As the 13th World Trade Organization (WTO) Ministerial Conference (MC13) approaches, expectations are growing for the WTO's fair trade rule system. The reasons for this are (1) the WTO's chronic failure to conclude new agreements aimed at expanding trade, and (2) the number of cases is increasing. WTO members' disregard for their obligations and disregard for the rules.
Despite its long-standing support for the WTO, the United States is contributing to the WTO's problems, given bipartisan disillusionment with the status quo in Congress and the administration. Of course, success at the multilateral level is an exercise in give and take, but the reality is that for the United States, given the size and consistency of its domestic market, it may ultimately be better to abandon the WTO and prioritize the interests of regional countries. That would be easy. Trade agreements with trusted partners and allies. With this in mind, the relevance of this organization depends on whether it can stabilize and reverse the negative spiral, especially with regard to free trade rules that sustain the growth of small and medium-sized enterprises (SMEs).
The MC13, to be held from February 26 to 29, will focus on the impending expiration of the WTO's suspension of tariffs on electronic transmissions, commonly referred to as the “e-commerce moratorium,” and the potential impact on small and medium-sized enterprises. It has become. In Abu Dhabi. Although only a tidbit, the expiration of this temporary agreement, which exempts electronically transmitted digital products from customs duties, will have a serious negative impact on the international trading system, particularly as it applies to the technology and entertainment sectors.
Unlike international trade in traditional goods (physical products), which is governed by strong and comprehensive free and fair trade rules, the governance of electronic transmissions and digital trade by permanent rules is weak. For digitally distributed products and services, there are no permanently agreed principles such as non-discrimination or national treatment that would facilitate the predictability of international trade in physical goods. The moratorium is a temporary exception in the western region, which has weak rules on digital trade.
Trade in services currently accounts for half of world trade on a value-added basis and is increasing while trade in goods is declining. Much of the current and future growth in services trade will be linked to the growth of digital trade and the rise of digitally enabled services, which will already account for 54% of global services exports in 2022, according to the WTO. At the same time, trade restrictive measures in the form of strong regulations on digital trade and data flows are expanding.
A relatively reliable element of WTO rules since 1998, this suspension period has since been extended by two years. But recently, opposition to the extension has grown stronger in some developing countries, and costs continue to rise as developing countries seek to hold the issue hostage to other unrelated priorities. In this vein, India and Indonesia are engaged in a wide-ranging lobbying effort to persuade other developing countries that are WTO members to allow the moratorium to expire. They argue that the moratorium is increasing the revenue loss to the national treasury as more and more products are traded internationally in digital format. This is highly questionable considering the results of many studies. For example, the WTO Secretariat assesses that the impact of the moratorium on overall government revenues in developing countries is less than 0.33 percent.
In today's world of advanced technologies such as 3D printing and cloud computing, many of the leaders of these countries are focusing on developing countries, given that tariff levels on goods are generally higher than those of developed countries. We believe that the “advantage'' of “superiority'' has been reduced due to the moratorium. On the contrary, the moratorium has become a fundamental principle guiding the global economy and a shining example of how the multilateral system, with all its flaws, can foster policies that foster innovation and growth, especially for small and medium-sized enterprises. . Various studies have shown that, on the one hand, there are benefits of duty-free cyberspace for small and medium-sized enterprises through low-cost access to global markets, and on the other hand, there is an increase in productivity and output caused by the import of innovative digital services. It is also emphasized in developing countries. Countries such as India and Indonesia currently oppose reinstating the suspension.
Growth in digital trade fosters overall economic growth. Just as the WTO's Information Technology Agreement, which eliminated tariffs on technology products, played a fundamental role in fostering service sector growth and deepening value chains in developing countries, tariff-free trade in e-commerce It also facilitates the adoption of new technologies. This will lead to healthy growth of the global economy as a whole. Research from the Organization for Economic Co-operation and Development has repeatedly shown that implementing digital tariffs slows digital trade flows to the extent that the gains from new tariff revenue are largely offset. This is particularly true for India, where opposing the moratorium risks severely damaging its most internationally successful industries (e-commerce platforms, entertainment, telecommunications, computer services) and reducing its tax base. There is.
The threat of new arbitrary trade barriers to the free flow of digital trade is becoming more concrete, especially in some large and influential developing countries. For example, Indonesia has added five new import categories to its tariff for “Software and other digital products transmitted electronically”. This change will allow the country to legally introduce any level of tariffs on these products (or transmissions) once the existing moratorium period ends.
Once the e-commerce suspension period ends, businesses and innovative businesses that sell services and products over the Internet, or use the Internet for internal management, dealer coordination, customer care, and maintenance service enhancements, will There would be significant uncertainty and increased costs for individuals. Service related. These “at risk” areas are not exhaustive and are used only to highlight some of the key factors that may be affected by the expiration of the moratorium.
With global cross-border data flows expected to reach $11 trillion by 2025, the stakes are high. A new generation of digital trade barriers will be disruptive and costly, leading to the fragmentation of global digital markets and hitting small and medium-sized businesses the hardest, if not completely excluding many companies from participating in e-commerce. Probably.
To ensure that services and digital trade continue to expand, boosting economies and jobs, the global economy needs permanent multilateral digital rules and a vibrant WTO to enforce them. While there may be some progress on the draft Joint Statement Initiative at MC13, a comprehensive agreement establishing permanent rules for fair and non-discriminatory treatment in the digital trade area is likely to be out of reach at the conference. It will probably be out of reach. However, extending the e-commerce moratorium is an essential step in this direction.
At this time, it is unclear whether the Office of the U.S. Trade Representative is pursuing a coordinated negotiation strategy to achieve an extension of the moratorium in MC13, working with a number of allies who share the same objective. . Given the economic impact on the U.S. economy, especially for small businesses, it will be essential for Congress to pressure the administration on this priority.
Meredith Broadbent is a senior advisor (part-time) to the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, DC. She would also like to thank Guillaume Ferlet for helpful research assistance.
