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Info Service on WTO and Trade Issues (Apr24/05) Geneva, 1 Apr (D. Ravi Kanth) — Australia, Japan, and Singapore, the co-convenors of the proposed plurilateral Joint Statement Initiative (JSI) on electronic commerce, issued a “toothless” draft chair’s text on 27 March that excludes any disciplines on cross-border data flows, localization of servers, and source code, in an attempt to cobble together an agreement before the “European summer break” in July-August, said people familiar with the negotiations. When the negotiations were launched in January 2019, the proponents, particularly the United States, had claimed that they would only settle for a high-ambition agreement with strong provisions concerning the removal of restrictions on cross-border data flows, localization of servers, and source code. After six years, and more so after the US withdrew its proposals on the three issues last year, the co-sponsors began chipping away on the margins to make the agreement “palatable” to the US, China, and the European Union among others, said people involved in the negotiations. A cursory glance at the latest draft text suggests that the agreement appears to be beneficial to e-commerce giants like Amazon, Apple, AliExpress (of the Alibaba Group) and Temu, among others, said people familiar with the agreement. A report in the Financial Times on 31 March, titled, “China’s e-commerce groups make inroads in South Korea with lure of low prices,” suggests that due to low demand in the Chinese economy, its e-commerce giants like AliExpress (of the Alibaba Group) and Temu are entering into other markets by selling products at much cheaper prices than Amazon and other Korean e-commerce companies. The 33-page third version of the draft chair’s text, seen by the SUNS, appears to contain asymmetrical provisions on “customs duties on electronic transmissions,” “personal data protection”, and “development” that could potentially undermine the interests of developing and least-developed countries in the rapidly evolving area of e-commerce, said people familiar with the latest draft text. In the introductory note attached to the restricted draft text, the co-convenors said they “take sole responsibility for this version of the Chair’s Text.” “It reflects our judgement on where consensus is most likely to be achieved in the agreement and has been updated to reflect the discussions that took place during the March negotiation cluster,” the co-convenors argued. However, they reiterated that “this Chair’s Text does not represent the dropping of any proposals from the Consolidated Text INF/ECOM/62/Rev.5 issued on 15 November 2023, which remains a comprehensive record of proposals, attributions and drafting notes.” The three co-convenors urged the JSI e-commerce participants “to take a holistic approach in considering the third Chair’s Text and the amendments made since the last negotiation cluster in March.” “We trust that you share our view that this Chair’s Text represents a commercially meaningful and inclusive package, broadly reflects the views and feedback of all participants since discussions began in 2019 and it provides a sound basis for us to achieve an agreement.” According to the co-convenors, the next round of negotiations beginning on 22 April will focus on (1) “ICT products that use Cryptography”; (2) “E-payments”; (3) “Development”; (4) “Final provisions”; (5) “Scope carveouts”; (6) “Customs duties”; and (7) “Report on progress of legal scrub(bing).” After the upcoming April cluster of meetings, the co-convenors plan to “circulate the final version to Members.” They urged the JSI participants to “use the April Chair’s Text to seek senior/political level approval of the final agreement.” “As you know, we aim to mark acceptance of the final agreement before the European summer break,” the co- convenors concluded. On the contents of the draft chair’s text, Section A covers “Scope and General Provisions”. It includes eight articles containing provisions on “scope”; “definitions”; “relation to other agreements”; “general exceptions”; “security exception”; “prudential measures”; “personal data protection exception”; and “indigenous peoples”. The commercially-meaningful Section B on “Enabling electronic commerce” includes six articles focusing on “electronic transactions frameworks”; “electronic authentication and electronic signatures”; “electronic invoicing”; “paperless trading”; “single windows data exchange and system interoperability”; and “electronic payments”. In Section C on “Openness and Electronic Commerce” , issues such as “customs duties on electronic transmissions”, “open government data”, and “access to and use of the internet for electronic commerce” are addressed. CUSTOMS DUTIES ON ELECTRONIC TRANSMISSIONS Against the backdrop of the decision taken at the just-concluded World Trade Organization’s 13th ministerial conference (MC13) in Abu Dhabi, it was agreed that “the current practice of not imposing customs duties on electronic transmissions will be maintained until the 14th Session of the Ministerial Conference or 31 March 2026, whichever is earlier.” Recently, in an interview to the FT on 27 March, the WTO’s Director-General, Ms Ngozi Okonjo-Iweala, “stressed that most governments would continue to exempt e-commerce duties even after 2026.” She was alluding to the plurilateral JSI e-commerce deal. The language proposed on customs duties on electronic transmissions in Article 16 of the latest draft Chair’s text is as follows: “16.1 For the purposes of this Article, “electronic transmission” means a transmission made using any electromagnetic means and includes the content of the transmission. 16.2 The Parties acknowledge the importance of the Work Programme on Electronic Commerce (WT/L/274) and recognise that the practice of not imposing customs duties on electronic transmissions has played an important role in the development of the digital economy. 16.3 No Party shall impose customs duties on electronic transmissions between a person of one Party and a person of another Party. 16.4 For greater certainty, paragraph 16.3 shall not preclude a Party from imposing internal taxes, fees or other charges on electronic transmissions in a manner consistent with the WTO Agreement.” The proposed language on customs duties on electronic transmissions may not be a problem for industrialized countries, which lose less customs revenue than developing and least-developed countries for whom customs revenue is a substantial component in their overall tax revenues, said a UN trade official, who asked not to be quoted. Effectively, the developing and least-developed countries are making a huge payment to the global e-commerce giants by not applying customs duties, the official said. For developing and least-developed countries, the JSI e-commerce agreement is particularly inimical to their interests from both revenue and digital industrialization perspectives, the official suggested. “By agreeing to the JSI agreement, they are locking their future that would impede them from achieving realistic levels of digital industrialization,” the official warned. PERSONAL DATA PROTECTION The issue of personal data protection is covered under Section D of the draft text, titled “Trust and Electronic Commerce.” Articles 19-23 cover provisions on “Online Consumer Protection,” “Unsolicited Commercial Electronic Messages”, “Personal Data Protection”, “ICT Products That Use Cryptography,” and “Cybersecurity.” “Personal Data Protection”, which has seen some divisions during the negotiations following the European Union’s General Data Protection Regulation (GPDR), requires a regime of high standards for safeguarding personal data protection. Given the asymmetries in the protection of personal data among JSI members, the developing countries are at a particular disadvantage as it requires them to adopt high standards, said a developing country trade official, who asked not to be quoted. The proposed language on personal data protection in Article 21 of the draft text is as follows: “21.1 For the purposes of this Article, “personal data” means any information relating to an identified or identifiable natural person. 21.2 The Parties recognise that strong and effective protection of personal data and related individual rights contribute to enhancing consumer confidence and trust in the digital economy. 21.3 Each Party shall adopt or maintain a legal framework that provides for the protection of the personal data of the users of electronic commerce. 21.4 In the development of its legal framework for the protection of personal data, each Party should take into account principles and guidelines developed by relevant international bodies or organisations. 21.5 Each Party shall endeavor to ensure that its legal framework under paragraph 21.3 provides non-discriminatory protection of personal data for natural persons. 21.6 Each Party shall publish information on the personal data protections it provides to users of electronic commerce, including guidance on: a) how a natural person can pursue remedies; and b) how enterprises can comply with legal requirements. 21.7 Recognising that Parties may take different legal approaches to protecting personal data, each Party should encourage the development of mechanisms to promote compatibility between these different regimes. 21.8 The mechanisms referred to in paragraph 21.7 may include the recognition of regulatory outcomes, whether accorded autonomously or by mutual arrangement, or broader international framework. 21.9 Parties shall endeavor to exchange information on mechanisms referred to in paragraph 21.7 that are applied in their jurisdictions.” DEVELOPMENT The issue of development is covered under the provision on “Transparency, Cooperation and Development.” On development, particularly on the urgent need to address the enormous digital divide between the industrialized countries on the one side, and the developing and least-developed countries on the other, the proposed draft text only suggests best endeavour provisions, even though the developing countries are undertaking onerous commitments through binding provisions while getting little in terms of support to close their digital divide and promote digital industrialization, said an African trade envoy, who asked not to be quoted. For example, in the “General Principles” on development, the draft text merely states in Article 26.2 that the Parties recognize “the importance of strengthening international efforts to bridge the digital divide and enable an inclusive digital economy.” There is no binding commitment to set aside funds or address digital industrialization. However, the developing countries are being lured on the promise that they would be helped to close the digital divide. The issue of development in e-commerce cannot be addressed through longer gestation periods without a definite tangible commitment, the African trade envoy said. On capacity-building, the draft text merely states: “The Parties recognize the importance of technical assistance and capacity building for developing and least-developed country Parties in relation to matters covered by this Agreement. To this end, developing country and least-developed country Parties may identify any provision of this Agreement in respect of which they would most benefit from technical assistance and capacity building. Developed country Parties and developing country Parties declaring themselves in a position to do so, agree to facilitate the provision of assistance and support for capacity building in respect of such provisions, either bilaterally or through appropriate international organizations, on mutually agreed terms and taking into account the specific needs and priorities of developing and least-developed country Parties.” INSTITUTIONAL ARRANGEMENTS In Section G of the draft text concerning “institutional arrangements and final provisions,” the co-convenors spelled out provisions on “dispute settlement,” the creation of a “committee on trade-related aspects of electronic commerce” and other provisions. Since the JSI e-commerce negotiations have no procedural or systematic basis, as there is no consensus among the WTO members on the status of this agreement, the co-convenors are resorting to the proverbial “jumping of the gun”, when there is no clarity as to how it can be integrated into the WTO’s rule-book said people familiar with the discussions. +
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