WTO Members Signal Progress On Draft E-Commerce Deal

(Bloomberg) -- About half of the World Trade Organization’s members reached a preliminary deal on e-commerce that would permanently ban tariffs on digital transactions that are zipping across borders at twice the growth rate of physical merchandise.

Among the 91 participants were the US, China, Japan, the UK and the major economies of the European Union —  although Washington also signaled a reluctance to fully endorse it.

Absent from the list released on Friday were South Africa and India, two countries that have raised concerns in the past about rules designed to benefit wealthy nations over poorer ones.

Customs duties on electronic transmissions aren’t currently allowed under a moratorium that the WTO’s 164 members extended by consensus for two years at their ministerial meeting in the United Arab Emirates in March.

The ban has helped fuel the fastest-growing segment of world trade: digital goods and services. A tariff-free global internet has been the key to the success not just of US tech giants like Amazon.com Inc. and Netflix Inc., but also the growing number of traditional firms that collect data and conduct e-commerce in foreign markets.

But it’s also raised concerns in some countries about privacy, the market dominance of Big Tech, cyber vulnerabilities and national security threats.

After a contentious negotiating round in Abu Dhabi, some members signaled that the moratorium shouldn’t be extended again — raising the prospect of unilateral moves by some governments to, for the first time, raise revenue and protect domestic industries by taxing e-commerce and data flowing across their borders.

The draft measure produced in Geneva this week — the result of five years of talks — was designed to settle the issue rather than extend it every two years as it has been for much of the past two decades.

US’s View

A footnote on the document indicated that it was circulated on behalf of the participants in the talks, except for 11 WTO members including the US, Brazil and Turkey.

The US called it an important step, but one that needs more work.

“As the United States has repeatedly communicated to the co-conveners and participants, the current text falls short and more work is needed, including with respect to the essential security exception,” Maria Pagan, the Biden administration’s representative at the WTO, said in a statement.

The OECD has estimated digital trade — defined as “all international trade transactions that are digitally ordered and/or digitally delivered” — is worth about $4 trillion. That’s about half of all global services exports.

Jake Colvin, president of the Washington-based National Foreign Trade Council, praised the WTO’s progress but blasted the lack of US leadership. 

“Other countries will step into a leadership vacuum when the United States steps away,” Colvin said in a emailed statement. “But the fact that other major economies felt emboldened to move on digital trade without the United States is extraordinary.”  

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