Today's Editorial

Today's Editorial - 23 February 2024

Fair trade call

Relevance: GS Paper III

Why in News?

India's opposition to extending a global ban on cross-border e-commerce duties at the World Trade Organisation (WTO) highlights the complex intersection of technology, commerce, and international relations.

Beyond Editorial:

What is the e-commerce Moratorium?

  • The e-commerce Moratorium begins with an agreement to maintain the current practice. It does not impose positive obligations or commitments to change the course of action, only to continue existing conditions.
    • Those conditions are not imposing customs duties, that is, tariffs which are collected on goods trade (and not other taxes).
      • This commitment applies to electronic transmissions, a category of trade that has not been defined.
  • Since 1998, WTO Members have regularly extended a Moratorium on applying customs duties on electronic transmissions.
  • However, several developing countries have recently started opposing the moratorium as they believe that it disproportionately favours the developed world as digital trade is dominated by industries based in rich nations.
    • WTO Members agreed to preface the renewal of the Moratorium with a commitment to intensify discussions on its scope, definition and impact.
  • The WTO Ministerial Conference (MC12) agreed to maintain the current practice of not imposing customs duties on electronic transmissions until MC13.
    • The MC13 will occur from 26 to 29 February 2024 in Abu Dhabi, United Arab Emirates.
  • Failure to renew the Moratorium would result in greater policy uncertainty and less trade, and tariffs on electronic transmissions would reduce domestic competitiveness. Adverse effects would be most pronounced for low-income countries and smaller firms.

What are the grey areas of the e-commerce Moratorium?

  • Whether electronic transmissions should be treated as goods or as services, in particular, there is ambiguity about products such as films, video games, music or software, which can be digitally delivered or delivered through a physical carrier medium such as DVDs, CDs or SD cards. These ambiguities have a long history transcending the Moratorium debate and have often been called the ‘classification issue’.
  • Whether the Moratorium applies to content or to the ‘carrier medium’. That is, whether, absent the Moratorium, customs duties would be charged on the transmission itself, i.e., the bits and bytes that carry the content or the content that is being carried by the transmission.

Complexity of the issue:

  • The heart of the matter lies in the complexity of defining the scope of the moratorium on e-commerce duties.
  • While developed nations like the United States, Britain, and the European Union advocate for its extension, India insists on a nuanced examination of the issues before committing to such a decision.
  • India’s resistance, echoed by South Africa and Indonesia, stems from a legitimate concern. The resistance stems from the fear of continued revenue loss due to transforming traditional goods into digital services, challenging established tariff norms.
    • The World Trade Organisation estimates that developing countries, including India, incurred a staggering $10 billion loss in customs duties in 2017 due to imports of e-commerce products from developed nations.
      • Since then, digitisation has grown manifold, and losses will be much higher in 2024.
    • India contends that digital services should not be exempt from customary duties, as they seamlessly traverse borders as electronic transmissions.

Comprehensive approach of India:

  • With a notable portion of the revenue loss attributed to India, the government’s steadfastness in pursuing fair trade practices is not just a matter of policy.
    • It is a financial imperative.
  • India's proposal to tax cross-border electronic transmissions aligns with a broader narrative of safeguarding economic interests while adapting to the digital paradigm.
  • As electronic transmissions become a dominant force in global trade, India aims to level the playing field by strengthening consumer rights, developing digital public infrastructure, and promoting competition in e-commerce to ensure that the benefits of the digital economy are shared equitably.
    • India’s proactive approach in presenting three proposals signifies a commitment to constructive engagement, seeking solutions that go beyond mere opposition.

Way forward:

  • It is crucial to acknowledge the necessity of balancing fostering global e-commerce recovery and addressing the concerns of nations grappling with revenue loss.
    • A thoughtful, inclusive dialogue on the scope of the e-commerce duties moratorium is essential for charting a path forward that accommodates both the imperatives of the digital age and the legitimate concerns of developing nations.
  • As the WTO Ministerial Conference in Abu Dhabi approaches, the international community must recognize the merit of India's argument.
    • The international community must craft a trade policy that resonates with the dynamics of the 21st century, a bold step into a future where fairness and progress coexist.

Conclusion:

India has shown a proactive and thoughtful approach to address the challenges of the digital transformation of commerce while advocating for fair global trade practices and safeguarding its economic interests.

 

Mains PYQ

Q. What are the key areas of reform if the WTO has to survive in the present context of ‘Trade War’, especially keeping in mind the interest of India? (UPSC 2018)

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