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India pushes for customs duties on ‘Electronic Transmission’ at the World Trade Organization

The 12th Ministerial Conference of the World Trade Organization is underway in Geneva, with negotiations on until June 15th 2022

*Update: by the end of the 12th Ministerial Conference on 17th June, amidst other trade decisions, India agreed to extend the electronic transmission moratorium until 2025. However, India reiterated the need to clarify the moratorium’s definition and scope well in advance.

Following its long-held stance on the matter, India stated that it was likely to oppose extending the moratorium on import customs for ‘electronic transmissions’ at the 12 Ministerial Conference of the World Trade Organization in Geneva. However, a  recent statement* post the conference has seen India agree to extend the moratorium instead.

Why this matters: a lapsed moratorium could have implications for companies that are engaging in cross-border trading both with and from India, in ‘electronic transmissions’—which may include a gamut of digital goods, such as e-books, e-music, and video games, depending on whether this position is accepted, and how ‘electronic transmissions’ are defined.

The Indian government argues that imposing import tariffs helps it make up millions of dollars worth of lost tax revenue on electronic transmissions, which are otherwise retained by developed countries and Big Tech companies. On the flip side, unnamed executives from Big Tech firms told Economic Times that imposing customs in the absence of a clear definition of ‘electronic transmissions’ may lead to uncertainties between countries importing to India, especially when it comes to intellectual property and trade rights.

This stance builds on India’s storied history of asserting the rights of the developing world at international fora. However, imposing innocuous customs on ‘electronic transmission’ may be easier said than done in an increasingly interconnected world.

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‘The definition of ‘electronic transmission’ remains a grey area in spite of repeated extensions [of the moratorium],’ Dr. Pralok Gupta, Associate Professor (Services and Investment) at the Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi, told MediaNama. India, along with South Africa and Indonesia, have in the past claimed that this ambiguity deprives the ‘developing world’ of millions of potential customs revenue generated by the digital economy—while benefiting rich countries and Big Tech companies in the process.

The WTO is an intergovernmental body facilitating international trade. Approximately every two years, the WTO’s 164 members convene at the Ministerial Conference—the WTO’s highest decision-making body, where it takes decisions on any of the multilateral trade agreements under it. Negotiations at the 12th Ministerial Conference broadly centre around fisheries subsidies, TRIPS waivers on vaccines, food security and agriculture, and customs duties on electronic transmission.

Why Introduce a Customs Moratorium on ‘Electronic Transmission’?

In 1998, after discussing a proposal submitted by the United States, members of the newly-formed WTO agreed to establish a comprehensive ‘Work Programme’ to examine potential trade-related ambiguities arising from the nascent global e-commerce sector. This declaration included a moratorium on customs duties on ‘electronic transmission’.

Since 1998, this moratorium has instead been extended by subsequent Ministerial Conferences—even as recently as 2019.

‘In 1998, there was limited understanding of e-commerce and electronic transmission. That may have resulted in the limited opposition to the moratorium from member countries,’ explains Dr. Gupta. ‘The Work Program was established to sharpen these nascent understandings of e-commerce’s relationship with various trade dimensions falling within the purview of WTO. It was important to be clear on the different aspects of the sector, before taking a call on customs.’

However, repeated extensions have left a key question unanswered for well over two decades now: how is ‘electronic transmission’ defined?

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How is Electronic Transmission Broadly Defined?

The WTO defines electronic commerce as the ‘production, distribution, marketing, sale or delivery of goods and services by electronic means’.

However, there is still no clear definition of what ‘electronic transmission’ means.

‘Electronic transmission is generally understood to mean all goods transmitted through electronic means. These could include e-books or e-music,’ says Dr. Gupta. ‘Some free trade agreements (FTA) define electronic transmission as the transfer of digital products through electromagnetic or photonic means. But these agreements are specific to the parties to the FTA—they don’t apply to all WTO members.’

The International Chamber of Commerce adds that in the context of the WTO, electronic transmissions ‘are commonly held to encompass anything from software, emails, and text messages to digital music, movies and videogames.’ Speaking to Mint, officials at the Ministry of Commerce describe it broadly as a digital good. However, some scholars suggest it could also encompass electronic communications between companies—which are hard to measure. The absence of government data on electronic transmission is perhaps emblematic of this unclear definition.

In 2019, developing countries agreed to extend the moratorium, hoping to resolve the definition in the coming years. No progress is seen so far—partially explaining India’s heightened focus on the issue as a developing country.

How Does the Moratorium Affect the Developing World?

In 2021, India twice reiterated that the unclear moratorium disadvantages the developing world—the ‘net importers of digitalized products‘, they lose billions of dollars worth of potential taxes on imported ‘electronically transmitted’ goods. Some estimates peg these losses to be as high as $10 billion. These losses may ‘increase as the digital world continues to rapidly evolve and expand its revenue potential,’ says Dr. Gupta. ‘Regardless of whether electronic transmission is defined broadly or narrowly, developing countries still lose revenue.’ At the WTO, India argues that this deepens a pre-existing digital divide.

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On the other hand, developed countries and Big Tech companies, who largely export these goods, enjoy unfettered profits and access to developing markets.

India’s joint submissions [read] with the likes of South Africa and Indonesia reflect this stance—while others clearly focus on clearly defining ‘electronic transmissions’, outlining the scope of the moratorium, and assessing its potential impact. According to government officials in conversation with The Hindu, a digital world where countries impose tariffs on digital goods would preserve the policy interests of developing countries, while promoting revenue generation through the regulation of imports.

How is the rest of the world responding?

The likelihood of the moratorium being lifted as a result of India’s efforts is unlikely. As India, Indonesia, and South Africa submitted their joint proposal, in parallel, 51 developing and developed countries submitted another standing by the extension of the moratorium.

Some countries and international bodies further argue that a customs-free digital world ‘enabled exponential growth in use of the Internet and the flourishing of the digital economy.’ The question that remains, then, is if this level of ‘growth’ would be affected by customs protocols that ‘benefit’ domestic interests.

It is clear that there are ambiguities in what kinds of goods fall under the ambit of ‘electronic transmission’. In the absence of a fixed definition, countries may interpret the term differently—leading to regulatory ambiguity. The International Chamber of Commerce ominously (if not emphatically) suggests that implementing such customs protocols would not only be technically infeasible but in violation of existing free trade agreements. While India may indeed be losing revenue in the digital economy, whether imposing customs can also support its growth is unclear.

Regardless of its feasibility, India’s stance at the WTO is an addition to India’s repeated stand against global fiscal inequities at various international fora. In the face of seemingly large-scale opposition at the WTO, whether India’s desire to lapse the moratorium is more symbolic than feasible remains to be seen. Answers may be gleaned from a statement by Piyush Goyal, Minister of Commerce and Industry, laying out India’s stance on the various issues to be discussed at the summit. ‘I carry the aspirations of 1.4 billion Indians who, despite global challenges, are actively participating as trusted partners in making this planet a better place. (..) The WTO should embrace a people first [sic] approach to trade.’

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Featured image: Minister of Commerce, Piyush Goyal, meets Director General of the WTO, Ngozi Okonjo-Iweala, at the 12th Ministerial Conference; accessed via Twitter. | This article was updated on June 18th, 2022 at 2:25 pm.

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