The WTO and the Search for Consensus on Digital Trade By Karen Lynch

What will be the rules governing cross-border digital trade, and how will they be decided? No clear answer emerged from the World Trade Organization’s (WTO’s) December 2017 Ministerial Conference in Buenos Aires, though many in business and government lobbied for the conference to begin negotiating digital international trade rules. The meeting did, however, agree to continue the current practice (established in 1998) of not imposing customs duties on cross-border electronic transmissions. And 71 of the WTO’s 164 member nations formed a group devoted to advancing digital trade negotiations, beginning with a meeting on e-commerce in the first quarter of 2018.¹,²

Calls to address 21st century international trade were issued in the run-up to the meeting, held every two years by the WTO’s topmost decision-making body. “Global value chains and digitalization have created new trade realities requiring new multilateral governance,” said a group of 15 business organizations from across the world.³ A WTO focus group of businesses said that, “Fragmented national rules on data, consumer protection, and the availability of online information can act as a major impediment to trade – creating new market barriers and pushing up costs.”⁴

More specific positions advanced by business and government have included the facilitation of cross-border data flows; a prohibition on forced data localization; the avoidance of forms of cyber-regulation that unnecessarily restrict international trade;⁵ the easing of international trade in digital products and services, including a permanent prohibition of related customs duties;⁶ and regulatory coherence.⁷

Diverse Views on Digital Trade

But there isn’t consensus on these issues. For example, the government of China has been advocating multilateral e-commerce negotiations since at least late 2016, including discussions on cross-border payments and logistics.⁸ However, governments such as India opposed moving ahead on e-commerce and digital trade at the ministerial conference. “When we do not know how and what future e-technology will develop and what regulation it will need, the question of freeing up regulation in this area should not even arise at this juncture,” said a statement from an Indian group.⁹ A group of African countries advocated keeping discussions within the WTO’s current exploratory work program,¹⁰ which has conducted work on e-commerce within various WTO groups, such as its Council for Trade in Services, since 1998.¹¹

Progress on digital trade was also stymied by other international trade issues. WTO Director-General Roberto Azevêdo expressed disappointment that the meeting did not produce better outcomes. “What we’ve seen over the last three days is the hard grind of multilateralism,” he said. “Members did not manage to agree final, substantive agreements this time.”¹²

Nevertheless, Azevêdo praised the formation of the new e-commerce group, as well as similar groups on foreign investment and on small and midsize enterprises (SMEs).¹³ “It seems that Buenos Aires has in fact breathed fresh air into some parts of the organization,” he said.¹⁴

The work of the e-commerce group begins to open the larger umbrella of digital trade, which refers to international trade in which the internet and internet-based technologies play a particularly significant role in ordering, producing, or delivering products and services. In that way, “the outcome of this ministerial was the most promising result in years for the future of the digital economy and e-commerce work at the WTO,” the National Foreign Trade Council, a U.S. business group, said after the conference.¹⁵ Concurring that the new group embodies a more strategic and pragmatic path for the WTO to address new issues among “coalitions of the willing,” the International Chamber of Commerce urged governments to work expeditiously in 2018.¹⁶

At the same time, the WTO, World Economic Forum (WEF), and Electronic World Trade Platform, an initiative of Alibaba Group Executive Chairman Jack Ma, launched a public-private dialogue on e-commerce. The Enabling E-commerce Initiative was scheduled to hold its first session at WEF’s annual meeting in Davos, Switzerland, in January 2018.¹⁷ “It will create a high-level dialogue to deepen the debate on e-commerce, with the aim of ensuring that the benefits of e-commerce are available as widely as possible,” Azevêdo said.¹⁸

Much of this work is said to offer benefits to SMEs. However, the business focus group at the WTO pointed out that, “since [SMEs] operating online rely on larger service providers to deliver products and services, an effective e-commerce environment must level the playing field for all businesses – including global enterprises.” ¹⁹

Pursuing a different approach, India is reportedly looking to convene a “mini-ministerial” of several countries in early 2018, in line with its support of pursuing more traditional WTO channels including the Doha Round of multilateral negotiations, which was never formally concluded despite several years of inaction.²⁰

But observers warn of the consequences if consensus is not achieved. “If, for example, the long-adopted moratorium on e-commerce duties expires, WTO members would theoretically immediately have the right to impose new tariffs on data crossing their borders,” according to Public Knowledge, an internet advocacy group.²¹

The stakes are high. In just one area, business-to-consumer e-commerce, cross-border shopping is expected to make up 20 percent of e-commerce in 2022, with sales of $627 billion, according to the Forrester market research company.²²

Digital Trade in Bilateral and Regional Accords

Outside of the WTO, e-commerce and digital trade are already being addressed in bilateral and regional proposals and agreements. WTO rules generally accommodate bilateral and regional agreements, because of their role in facilitating international trade – as long as they follow certain rules, do not raise barriers vis-à-vis third-parties, and complement the WTO system, rather than substitute for it. Yet a proliferation of different e-commerce and digital trade provisions is seen to create uncertainty.

A WTO analysis of 275 of these agreements found in May 2017 that, “e-commerce provisions have become increasingly more detailed but remain highly heterogeneous.”²³ Summarizing the situation, the analysis shows the most common e-commerce provisions address e-commerce promotion and cooperation, while maintaining the moratorium on customs duties mentioned above. Other e-commerce provisions concern domestic legal frameworks as well as more specific issues, such as electronic authentication, consumer protection, personal information protection, and paperless trading.²⁴

Looking ahead, the WTO analysis points to pending bilateral and regional agreements, such as an amended Australia-Singapore agreement, that are beginning to cover additional e-commerce and digital trade matters – including unsolicited commercial electronic messages, internet interconnection charge sharing, code source protections, and cybersecurity, for example. And businesses are expected to continue their push for, as one group put it, “establishment of a WTO rule to ensure the free flow, storage, and handling of all types – in any sector – of data across borders.”²⁵ Also on their list are a permanent prohibition on customs duties for digital products and services, cross-border consumer protection standards, limitations on liability for online platforms that handle user content and transactions, technological neutrality, harmonized tariff codes for low-value e-commerce products, electronic signatures, intellectual property protection, and more.²⁶,²⁷