Relevance: GS-2: Important International Institutions, Agencies and Further Structure, Mandate etc

Key Phrases: e-Transmission moratorium, WTO Moratorium on customs duties on electronic transmission, World Trade Organisation, General Agreement on Tariffs and Trade (GATT), 3D printing, Information and Communications Ttechnology (ICT) infrastructure.

Why in News?

• India reiterated its opposition to a proposal to extend the global moratorium on customs duties on electronic transmission as the ministerial meeting at the World Trade Organization in Geneva.

World Trade Organisation (WTO)

• The World Trade Organization (WTO) is an intergovernmental organisation that regulates and facilitates international trade.
• Governments use the organisation to establish, revise, and enforce the rules that govern international trade.
• It officially commenced operations on 1 January 1995, under the 1994 Marrakesh Agreement, thus replacing the General Agreement on Tariffs and Trade (GATT) that had been established in 1948.
• The WTO is the world's largest international economic organisation, with 164 member states representing over 98% of global trade and global GDP.
• The WTO is headquartered in Geneva, Switzerland.
• Its top decision-making body is the Ministerial Conference, which is composed of all member states and usually convenes biennially; consensus is emphasised in all decisions.
• Day-to-day functions are handled by the General Council, made up of representatives of all members.
• India is a founding member of the WTO since 1 January 1995 and a member of GATT since 8 July 1948.

Meaning of Electronic Transmission

• Though there is no concrete definition of what comprises electronic transmission, WTO members have generally agreed that anything from software to email, digital text messages, music videos, songs, and video games fall under the ambit of this term.
• Meaning of Electronic Commerce: The WTO Work Programme on Electronic Commerce defines “electronic commerce” as the “production, distribution, marketing, sale or delivery of goods and services by electronic means.”

What is the Issue?

• The moratorium is not set in stone: every two years governments agree to extend the moratorium at the biennial WTO Ministerial Conference.
• As the moratorium has been periodically extended at the ministerial conferences and several countries are seeking to make the moratorium permanent.
• India is opposed to an extension on grounds that developing countries have been losing revenue.
• Since digital trade at present is dominated by big tech and developed countries, the moratorium squarely favours the developed nations.
• The United Nations Conference on Trade and Development has estimated the potential tariff revenue loss for developing countries every year due to the moratorium on e-transmissions at $10 billion as compared to only $289 million for high-income countries.

India’s Concerns:

• On the proposals to reform the WTO, India pressed for retaining the existing special and differential treatment provisions that exempt developing countries from the same strict trade rules and disciplines placed on industrialised countries.
• India contested proposals that could result in fundamental changes in the institutional architecture of WTO, “running the risk of skewing the system against the interest of developing countries.”
• India is witnessing an exponential rise in imports of electronic transmissions, mainly of items like movies, music, video games, and printed matter, some of which could fall within the scope of the moratorium.
• While the profits and revenues of digital players are rising steadily, the ability of the governments to check these imports and generate additional tariff revenues is severely limited because of the moratorium on e-commerce.
• Loss of Revenue:
  • The moratorium costs developing countries billions of dollars in lost revenue.
  • Between 2017 and 2020, developing countries have lost potential tariff revenue of possibly upward of $50 bn only on the import of 49 digital products.
  • It is not fair that the cost of the moratorium is almost completely borne by the developing countries for extending duty-free quota, and quota-free market access, largely for a very few players.
  • This cannot be justified that this wealth accumulated by Big Tech at the cost of the ability of the emerging markets to generate resources, to meet the basic needs of their large population the way, by 2025 this revenue loss is estimated to be $30 bn every year. A lot of public good can be done using these resources.

  

• Losing Policy Space:
  • The impacts of losing their policy space to develop their digital capabilities as well as their software sectors can have important implications for their digital industrialisation.
  • To remain competitive in the digital era, developing countries will need to build their digital infrastructure and digital capabilities.
  • While developed countries are investing huge amounts in digital technologies like robotics, artificial intelligence, big data analytics, and 3D printing, developing countries are still struggling to build their Information and Communications Technology (ICT) infrastructure and improve their internet penetration.
  • It is extremely important to regulate trade in electronic transmissions in a way that provides regulatory policy space to the developing countries to provide a level playing field to their domestic producers as well as protect their infant digital services providers.
  • Making the moratorium on customs duties on electronic transmissions permanent will take away this policy space from the developing world and can make them forever dependent on the developed world for their digital products and technologies.
• Impact on Industrialisation:
  • Currently the world is characterized by a massive gap between the under-connected and the hyper-digitalised countries.
  • Currently, except in China, the situation has not changed to any significant degree.
  • 80% of the cross-border e-commerce in the world is undertaken by the US, China, and the EU.
  • Clearly, the benefits of the digital economy are highly uneven and it does not serve all people equally.
  • Under the current configuration of policies, rules, market dynamics, and corporate power, economic gaps are likely to increase.
• Meanwhile the provisional deal has been reached which states "We agree to maintain the current practice of not imposing customs duties on electronic transmissions until MC13 which should ordinarily be held by 31 December 2023," Further; it specified that the moratorium would expire in March 2024, should the next conference be postponed.

Conclusion:

• Developing countries need to preserve flexibility to implement policies to catch up with the developed countries in the digital arena.
• India urged countries to reinvigorate talks on the work program on e-commerce, by comprehensively examining all trade-related issues relating to global e-commerce, taking into account the economic, financial, and development needs of developing countries.
• The moratorium that has been continuing for 24 years needs to be reviewed and relooked at.
• The work program needs to be reinvigorated and must provide regulatory space for developing countries to provide a level playing field to domestic SMEs in the digital sector while continuing to contribute to their economies.

Sources: Live-Mint

Mains Question:

Q. The continuation of the ‘WTO Moratorium on customs duties on electronic transmission’ can lead to losses for developing countries. Discuss.