India firmly opposes extension of moratorium on customs duties on electronic transmission at WTO

India has firmly opposed any further extension of a moratorium on the imposition of customs duties on electronic transmission at WTO’s 12th ministerial conference (MC12).

Officials argued that since digital trade at present is dominated by big tech and developed countries, the moratorium squarely favours the developed nations. Meanwhile as per some estimated India loses about $500 million annually by foregoing duty on e-transmission.

Though it is not clear what is an electronic transmission. The dominant understanding has been that it is a digital good. Digital goods are now growing in trade and are being exported mostly by developed countries. So the policy space to levy customs duty must be at the discretion of the member country is the stand.

India and South Africa (SA) have been making several joint submissions highlighting the adverse impact of the moratorium on developing nations and suggesting that a reconsideration of the moratorium is important for developing nations so as to preserve policy space for their digital advancements.

“One of the reasons why the moratorium exists is that it is not possible for customs to collect tariffs as in the case of goods. Every year India tries to use the withdrawal of the e-commerce moratorium as a bargaining tool in the WTO. We do need data on e-commerce trade in India to have a clear position. At present, there is no government data on the same,” says Arpita Mukherjee of ICRIER.

In one of the joint statements by India and SA, it was argued that the percentage of customs revenue lost for developing nations is 4.35% while that of the developed countries is a mere 0.24%. Moreover, India has argued that the pace of growth of 3D printing would significantly increase the potential tariff revenue loss.

“As per UNCTAD, 3D printing is currently at a nascent stage in developing countries, its market has grown annually by 22% between 2014-1018 and it is estimated that if investment in 3D printing is doubled, it could potentially replace 40% of the cross-border physical global trade by 2047,” India and SA had said in a joint statement.

Executives at Big Tech firms are hugely concerned that not extending the moratorium as it could adversely impact the outsourcing industry. In the absence of a uniform way to assess the value of free email services such those provided by Google or video calls over Zoom or content over OTT platforms, countries may interpret the rules differently, leading to chaos.

“The key issue, when it is a trade policy question, is what type of transfer of information is captured? Does it go beyond streaming services into e-mail, transfer of data between companies and include voicemail and phone communication in general? That question is wide open,” said Simon Evenett, professor of international trade and economic development, University of St. Gallen and Founder of the St Gallen Endowment, the new home of the Global Trade Alert initiative, the leading independent trade policy monitoring initiative at the WTO session.

CT Bureau