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INTERVIEW: Possible 2024 e-commerce plurilateral ‘not end in itself’

Chris Horseman sat down with Pascal Kerneis and Christine Bliss at MC13 in Abu Dhabi to discuss the future of the e-commerce moratorium and the politics surrounding it.

The world’s trade ministers are set to decide this week whether or not to renew a moratorium on import duties on e-commerce transmissions which has been in place since 1998. 

India, South Africa and Indonesia are prominent among a small group of countries arguing that the moratorium should be allowed to lapse. Each individual World Trade Organization member has the power to veto any rollover of this agreement. 

Pascal Kerneis, managing director of the European Services Forum
Christine Bliss, president of the US Coalition of Services Industries

As the 13th ministerial conference began, Borderlex spoke to Pascal Kerneis, managing director of the European Services Forum and Christine Bliss, president of the US Coalition of Services Industries. 

The discussions covered the politics of the moratorium discussion, the real-world consequences of a moratorium lapse – and how the much-publicised disengagement of the US administration from the digital trade debate is affecting the US tech sector. 

Borderlex: We are awaiting a decision on whether or not to renew the WTO’s moratorium on e-commerce up until the next WTO ministerial conference. How optimistic are you that this will be achieved? 

Pascal Kerneis: I’m afraid I’m not that optimistic. Indonesia and South Africa have just tabled a revised paper to the WTO in which they asked for a termination of the moratorium, plus a continuation of the work programme [the ongoing multilateral negotiations on new e-commerce rules]. In addition, they asked for a fund financed by countries who wish to do so. That is a lot of asking, and no giving. So it’s not going well! 

Do you think this is a tactical move by these countries? 

Christine Bliss: That is a very difficult question. India would stand 

to lose more than it would gain from imposing duties – and that’s even aside from any potential retaliation that they might face on their own movies and entertainment products. 

India also has a huge stake in the global semiconductor industry. It would really hurt them and their position in global value chains if they started imposing duties on things like software. They know they’d be shooting themselves in the foot. 

And this argument about ‘policy space’ – they know they can impose their own VAT on tech services if they want to. It really is pretty disingenuous. 

So with India, it’s tactical. The question is: what do they want?  

The common wisdom is that they want a permanent solution at MC13 on public stockholding for food security [or PSH]. We don’t know what else. 

For Indonesia, the picture is really unclear. They already have a VAT scheme which raises a lot of money. The amount they would raise from duties would be far outweighed by the amount of damage they would be doing to themselves and their SMEs. It really doesn’t make rational sense. 

It seems to be that the national customs authority and finance ministry have grabbed hold of this issue. But we understand that the commerce ministry doesn’t agree. 

Kerneis: I believe the South African trade minister Ebrahim Patel has given some signals that he might be ready to accept the extension of the moratorium in return for a ‘digital divide fund’ designed to help developed and least-developed countries.  

As for India – its tactic has always been to ask for a lot in all subjects, and, at the very last minute, to decide which ones they really want. 

But the TRIPS waiver issue has been put to one side, and their demand for PSH to be permitted on a permanent basis will not be accepted. 

So now I wonder where the other areas of leverage are to be found. If the only other bargaining chip is the moratorium, then they might say that they are not in favour of its extension. 

Lifting the moratorium would not actually require countries to impose tariffs on digital trade – many of them would not do so. About 90 countries have already said that they are prepared to sign up to a commitment in the plurilateral JSI negotiations on e-commerce not to impose such tariffs. What would be the real-world impact of the moratorium disappearing? 

Kerneis: Nothing would change immediately. But in an organization like the WTO, principles are important. This would be the first time that countries will have the possibility to raise tariffs on services. The first loss would be the acceptance of this principle. 

There are 90 countries in the e-commerce JSI. But not all of these are in favour of a permanent ban. We are not completely clear, for example, where Turkey and Brazil stand. 

If there should be a failure to extend the moratorium, we are hoping that as many countries as possible make a unilateral declaration, as soon as possible, that they will not levy any duties on electronic transmissions. 

Has any country specified how it would actually go about imposing tariffs on electronic transmissions, were the moratorium to end? 

Kerneis: Indonesia has already changed its customs code. It has added a ‘chapter 99’ into its customs code – a list of intangible goods which are taken from the relevant section of the GATS agreement on services. 

The second step would be to adopt a law to put a tariff on these imports – at the moment Jakarta has set this at zero.  

Then we can have a very long debate on how you identify a digital transaction. Are you going to put a tariff on each electronic transmission? Or are you going to put a tax on every Netflix or Microsoft subscription? I don’t think they have yet decided how they will do that.  

Is it possible that tech companies might simply decline to do business in countries that imposed taxes on digital transmissions? 

Bliss: I don’t think that’s likely. But I have heard that US businesses would be more hesitant about making investments in a country that went ahead and opposed the moratorium. Even if no tariff were imposed, the spectre of possible future duties would still be looming.  

So I think it’s more a matter of business due diligence. 

Kerneis: Companies will continue to sell the product. But if they are subject to a tariff, who will pay it? It’s the final consumer. Companies won’t stop selling, they’ll just pass the fees on. 

The United States has taken a much-publicised step back from engagement on digital trade issues at the WTO. How does the US tech sector feel about this? Does it feel abandoned by the Biden government? 

Bliss: I think all of us in the services sector feel abandoned, not just big tech. Fears about the repercussions of the US taking a step back are very real. 

Would that stance change if there were to be a change of president in November? 

Bliss: It’s not clear. We hope that if there were to be a change in administration, or even a ‘Biden 2’ administration, there would be a change of heart. But it’s hard to see that right now. 

A lot of text of the plurilateral JSI agreement on e-commerce has been settled, even though negotiations will continue beyond MC13. What are your expectations for the rest of this year? 

Bliss: The co-convenors [of the JSI negotiations] say that they want to wrap things up by early summer. They have a shot at putting together a package that would include what we would see as ‘trade facilitation’ elements. This would cover open government data and telecoms, and we hope that they include something on electronic payment services too. 

What we hope is that as they move forward, they develop a ‘roadmap’ for how to tackle what we see as the real meat on the bones – the questions of data flows, data localisation, and access to source code. [These issues have now been left out of the emerging e-commerce JSI agreement]. 

For us, the real question is whether this agreement will be a building block towards something more. If there is a clear path forward, then we would see this as a positive step. But if it’s just an end in itself, that would be a real disappointment. 

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