TWN Info Service on WTO and Trade Issues (Jul24/02)
3 July 2024
Third World Network

Trade: Controversial JSI draft e-com agreement could pose threat to WTO
Published in SUNS #10037 dated 2 July 2024

Geneva, 1 Jul (D. Ravi Kanth) — Singapore, Japan and Australia, the three co-convenors of the non-mandated “Joint Statement Initiative on E-Commerce”, on 28 June issued a draft agreement at the World Trade Organization, which seems to have further watered down several provisions, including the so-called e-commerce trade facilitation measures, said people familiar with the development.

After the United States pulled out its proposals on cross-border data flows, localization of servers, and source code due to alleged national security considerations, the proposed JSI agreement has almost become an agreement for an agreement’s sake, said people who asked not to be identified.

On top of the US removal of its core proposals, the latest JSI draft agreement has further lowered the level of ambition even in the e-commerce trade facilitation measures due to the alleged creation of new value chains on geopolitical and geoeconomic considerations, said people familiar with the draft text.

Despite the changes, the US e-commerce giants such as Amazon, Google, Microsoft, and Apple, as well as Alibaba and Tencent from China, are expected to be the major beneficiaries.

With China having become the world’s largest manufacturer of goods, its thriving e-commerce companies would certainly benefit most from the agreement, said an analyst who asked not to be quoted.

Although the draft agreement has seemingly set the stage for its conclusion by July-end, its fate in terms of integration into the WTO rule-book remains uncertain.

To recall, several developing countries including India and South Africa among others, opposed the launch of the JSI initiatives at the WTO’s eleventh ministerial conference (MC11) in Buenos Aires, Argentina, in December 2017.

Consequently, the JSI participants went out of the main conference hall to announce the JSI initiatives on the margins of the conference despite seemingly posing a threat and an assault on the WTO’s multilateral, rules- based, and member-driven framework, said people familiar with the development.

JSI DRAFT AGREEMENT

In the draft agreement shared with the JSI participants on 28 June, seen by the SUNS, the three co-convenors said: “We are pleased to share with you the draft agreement text of the WTO Joint Statement Initiative on E-Commerce. We have attached both a clean version and a version showing amendments to the text since circulation of INF/ECOM/85/Rev.3 on 6 May 2024.”

The three co-convenors said the draft agreement contains “substantive edits” that were made “as a result of negotiations between participants most concerned.”

They informed the JSI participants that “substantive changes were made to Article 11 (Customs Duties) and Article 21 (Telecommunications).”

“Changes to the horizontal provisions include Article 3 (Relation to Other Agreements) and Article 27 (Dispute Settlement),” the co-convenors maintained.

The co-convenors asked “Members to consult capitals on this text as an overall package to stabilize the text for a WTO E-Commerce Agreement.”

The draft agreement contains 38 articles with a somewhat weak preamble, which states:

“The Parties to this Agreement (hereinafter referred to as “the Parties”);

“Building on their respective rights and obligations under the WTO Agreement;

Recognizing the right of each Party to adopt regulatory measures to achieve legitimate policy objectives;

Reaffirming the importance of global electronic commerce and the opportunities it creates for economic growth and sustainable development;

Emphasizing the importance of frameworks that promote open, transparent, non-discriminatory, and predictable regulatory environments for facilitating electronic commerce;

Recognizing the importance of the safe and responsible development and use of digital technologies to foster public trust;

Determined to further narrow the digital divide, and to enhance the benefits and opportunities provided by electronic commerce for businesses, consumers, and workers in the global economy, and particularly in developing and least-developed countries;

Recognizing the special needs of developing and, particularly, least-developed country Parties and the importance of supporting them in implementing this Agreement through enhanced technical assistance and capacity building;

Recognizing the potential of electronic commerce as a social and economic development tool and the importance of enhancing interoperability, innovation, competition, and access to information and communications technologies for all peoples, particularly under-represented groups, and MSMEs;”

The 38 articles comprise eight sections.

Section A includes “Scope” in Article 1, “Definitions” in Article 2, and “Relation to other Agreements” in Article 3.

Section B, focused on “Enabling Electronic Commerce”, covers “Electronic Transactions Framework” in Article 4; “Electronic Authentication and Electronic Signatures” in Article 5; “Electronic Contracts” in Article 6; “Electronic Invoicing” in Article 7; “Paperless Trading” in Article 8; “Single Windows Data Exchange and System Interoperability” in Article 9; and “Electronic Payments” in Article 10.

Section C on “Openness and Electronic Commerce” includes “Customs Duties on Electronic Transmissions” in Article 11; “Open Government Data” in Article 12; and “Access to and Use of Internet for Electronic Commerce” in Article 13.

Section D, which addresses “Trust and Electronic Commerce”, includes “Online Consumer Protection” in Article 14; “Unsolicited Commercial Electronic Messages (Spam)” in Article 15; “Personal Data Protection” in Article 16; and “Cyber Security” in Article 17.

Section E, which deals with “Transparency, Cooperation, and Development”, includes “Transparency” in Article 18; “Cooperation” in Article 19; and “Development” in Article 20.

Section F deals with “Telecommunications” in Article 21.

Section G, which is focused on broad “Exceptions”, consists of “General Exceptions” in Article 22; “Security Exception” in Article 23; “Prudential Measures” in Article 24; “Personal Data Protection Exception” in Article 25; and “Indigenous Peoples” in Article 26.

Section H on “Institutional Arrangements and Final Provisions” covers “Dispute Settlement” in Article 27; “Committee on Trade-related Aspects of Electronic Commerce” in Article 28; “Acceptance and Entry into Force” in Article 29; “Implementation” in Article 30; “Reservations” in Article 31; “Amendments” in Article 32; “Withdrawal” in Article 33; “Non-application of this agreement between Particular Parties” in Article 34; “Review” in Article 35; “Secretariat” in Article 36; “Deposit” in Article 37; and “Registration” in Article 38.

The three co-convenors said that substantial changes were made in Article 11 (Customs Duties) and Article 21 (Telecommunications).

CUSTOMS DUTIES

The draft text on “Customs Duties” states the following:

“Article 11: Customs Duties on Electronic Transmissions

11.1 For the purposes of this Article, “electronic transmission” means a transmission made using any electromagnetic means and includes the content of the transmission.

11.2 The Parties acknowledge the importance of the Work Programme on Electronic Commerce (WT/L/274) and recognize that the practice of not imposing customs duties on electronic transmissions has played an important role in the development of the digital economy.

11.3 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 3 does not preclude a Party from imposing internal taxes, fees, or other charges on electronic transmissions in a manner not inconsistent with the WTO Agreement.

16.5 Taking into account the evolving nature of electronic commerce and digital technology, the Parties shall review this Article in the fifth year after the date of entry into force of this Agreement, and periodically thereafter, with a view to assessing the impacts of this Article and whether any amendments are appropriate.”

In effect, the moratorium on customs duties on electronic transmissions is not permanent and shall remain in force for five years after the Agreement comes into effect. It shall be reviewed after five years and by then, the geopolitical and geoeconomic conflicts based on national security-driven trade policies may create new barriers to global trade, said people familiar with the development.

TELECOMMUNICATIONS

Telecommunications, which is based on market access interests and where substantial changes are made in the draft text, suggest stringent norms following the ban imposed by the Group of Seven (G7) industrialized countries led by the US on Huawei and other major Chinese suppliers of telecommunications networks, said people familiar with the development.

The language in the draft text with several provisions highlighted in red colour suggests that China could be disadvantaged, said an analyst who asked not to be quoted.

The draft text on “Telecommunications” states the following:

Article 21: Telecommunications

21.1 For the purposes of this Article and the Annex:

(a) “essential facilities” means facilities of a public telecommunications transport network or service that:

(i) are exclusively or predominantly provided by a single or limited number of suppliers; and

(ii) cannot feasibly be economically or technically substituted in order to provide a service;

(b) “major supplier” means a supplier that has the ability to materially affect the terms of participation (having regard to price and supply) in the relevant market for basic telecommunications services as a result of:

(i) control over essential facilities; or

(ii) use of its position in the market;

(c) “network element” means a facility or equipment used in supplying a public telecommunications service, including features, functions, and capabilities provided by means of that facility or equipment; and

(d) “user” means a service consumer and service supplier.

21.2 Each Party shall undertake the obligations set out in the Annex.

21.3 Each Party shall ensure that its telecommunications regulatory authority does not hold a financial interest or maintain an operating or management role in a supplier of public telecommunications networks and services. This paragraph shall not be construed to prohibit a government entity of a Party other than its telecommunications regulatory authority from owning equity in such a supplier.

21.4  Each Party shall ensure that its telecommunications regulatory authority has the power to carry out the functions assigned to it by law, including the ability to impose sanctions, and exercises such power transparently and in a timely manner.

21.5 Each Party shall make publicly available in an easily accessible and clear form the functions carried out by its telecommunications regulatory authority.

21.6 Each Party shall endeavour to:

(a) ensure that the assignment of frequency bands for public telecommunication services are  carried out through an open process that takes into account the public interest, including the promotion of competition; and

(b) carry out such assignment using market-based approaches, such as bidding procedures, where appropriate.

Negotiators’ note: [A1] Negotiators understand that the term “public telecommunications services” has equivalent meaning to “telecommunications services available to the public” and the terms can be used interchangeably.

21.7 Each Party shall empower its telecommunications regulatory authority to:

(a) determine which essential facilities are required to be made available by a major supplier to other suppliers of public telecommunications services on reasonable, non-discriminatory and transparent terms and conditions for the purpose of providing public telecommunications services; and

(b) require a major supplier to offer access on an unbundled basis to its network elements that are essential facilities on reasonable, non-discriminatory and transparent terms and conditions for the purpose of providing public telecommunications services.

21.8 A supplier of public telecommunications services shall have access to recourse, within a reasonable period of time, to a Party’s telecommunications regulatory authority or other competent authority to resolve disputes with other suppliers of public telecommunications services regarding the requirements set out in paragraph 7.

21.9 Where a telecommunications regulatory authority or other competent authority declines to initiate any action regarding a request to resolve a dispute referred to in paragraph 8, it shall, upon request of a supplier involved in the dispute, provide a written explanation for that decision within a reasonable period of time.

21.10 A supplier of public telecommunications services involved in a dispute referred to in paragraph 8 shall not be prevented from bringing an action before a Party’s judicial authorities. +