services, will be hosting a mini-ministerial conference in Paris on 5-6 October, on the margins of the annual Organization for Economic Cooperation and Development (OECD) ministerial council meeting, according to an email seen by this writer. Unless many developing and least-developed countries forge a common front on their issues and thwart the continued attempts being made by the industrialized countries to divide them, there is little likelihood of any progress on the ten developmental issues mentioned above, said people familiar with the developments. The “us” and “them” divide on the ten issues was starkly witnessed at the General Council (GC) meeting at the WTO on 27-28 July. The so-called “us” group led by the European Union, Canada, Australia, and the United States have flatly rejected the ten issues raised by the developing and least-developed countries at that GC meeting, said people familiar with the developments. The two outstanding issues that have been on the table for more than 20 years, namely, the 1998 multilateral work program on electronic commerce and the G90’s ten Agreement-specific proposals on S&DT, faced a “frosty” response from the members of the “us” group at the GC meeting. 1998 E-COMMERCE WORK PROGRAM At the GC meeting on 27-28 July, India and South Africa underscored the need for reviewing the current moratorium on imposing customs duties on electronic transmissions on account of several developments that have taken place over the past 22 years. India acknowledged that digital infrastructure played a significant role during the ongoing COVID-19 pandemic. Yet, it also revealed the widening digital divide among members, according to India. Further, the WTO members are yet to comprehend the implications of e-commerce on “competition and market structures; issues related to transfer of technology; data storage; automation and its impact on traditional jobs; and gaps in e-commerce policy and regulatory frameworks in developing countries, including LDCs,” India is understood to have said at the meeting. Being a proponent of strengthening the multilateral work under the non-negotiating and exploratory 1998 Work Program on e-commerce, India and South Africa sought to know the “implications of the moratorium on customs duties on electronic transmissions,” and the scope and impact of the moratorium, India said. Further, it is time to review the 1998 decision to have a moratorium on customs duties on electronic commerce, as the decision was taken without consensus on the scope of the moratorium and without any understanding of the unfolding digital revolution, said India. While the decision was extended for six months in December 2019, the moratorium has been in place for the last four years since the WTO’s eleventh ministerial conference (MC11) in Buenos Aires, in December 2017. The extension of the moratorium was granted on the commitment that the 1998 work program “will be re-invigorated, to achieve clarity on various issues, including the scope of the moratorium and its impact on Members’ policy space and revenues,” India had said, according to people familiar with the development. However, there has been little progress in the discussions on the Work Program on Electronic Commerce. India said that during the coming few months before MC12, members need to engage constructively on various issues under the Work Program. It is important to have “a clear understanding on the scope of the moratorium, to enable us to make an informed decision on extension or otherwise of the moratorium in the upcoming Ministerial Conference,” India has apparently argued. More importantly, a re-consideration of the moratorium is critical for developing countries to preserve their “policy space to regulate imports, generate revenue through a simple and direct instrument such as customs duties and achieve digital industrialization,” India said. It called on the strong proponents of the moratorium to provide specific evidence of the significant benefits, including the increasing digitalization and the development of the digital economy, and how they will be disrupted. India said the developing countries and LDCs are bearing the brunt of the impact of the moratorium by “extending duty free, quota free market access, largely for the developed countries. We, therefore, need further discussions on this issue.” India called for maintaining the work program on e-commerce as a standing item on the agenda of the GC meetings before MC12. India said it is important to reinvigorate work in all the four related WTO bodies – the Council for Trade in Goods, the Council for Trade in Services, the Committee on Trade and Development, and the TRIPS Council. SOUTH AFRICA’S INTERVENTION South Africa emphasized the need for structured discussions in the General Council on: (1) developmental aspects of electronic commerce; (2) scope, definition and impact of the moratorium on customs duties on electronic transmissions; (3) examination of the challenges experienced by developing countries and LDCs in relation to electronic commerce; and (4) explore ways of enhancing the participation of developing countries in electronic commerce. It said emphatically that the pandemic highlighted the enormous gap in access to digital technologies, laying bare the problems of the digital divide both between and within countries. Emphasizing the critical role played by technology in achieving the United Nations Sustainable Development Goals (SDGs), it argued that to harness its potential, rapid action is needed to close the digital divide and promote inclusion. Therefore, the issues raised in the Work Program remain critical to achieve this objective, South Africa apparently said. It underscored that only through a truly multilateral process that issues identified by Members under the Work Program such as classification, definition and scope can be clarified to enable a common understanding on e-commerce. It is regrettable, said South Africa, to see lack of commitment to the developmental aspects of the WTO-mandated work and “we are concerned that this is increasingly contributing to lack of progress in the WTO.” It cautioned against attempts to expand the definition of ET (electronic transmissions) which will have significant revenue and industrialization implications for developing countries. An UNCTAD paper (Research Paper No. 47 of June 2020) estimates that the total imports of services via Mode 1 amounted to USD 705 billion in 2017 while total imports of digitizable products were around USD 80 billion in 2017. The UNCTAD paper also estimated the potential losses from the moratorium of up to $10 billion per annum for developing countries and only $289 million in losses for advanced economies. These forgone revenues to developing countries are set to exponentially increase with the increasing digitization of goods, including advances in 3D printing technologies. At the GC meeting, South Africa alluded to the narrative being advanced by the developed countries that revenue losses can be evened out by internal taxes or compensated for by dynamic gains. However, this narrative ignores the principal purpose of customs duties as an industrial policy tool that can and indeed should also be deployed to foster the development of local digital economies, it said. The Work Program is designed to adopt a comprehensive and holistic approach to e-commerce to ensure equitable benefits for all, South Africa said, arguing that the reinvigoration of the Work Program is critical for securing the development dimension of the longstanding area of work in the multilateral framework of the WTO, including digital industrialization and the need to address the digital divide. The African Group, the ACP (African, Caribbean, and Pacific) Group and many other countries strongly supported the call for reinvigorating the work program in order to have a clear idea about the impact of the moratorium. DEVELOPED COUNTRIES RULE OUT ANY CHANGE IN THE MORATORIUM At the GC meeting, the United States, the European Union, Australia, Singapore and other members of the Joint Statement Initiative on digital trade opposed any change in the current moratorium. The US apparently said that it wants a permanent moratorium on customs duties on electronic transmissions while opposing the retention of the 1998 work program as a standing item on the GC agenda, according to people present at the meeting. The European Union echoed that “the moratorium on customs duties on electronic transmissions provides the predictability and security that our consumers and businesses – in both developed and developing countries – need when engaging or planning to engage in e-commerce.” Without citing these studies, the EU maintained that several studies “provided solid new evidence on the positive economic implications of the moratorium.” The EU said that “while Members had decided to extend the moratorium until MC12, the European Union hopes that our Ministers will be in a position to consider a longer term – if not permanent – extension at the next Ministerial Conference.” In short, the developed countries seem determined to stymie any progress on the issues of scope and definition of electronic transmissions as well as address the revenue implications of the moratorium, said people, who preferred anonymity. According to analysts, the developing countries need to advance their digital industrialization in the face of the growing digital divide that is contributing to growing inequalities, particularly during the worsening COVID-19 pandemic. The growing digital monopolies such as Google, Amazon, Facebook, Apple, and Microsoft, which made tens of billions of dollars of profits during the pandemic and paid little tax, must be subjected to customs duties to level the playing field with the exporters of physical goods, said analysts, who asked not to be quoted. In conclusion, it appears to be clear that unless there is unity of purpose among many developing countries and LDCs in the next three months beginning from September to November, these countries could face the prospect of having their interests being squashed permanently, said analysts, who asked not to be quoted.
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