MC13: Abu Dhabi E-commerce moratorium linked to definitional discussion, stoking business fears

Brett Fortnam
Inside US Trade

-- A deal to renew the World Trade Organization’s moratorium on electronic commerce duties likely will include language on an e-commerce work program requiring that members define the parameters of the temporary ban -- a move industry stakeholders fear could make future renewals even more difficult.

Negotiations on e-commerce will begin in earnest here at the 13th ministerial conference on Thursday -- the last scheduled day of a ministerial many expect will be extended one more day. New Zealand Trade Minister and MC13 Vice Minister Todd McClay told Inside U.S. Trade he believes the most likely outcome on e-commerce is that the moratorium is renewed in parallel with a work program that calls on members to clarify the moratorium’s definition by the next ministerial.

But many stakeholders here believe the moratorium’s renewal is only a 50-50 prospect, with some believing it might not be even that high.

McClay, the facilitator for the e-commerce negotiations, has been meeting bilaterally with delegations -- around 50 by Wednesday afternoon -- about their stances on the moratorium as well as the work program. Ministers at MC12 agreed to “reinvigorate” the work program, including by “intensifying discussions on the moratorium … including on scope, definition, and impact of the moratorium on customs duties on electronic transmissions.”

“I think what’s fair to say is there is a degree of frustration -- that may be overstating it -- frustration that some of the issues around scope and definition and rules … haven’t been advanced as much as they might have been over the last two years,” McClay said. “Developing countries are very keen to have that as part of a work program to be delivered on.”

The idea that the moratorium must be clarified in any way is not universal, however. The moratorium has referred only to “electronic transmissions” for its entire 25-year existence without a more expansive definition, a European official noted. “That has been a source of enough legal certainty for countries not to impose such customs duties and we do not think that we need to necessarily enter into the discussion on the definition,” the official said.

The discussion about defining “electronic transmissions” is a Trojan horse that could allow for either exceptions to the moratorium to be introduced or for some countries to eventually do away with the moratorium entirely at future ministerials, according to industry sources.

One called the argument that the moratorium must be clarified “disingenuous.” Two others said any conditionality between defining “electronic transmissions” and renewing the moratorium would be “dangerous.” And, these sources agreed, linking an agreement on definition with the moratorium’s renewal could create a scenario in which a deadlock over the definition -- a likely prospect, as a handful of countries would push for a narrower interpretation than others -- would that mean the moratorium is not be renewed when that deadlock cannot be resolved at future ministerials, the sources contended.

Many stakeholders here believe the moratorium’s renewal will be harder to pull off than in years past, citing several new developments. For one, the U.S. has long been seen as the primary defender of the moratorium, but its willingness to continue to play that role is being questioned. U.S. stakeholders do not have as much confidence in the steadfastness of the U.S. position as in years past, several said. That lack of confidence stems in part from the Biden administration’s decision last October to withdraw its support from four digital trade proposals in the WTO joint statement initiative on e-commerce.

The administration has emphasized to stakeholders that its support for the e-commerce moratorium is unaffected by the change in its digital position. Several industry sources optimistic about the potential for the moratorium to be renewed described U.S. support as “unequivocal.”

But some industry sources have described what they view as a worrying trend -- the administration’s leaning into a warring narrative against “Big Tech,” which has led them to question just how much the administration cares about the moratorium.

“Does she really care about this issue?” asked Consumer Technology Association Vice President of International Trade Ed Brzytwa, referring to U.S. Trade Representative Katherine Tai.

“The U.S. government has stated its support for the extension,” another industry stakeholder said. “But is it still as categorical as we’ve counted on it being? A stronger sense of support would have been nice.”

Other countries also are working harder to ensure the moratorium is not renewed, sources said. Indonesia, for instance, is a vocal opponent of renewal and has prepared for its eventual downfall. Jakarta has begun requiring that e-commerce operators, such as software importers, fill out customs declarations even though tariffs for e-commerce transmissions are set at zero.

In the days immediately before the ministerial, Indonesia signed on to two e-commerce proposals that show it is not backing down from its opposition -- South Africa’s push explicitly calling for the moratorium’s elimination and an Indian proposal that makes no mention of the moratorium.

“That’s worrisome,” said Pascal Kerneis, the managing director of the European Services Forum, the business group representing the EU services industry.

India, as always, is a wild card, pushing to let the moratorium lapse. Complicating that position is the parliamentary election campaign of Indian Commerce and Industry Minister Piyush Goyal, which kept him away from the ministerial’s first two days. Goyal is a member of the upper house of India’s parliament, elected by state legislatures. He is now running for a position in the lower house, elected by the people.

For Goyal to win election, he must appeal to nationalistic forces in India, according to Kerneis. The nationalistic appeal does not necessarily have to include the lapse of the moratorium, he said, but Goyal almost certainly will have to come away from Abu Dhabi with a tangible victory he can tout during his campaign, Kerneis added.

That possible need for a tangible victory has sparked industry fear about what the U.S. might put forward in exchange for the moratorium’s renewal -- if it offers anything. The moratorium has long been politically linked to another, on bringing non-violation dispute settlement cases under the WTO’s Agreement on Trade-Related Aspects of Intellectual Property. But the utility of that link has been nullified by the dysfunctional dispute settlement system.

Even if the moratorium is renewed, some business groups worry about the potential cost. The e-commerce moratorium and work program have not been politically linked with other issues, at least not yet, but many suspect those linkages will come as the negotiations enter their final stages.

India’s stated priority at MC13 is a permanent solution on public stockholding for food security purposes, which many believe New Delhi could link to the moratorium. But it also might seek to link the moratorium to the fisheries deal or even an expansion of TRIPS flexibilities agreed to at MC12, sources said.

Many stakeholders, even as pessimism mounts, believe the moratorium will be renewed. India wants to increase its technology industry, one source said, contending that e-commerce duties would make it “uninvestable.” Kerneis pointed to a letter that more than 200 business groups, including ones in countries that have opposed the renewal of the waiver, have signed onto calling for the moratorium’s extension as a good sign.

Some industry sources cite other reasons for optimism, such as increased support from developing countries. The African, Caribbean and Pacific group, for instance, issued a proposal in support of the moratorium’s renewal. The proposal did include language calling for “further deliberations and gather empirical evidence on the scope, definition, and impact of the moratorium.”

But industry supporters of the moratorium repeatedly pointed to the ACP group proposal as positive sign -- both because more developing countries are on board and because it potentially undermines India’s ability to say it is standing up for the developing world.


The hand-wringing, however, will continue until the ministerial concludes