WTO Joint Initiative on e-commerce close to finalising negotiations

The co-conveners of the Joint Initiative (JI) on e-commerce – Australia, Japan and Singapore – have published a stabilised text of an “Agreement on Electronic Commerce“. The publication represents a significant milestone, and comes after almost seven years of discussions and negotiations.

The text proposes rules on a range of substantive issues, including:

• Openness and electronic commerce, which includes commitments on customs duties on electronic transmissions; open government data; and access to and use of the internet for electronic commerce.

• Trust and electronic commerce, which covers online consumer protection;
  unsolicited commercial electronic messages (spam); personal data protection; and cybersecurity.

• Telecommunications, which presents a revised version of the Telecommunications Reference Paper
• Cross-cutting topics related to transparency, cooperation, and development.
• Exceptions, including for security, prudential reasons, data protection, and preferences for indigenous peoples.

The current draft text has been published by the co-conveners on behalf of 82 out of 91 JI members. Some countries, notably Brazil, Colombia, El Salvador, Guatemala, Indonesia, Paraguay, Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Türkiye and United States are still undertaking domestic consultations on the text.  

Why this is important

The regulation of e-commerce and digital trade has taken place so far within preferential trade agreements (PTAs), celebrated bilaterally or plurilateraly among countries. Nevertheless, there is no specific agreeemnt on this issue in the context of the WTO.

An e-commerce agreement would be an important step towards promoting global harmonisation of norms. Although the participation of LDCs and of some regions, such as the Caribbean, is still limited, the JI counts on the participation of a significant number of WTO members, which account for approximately 90% of global trade. While topics under ‘enabling electronic commerce’ carry special importance to development, consumer protection and privacy help to put individuals at the center of the digital economy.

In addition, the text of the “Agreement on Electronic Commerce” enshrines a commitment not to impose customs duties on electronic transmissions (to be reassessed after five years). Currently, a moratorium on customs duties on electronic transmissions is in place among all WTO members, exempting  digital products, such as online films, music, and software from tariffs (customs duties) as they cross borders. Nevertheless, this WTO-wide moratorium is likely to expire at the next WTO Ministerial Meeting. The inclusion of a moratorium in the e-commerce agreement means that the status quo – the non-application of custom duties – would continue to be the rule among most WTO members, regarless of the expiration of the wider moratorium.

Finally, the agreement also presents extensive provisions aiming to cater to the specific needs of developing countries and LDCs. Nevertheless, there are doubts with regards to whether these provisions would be fit for purpose, since most of them are formulated in a ‘best effort’ language, and they do not follow the model of the Trade Facilitation Agreement (TFA), which links implementation with the existing capacity, and with “mandatory” technical assistance.  

What is missing

The JI officially began negotiations with an ambitious agenda, which included enabling issues, customs duties and market access, as well as a wide range of digital policy issues, such as data flows, localisation, access to the source code, and cybersecurity.  

Negotiations on some of the most ‘digital’ issues, such as data flows and source code, halted when the United States decided to withdraw its support for these areas in order to preserve domestic policy space. Although data flows are the lifeblood of the digital economy, it seems unlikely that rules on this issue will be harmonised on a multilateral basis anytime soon. The co-conveners simply state that “participants recognise that some issues of importance to digital trade have not been addressed in this text. Participants will discuss the inclusion of these issues in future negotiations”.

The mechanism to include a future agreement on e-commerce in the WTO legal architecture is also an open issue.  The members of another Joint Initiative on Investment Facilitation for Development (IFD) have not managed to secure the inclusion of the agreed text under Article 4 of the Marrakesh Agreement, which deal with WTO Plurilateral Agreements. Such an inclusion requires a hard-to-achieve consensus among WTO Members, given the explicit opposition by some countries. This raises questions on the path forward towards the incorporation of the outcomes of other JIs, including on e-commerce. 

The negotiations at WTO JI will continue pending endorsement by several countries. According to the United States, “the current text falls short and more work is needed, including with respect to the essential security exception”.