The global market for e-commerce is forecast to approach USD 1 trillion in 2020 as electronic transactions continue to grow exponentially, yet common multilateral rules regarding this trade are still lacking. A group of countries are seizing the opportunity to change that.
Last week, on the sidelines of the World Economic Forum in Davos, representatives from 76 countries agreed to start talks as part of a WTO plurinational initiative to develop new global rules on e-commerce.
This is a breakthrough in a previously deadlocked area; ultimately, it could help foster an international framework covering areas like data localisation, data flows and a permanent ban on customs duties on electronic transmissions. This would mark a major department from the complex patchwork of rules that now exists — but not all countries are on board.
E-commerce has deeply divided WTO members over the years. Little progress has been achieved since 1998, when the WTO adopted a temporary moratorium on tariffs on the electronic transmission of goods or services across borders, renewed every two years — until world trade ministers gathered in Buenos Aires in December 2017. Talks ended in disarray when India and South Africa threatened to block the routine two-year rollover of the moratorium and urged WTO members to “rethink” the current structure from a development perspective. Without the temporary ban, WTO members could impose new tariffs on data crossing their borders, a move that could cost thriving digital economies like the UK billions of pounds.
Even though India and South Africa backed down at the very last minute, the move was emblematic of the recent trend towards digital protectionism. Many developing countries believe common e-commerce rules would force them to open their markets to established online companies that dominate global trade which would ultimately lead to revenue loss. Other states, with growing digital markets, are moving to harmonise tariffs between conventional sectors and their digital equivalents. For example, last year Indonesia introduced tariff lines on intangible goods, while in December the World Customs Organisation (WCO) surprised observers by coming close to opening discussions on customs for intangible goods.
In the context of these developments, it is essential that the negotiations announced at Davos proceed smoothly. Digital increasingly underpins almost every aspect of global trade and another failure to make progress could lead to further fragmentation that would make cross-border operations difficult. While over half of the WTO members are yet to announce whether they will take part, the plurinational initiative could set a new path for the WTO in which like-minded countries engage in sectoral agreements that facilitate trade.
The fact that China offered its conditional support is significant. Though it is unlikely the country would take complying with global standards on data transfers particularly far, the fact that it will take a seat on the table is certainly worth noting and will encourage those with protectionist inclinations to take the process seriously.
As a leading digital economy, the UK would be a beneficiary of new global rules and will likely play an important role in the negotiations. After the country’s scheduled departure from the EU in less than sixty days, much of Britain’s trading future will be stacked on playing a key role in global trade forums like the WTO.
Author: Teodora Delcheva, Access Partnership