India on Wednesday asked members of the World Trade Organisation (WTO) to review the continuation of the moratorium on customs duties on e-commerce trade, seeking a change in status quo prevailing over the past 24 years.
Speaking at the thematic session on e-commerce work programme and moratorium at the 12th ministerial conference of the WTO, commerce and industry minister Piyush Goyal stressed that the financial consequences of such a moratorium have been mostly borne by the developing countries.
According to an estimate, 86 out of 95 developing countries are net importers of digital products and only five big tech giant companies are controlling the market.
Between 2017 and 2020, developing countries have lost potential tariff revenue of at least $50 billion only on the import of 49 digital products, Goyal said. About 95% of this revenue tariff loss is borne by the developing countries. By 2025, this potential revenue loss is estimated to be about $30 billion a year.
WTO members have agreed not to slap customs duties on electronics transmission since 1998 and the moratorium has been extended periodically at successive ministerial conferences. The validity of the current extension is up to the 12th ministerial. Many members, mainly the developed countries, are seeking another extension up to the 13th ministerial (whenever it’s held).
While small exporters of physical products like textiles, handloom, clothing, footwear, mainly based out of developing countries, are facing both domestic taxes and customs duties, the big digital exporters are being exempted from custom duties due to the moratorium, Goyal said.
An estimate points out that about 40% of cross-border physical trade globally will be replaced by 3D printing by 2040.
“This will actually jeopardise domestic manufacturing capacities which will be subjected to regular tariffs, which would actually become totally uncompetitive. I think this moratorium which has been continuing for 24 years needs to be reviewed, relooked at,” Goyal said.
“Is it fair that the cost of the moratorium is almost completely borne by the developing countries for extending duty free quota, quota free market access, largely for a very few players? Can we justify 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 minister asked.
Since most countries didn’t have concrete policies on e-commerce, which was an emerging area of trade in even developed countries in 1998, they had decided to establish a work programme on it to hold intensive talks and also impose a moratorium on customs duties on electronics transmission.
Interestingly, even over two decades later, WTO members have neither defined what constitutes electronics transmission nor come to an understanding on its coverage of products, let alone finding ways to impose the duties. This has made it difficult for countries to even tax imports of products that can somehow be linked to digital goods.