Why Do Developing Countries Want to End the E-Commerce Moratorium?

Writing Series to Respond Ministerial Conference 13th WTO

On July 18 2023, several southern countries such as India, South Africa, Turkey, Argentina, and Indonesia openly pushed for changes and lifting of the moratorium of import duties on electronic transmissions (E-Commerce Moratorium). In contrast to a group of developed countries such as the United States (US), Australia, and the European Union (EU) which insists on maintaining the E-Commerce Moratorium. All three developing countries (India, Indonesia, and South Africa) issued a statement strongly, that the moratorium must end at the 13th Ministerial Conference which will take place in Abu Dhabi in February 2024.[1]

Since 1998, the World Trade Organization (WTO) has adopted a global electronic trade declaration at the 2nd MC session held in Geneva 1998. WTO member countries agreed to implement a moratorium on the imposition of tax rates on electronic/digital transmissions, known as the E-Commerce Moratorium,[2] This has happened consecutively until now.

Moratorium on E-Commerce is the postponement of tax rates in electronic/digital commerce which includes: production, distribution, marketing, sales, and delivery of goods and services via electronics. In short, electronic transmission encompasses technologies such as 3D printing, which enables the electronic commerce of goods and services, and even encompasses content. audiovisual or streaming, via digital platforms such as Netflix and Spotify which is considered part of E-Commerce.[3]

The E-Commerce Moratorium Declaration is a response to the rapid development in the field of electronic commerce, the main reason for WTO members to impose the moratorium is to provide space for the growth and innovation of electronic commerce without excessive obstacles through taxes and increased public consumption of digital shopping needs, increasing Gross Domestic Product and increasing the stability of electronic transmission prices.[4]

However, the Moratorium means WTO members cannot implement taxes on electronic transmissions which results in significant losses for developing countries. Quoting UNCTAD’s research report entitled “Growing Trade in Electronic Transmission: Implications for the South” In 2019, it was estimated that the moratorium resulted in developing countries losing US$8 billion in revenue in 2017, while developed countries only lost potential revenue of US$212 million.[5]

Ministerial Conference 12th Decision Concerning E-Commerce Moratorium

On June 17 2022, the WTO held the 12th KTM which took place in Geneva. The MC meeting resulted in a decision regarding the moratorium and E-Commerce work program Members agreed to maintain the E-Commerce moratorium practice, by not imposing import duties on electronic transmissions until the MC 13th. Currently, several countries are developing to discuss the E-Commerce Moratorium intensively and analyze the impact of the import duty moratorium on electronic transmissions.[6]

Those supporting the moratorium seem to only put forward repeated arguments without providing concrete evidence, as argued by India. The United States and the EU stated that the moratorium has helped countries affected by the COVID-19 pandemic and is considered successful. The two members and developed country allies are trying to push for a permanent moratorium within the Plurilateral Joint Statement Initiative (JSI) group regarding digital trade.[7]

At the same time, Indonesia together with India, South Africa, and Pakistan sharply questioned the logic of members supporting the moratorium, such as India which called for an end to the moratorium at the MC 12th meeting, Pakistan which stated that the moratorium is not regulated in the General Agreement on Tariffs and Trade (GATT) and the General Agreement on Trade in Services (GATS) and Indonesia submitted a detailed study at the meeting, pointing out that the Indonesian Customs Law has stipulated that customs duties are imposed on digital goods (software, electronic data, and multimedia, etc.) sent via electronic transmission, namely the internet. Some opponents of the Moratorium argue that it is a market access issue and insist that continuing the moratorium would harm the interests of developing countries.[8]

Though The E-commerce moratorium has been widely rejected by members from developing countries, the WTO is still determined to liberalize trade by launching a draft regulation which could ultimately lead to the E-Commerce moratorium being reimposed and changed to permanent for the MC 13th February 2024.[9]

E-Commerce Moratorium Harms Developing Countries

Article XIX of the GATS has emphasized that the process of liberalization of trade in services “shall take place with due regard for the national policy objectives and the level of development of each member, both as a whole and in individual sectors.”

The US is intensively campaigning for a permanent moratorium on electronic transmission, even though the E-Commerce moratorium violates GATS principles, the US is adamant that this moratorium can have a positive impact on the growth and innovation of the digital economy.[10]

In reality, the “positive impact” discussed by the US is a false impact, this is because the E-Commerce moratorium only benefits developed countries that have large technology companies (Big Tech). As is known, Big Tech is owned by many developed countries, so it is easy for developed countries to exploit developing countries, including Indonesia, which currently does not have a conducive digital industry so it should still not be able to compete competitively with global capitalism.

With the E-Commerce moratorium still in effect, developing countries experience a loss of tax revenue that should be received through digital trade, thereby reducing budgets for public services and infrastructure development, while developed countries gain benefits through the development of Big Tech in their respective countries.

Further information:

M. Aryanang Isal
Program Officer Business and Human Rights
Indonesia for Global Justice (IGJ)

Address:

Rengas Besar No. 35C, Jatipadang, Pasar Minggu, South Jakarta, Capital City of Jakarta
Website: www.igj.or.id
Email: igj@igj.or.id

[1] https://www.twn.my/title2/unsd/2023/unsd230910.htm, accessed on February 5, 2024.

[2] https://www.telefonica.com/en/communication-room/blog/moratorium-of-e-commerce-the-tax-debate-on-e-commerce/, accessed on February 5, 2024.

[3] Ibid.

[4] https://ecipe.org/publications/moratorium/, accessed on February 5, 2024.

[5] https://www.cnbcindonesia.com/tech/20220616132629-37-347644/gertak-wto-moratorium-pajak-impor-e-commerce-bikin-ri-rugi, accessed on February 6, 2024.

[6] https://www.twn.my/title2/wto.info/2023/ti230416.htm, accessed on February 6, 2024.

[7] Ibid.

[8] Ibid.