The United States’ insistence on a five-year moratorium on taxation of cross border electronic transmissions, instead of two years that other countries were open to, caused the 14th Ministerial Conference of the World Trade Organisation (WTO) to end inconclusively at Yaounde in Cameroon late Sunday. Discussions on the key issues on the agenda were postponed to a future date.
As the moratorium on e-commerce expires on Tuesday, the WTO members would no longer be legally prevented from taxing electronic transmissions, international trade expert and former head of Centre of WTO Studies Abhijit Das said. However, it remains to be seen if any country will go ahead and impose taxes at this juncture.
After Brazil’s refusal to agree to the moratorium that goes beyond the customary two-year period despite discussions going on till late on Sunday, it was decided to move the discussions to Geneva where the next General Council (GC) meeting of the world body would be held. The GC meeting hasn’t been scheduled as yet, but it might materialse in a couple of months.
The MC14 started on March 26.
“We believe that it would be appropriate to preserve the important texts we have developed here and use them as a basis to finalize agreements in Geneva at the next General Council meeting,” Director General of WTO Ngozi Okonjo-Iweala said in her closing remarks. The GC is the highest decision making body of the WTO and is composed of ambassadors of member countries.
While countries are now free to tax electronic transmissions they would have to examine its technical feasibility and overall assessment of its utility, Das added. India has been against the extension of the moratorium which has existed since 1998.
As physical goods (like CDs, DVDs, and books) have been replaced by digital downloads and streaming, developing countries have lost the ability to collect traditional customs duties and as a result losing billions of dollars in potential revenue.
“The US, EU and others want the moratorium made permanent to support innovation and reduce trade costs. The real reason is ensuring a tax free future for the US tech firms as the digital economy is set to expand from $16 trillion to $50 trillion in the next 2 decades,” founder of Global Trade Research Initiative (GTRI) Ajay Srivastava said.
Along with the e-commerce moratorium, the safeguard against non-violation complaints under Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement also lapsed. “Developing countries had relied on this safeguard to protect policy space in public health. Without it even WTO-compliant measures like compulsory license can be challenged,” he added.
At the MC, 14 ministers agreed to continue to engage in negotiations on reducing fisheries subsidies on distant water fishing fleets operating far from home shores with the aim of making recommendations to the 15th Ministerial Conference.
They also adopted two decisions on improving the integration of small economies into the multilateral trading system; and on enhancing the precise, effective and operational implementation of special and differential treatment provisions in the Agreements on Sanitary and Phytosanitary Measures (SPS) and Technical Barriers to Trade (TBT), a WTO statement said..
Other than e-commerce and TRIPS, issues which could not be finalised at 14th MC and would be discussed in Geneva include draft on WTO Reform and Work Plan and least developed country (LDC) package.