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TWN
Info Service on WTO and Trade Issues (Dec25/02) Geneva, 27 Nov (D. Ravi Kanth) –The Trump administration has consistently touted the importance of tariffs as an instrument for raising government revenue, promoting domestic production, and generating employment, according to several trade envoys who asked not to be quoted. “Tariffs have also been used as a bargaining chip in several bilateral FTAs, sometimes as a stick or a carrot to force countries into agreements which go against their national interests, especially focusing on deregulating their digital sectors to give advantage to the US digital giants,” said a trade envoy who asked not to be quoted. Against this backdrop, the US on 26 November circulated at the World Trade Organization a “draft ministerial decision on electronic commerce”, seeking to indefinitely extend the moratorium on customs duties on electronic transmissions, according to people familiar with the development. This demand – that countries agree not to impose duties on digital imports – contradicts the US theory of using tariffs to increase government revenue, and stimulate growth and jobs. More importantly, the US proposal would reverse a decision made at the WTO’s 13th ministerial conference (MC13) in Abu Dhabi to let the E-Com moratorium expire by the end of March 2026. The MC13 decision (WT/MIN(24)/38-WT/L/1193), adopted on 2 March 2024, states: “We agree to maintain the current practice of not imposing customs duties on electronic transmissions until the 14th Session of the Ministerial Conference or 31 March 2026, whichever is earlier. The moratorium and the Work Programme will expire on that date.” In its restricted proposal (Job/GC/WPEC/1) circulated on 26 November and seen by the SUNS, the US called for maintaining “the current practice of not imposing customs duties on electronic transmissions”, without specifying any time limit. The US draft ministerial decision states that this practice “has played an important role in the development of the digital economy and promotes stability and predictability in the trading system for the benefit of least-developed, developing, and developed Members.” The US proposal defined “electronic transmission” for the purposes of the draft decision as “a transmission made using any electromagnetic means and includes the content of the transmission.” However, as former South African trade minister Rob Davies told the SUNS in the past, it did not spell out whether “the content” refers to goods, services, or both. This ambiguity concerns hundreds of billions of dollars in annual transactions conducted by tech giants like Google, Amazon, Facebook (Meta), Apple, Alibaba, and Tencent. The US assertion that the moratorium benefits all members was seemingly made without supporting data. In contrast, several studies by UN Trade and Development (UNCTAD) and the Geneva-based South Centre estimate that terminating the moratorium would enable developing countries to raise billions of dollars in tariff revenues. According to UNCTAD’s former digital trade expert Rashmi Banga, developing countries could have raised US$25 billion by imposing customs duties on just 49 digital products traded via electronic transmissions. Least developed countries could have raised US$5 billion in 2025 without the moratorium. Furthermore, with the exponential rise in digital trade, developing countries could secure a steadily growing stream of tariff revenues, if the moratorium is terminated at the upcoming MC14. “With the rapid advancement of digital technologies, especially Artificial Intelligence, developing countries need to regulate their digital imports through electronic transmissions, as AI is also electronically transmitted (software downloads, cloud APIs, remote model access, etc) and can pose a considerable threat to national security as it bypasses physical borders and traditional import controls. Continuing with the moratorium would imply that it will become harder for countries to keep track of AI tools like deepfake tools, cyber-attack models, autonomous drone algorithms, etc, which enter without oversight,” said another digital trade expert who preferred not to be quoted. The US push follows an earlier proposal from Barbados, on behalf of the African, Caribbean, and Pacific (ACP) group, which sought only a two-year extension of the moratorium. The US proposal is part of a broader push by major industrialized countries to continue with the moratorium. WTO Director-General Ms. Ngozi Okonjo-Iweala has reportedly said that several IT companies have approached her to underscore the need to continue with the e-commerce moratorium. “However, it is good to remind countries that they can choose to put tariffs to zero for those digital imports which are needed by the IT firms, after the moratorium is removed,” said a trade envoy. According to people familiar with the development, the US demand appears redundant, as the US has already included a permanent e-commerce moratorium in its unilateral and allegedly WTO-inconsistent bilateral trade deals. Several trade envoys, who asked not to be quoted, stated that the US seems to lack the moral credibility to push for this decision while it fiercely opposes outcomes on other issues. These include agriculture – particularly cotton – and the filling of vacancies at the Appellate Body, which the US has made dysfunctional since December 2019. Other trade envoys, who also asked not to be quoted, suggested that the WTO is entering into dangerous terrain. They argue that the proposed WTO reforms – such as changing the consensus principle, differentiating between developing countries for availing of special and differential treatment, and suggesting new disciplines to “level the playing field” – are aimed at appeasing the US without requiring any reciprocal concessions from it. Yet, except for securing a decision on the e-commerce moratorium, the US appears to be opposed to addressing any major issue at the upcoming WTO’s 14th ministerial conference (MC14) in Yaounde, Cameroon, in March next year. +
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