Important but modest success as WTO e-commerce negotiations are finalised
On 26 July an important step was taken towards establishing global rules on digital trade, as the plurilateral Joint Statement Initiative on Electronic Commerce (JSI on e-commerce) concluded after five years of negotiations in the WTO. The finalised text, which was announced in a declaration on behalf of the participants, sets out several rules of importance for digital trade, a growing area that currently comprises around one quarter of all global trade.
The conclusion of these negotiations also represents progress in a WTO marked by several challenges, exemplifying the role that plurilateral agreements can play in creating much-needed international trade rules. A total of 91 WTO members from across the world participated in the negotiations. Of these, 82 parties signed the final declaration, including the European Union and many of its global trading partners.
What is included in the finalised text?
The agreed text sets out several important rules for its members, not least a permanent prohibition of customs duties on electronic commerce (a so-called ‘permanent moratorium’). This is important since the temporary moratorium on customs duties on e-commerce, which has been in place since 1998, has continued to meet opposition in its latest renewal. As such, the permanent moratorium establishes a foundation of policy certainty from which digital development can be built.
The permanent moratorium establishes a foundation of policy certainty from which digital development can be built.
Moreover, the text includes several provisions intended to facilitate digital trade. These concern electronic transactions frameworks, electronic authentication and e-signatures, electronic contracts, electronic invoicing, paperless trading, ‘single windows’ for data submission, and electronic payments.
The text also sets out some basic provisions on regulations for cybersecurity, online consumer protection, and personal data protection. While these regulatory provisions generally lack any significant binding commitments, they should be seen as a first step towards achieving greater alignment and interoperability of the rules governing the digital economy.
The agreement contains several important commitments that will help to narrow the digital divide among its participants, not least a permanent moratorium on e-commerce customs duties. The text also sets out several development provisions, including recognition of the need for technical assistance and capacity building for developing countries that are party to the agreement.
Finally, the text includes some rules on telecommunications, including a commitment to prevent telecommunications regulatory authorities from holding a financial interest or management role in telecom providers, as well as a soft provision on market-based and competitive assignment of frequency bands.
What is not included in the final declaration?
The conclusion of a broad plurilateral negotiation with rules for digital trade represents a positive outcome, but in several respects the text is insufficient for businesses and consumers.
First, the text lacks certain provisions that are important to the digital economy. Notably, the proposed agreement lacks commitments for cross-border data flows and against mandatory transfers of source code. Such commitments are essential since companies often refer to the fragmented rules on data as a key obstacle to international trade.
Second, the final declaration lacks countries that are important to the digital economy, notably the United States. While having been part of its negotiations and calling the agreement “an important step forward for the WTO in a sector of growing importance to the global economy,” the U.S. government withdrew from the declaration because of what it perceived as a lack of security exceptions in the finalised text. Furthermore, Brazil, Colombia, El Salvador, Guatemala, Indonesia, Paraguay, Taiwan, and Türkiye declined to be part of the final declaration. Several of these countries – especially Indonesia, Türkiye and Brazil – have previously expressed their reluctance towards an e-commerce moratorium.
Where do we go from here?
In the immediate term, a challenge will be to make sure the proposed plurilateral agreement is integrated into the WTO’s legal framework so that it can become binding and benefit from dispute settlement. Another recently concluded plurilateral agreement, the Investment Facilitation for Development (IFD) initiative, is currently stuck in this stage with its progress blocked by countries such as India and South Africa. These two countries neither participated in negotiations on the IFD nor on e-commerce and have both been reluctant to extend the existing temporary moratorium on e-commerce.
In the medium term, it will be important to broaden participation in the agreement, with participation of the U.S. playing a key role. Moreover, increasing participation by low- and middle-income countries will be important to closing the digital divide. To help these countries join the agreement, development cooperation could play an important role.
In the longer term, the possibility to revisit the negotiations and include rules on cross-border data flows and source code should be pursued. Data is an essential part of the digital economy and establishing global rules that ensure it can flow between countries remains a key mission for promoting digital trade and development.
Hannes Berggren
Trade Policy Adviser
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