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WTO Members to Negotiate New Rules for Cross-Border E-Commerce

By Karen Lynch

Members of the World Trade Organization (WTO) are beginning negotiations to develop new rules for cross-border e-commerce, under an agreement announced early in 2019. The talks aim to bring global trade rules into the 21st century, negotiators say, and include a wide-range of issues such as customs barriers, cross-border data flows, intellectual property, and consumer protection. Also on the table is extending the current moratorium on customs duties for electronic transmissions, which would otherwise expire in 2019.

Many concerns of small and midsize enterprises (SMEs) are proposed for discussion. With ongoing digital innovation, SMEs have been gaining unprecedented opportunities to expand internationally, reaching new markets at lower costs. “E-commerce is especially important to small businesses as it enables them to participate in cross-border trade previously more practical for larger businesses,” according to David Parker, New Zealand Minister for Trade and Export Growth.1

 

Yet old trade rules, new digital regulations, and legacy trade systems can still make cross-border e-commerce prohibitively complicated and costly for SMEs. “Tariffs and non-tariff barriers can disproportionately burden the nearly 300,000 U.S. SME businesses exporting to foreign markets,” according to the U.S. Trade Representative.2

 

And going forward, “technological change could create new problems,” said WTO Director-General Roberto Azevêdo, addressing businesses and other stakeholders at the WTO Public Forum 2018. “It could increase the power of bigger firms at the expense of smaller companies … or it could help us to build the future that we want to see, helping smaller players and distributing the benefits of trade and economic growth more widely.”3

 

Business groups are lobbying to better the chances for SME success in cross-border e-commerce. An open letter to the WTO from more than 50 business associations around the world emphasized the importance to small and early-stage businesses of improving the global cross-border e-commerce environment.4 SME issues raised by the International Chamber of Commerce (ICC) have included the current thresholds for exempting low-value e-commerce purchases from customs duties, for example, and duties assessed on cross-border e-commerce returns.5

 

Talks Bring Many Countries to the Table—But Not All

 

At the World Economic Forum’s (WEF’s) 2019 meeting in Davos, Switzerland, 76 governments belonging to the WTO agreed to begin e-commerce negotiations. The coalition represents 90 percent of global trade, though it does not include all of the WTO’s 164 member countries.6,7

 

In the past, the WTO’s standard approach to negotiating global trade frameworks has usually involved all members, though an attempt to apply this approach to cross-border e-commerce fell short at the organization’s most recent ministerial conference, in December 2017. “The emergence of the coalition willing to press ahead with new e-commerce rules, despite others’ reservations, reinforces a trend toward the fragmentation of WTO negotiations and away from global ‘rounds’ of talks that have run out of steam,” Reuters reported.8

 

The coalition’s statement invited all WTO members to participate. However, governments such as India have reportedly declined, objecting to the digression from standard WTO negotiating formats as well as to the positions of some coalition members.9

 

Groups such as the ICC praised the new coalition, saying that, “today’s trade rules, which largely reflect 20th century patterns of trade, are not always well-suited to supporting the growth of SME e-commerce.”10 Yet some commentators predicted the talks would face an uphill battle.11 “The broadness of the issue itself harbors plenty of potential for clashes of opinion,” said one.12

 

In the meantime, existing WTO rules apply to e-commerce, “even when there is no specific reference to e-commerce or online trade,” according to a WTO report titled The Future of World Trade: How Digital Technologies are Transforming Global Commerce. E-commerce issues are also addressed by other international and regional organizations, such as the European Union and its General Data Protection Regulation, while bilateral and regional trade agreements include various related provisions in areas such as e-signatures and the cross-border transfer of information. “Given the dynamic nature of [FTAs] and the current trends, provisions related to digital technologies are likely to keep evolving,” the WTO report said.13

 

Negotiators to Address SME Concerns in Cross-Border E-Commerce

 

“Many trade costs such as logistics and transaction costs or cumbersome customs procedures weigh more heavily on SMEs,” the WTO said.14 The organization has welcomed the initiative of the coalition that is negotiating on cross-border e-commerce.15

 

The governments of Canada and New Zealand have launched online consultations, delving into details of interest to businesses large and small, including taxation of digital products, local presence or storage requirements (including for data), and the protection of personal information.16

 

Business groups have long lists of demands, as illustrated by one of their statements: “The ability of businesses and individuals to participate effectively in the global economy today requires a modern e-commerce framework that facilitates customs clearance, digital transactions, transparency, trust, movement of information, and access to a variety of e-commerce platforms, payments technologies, communications, social media and marketing tools, productivity software, and shipping and logistics services.”17

 

Specific SME issues have been singled out. For example, an industry newsletter has reported that, “increasingly, customs territories are removing previously allowed relaxations on small, low-value parcels.”18 This is just one of the SME cross-border e-commerce issues proposed for negotiation by the ICC, which is calling for governments to increase dollar-value thresholds for exempting small parcels from import duties and to eliminate duties on cross-border e-commerce returns.

 

The WEF has also suggested a common framework of regulatory principles for e-payments, while noting that e-payments can ease SMEs’ access to a much wider, international customer base.19

 

As for the WTO’s current moratorium on taxing electronic transactions as a means of spurring cross-border digital trade, member nations have renewed this provision every two years since 1998, and some bilateral and regional trade agreements have incorporated it permanently. Some concerns have been raised about the moratorium, which will need to be addressed before it expires at the end of 2019.20

 

The

Takeaway:

The current policy framework for cross-border e-commerce ranges from non-existent to inconsistent, hampering SMEs’ use of digital technology to expand their businesses abroad. Members of the WTO have agreed to negotiate a trade policy framework, and developments are expected to unfold in 2019.

Karen Lynch - The Author

The Author

Karen Lynch

Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners.

Sources

1. “NZ to Take Part in Talks on Global E-Commerce Rules,” Government of New Zealand; http://www.scoop.co.nz/stories/PA1901/S00069/nz-to-take-part-in-talks-on-global-e-commerce-rules.htm
2. “Small Business,” U.S. Trade Representative; https://ustr.gov/issue-areas/small-business
3. “Public Forum—Opening Plenary Debate,” World Trade Organization; https://www.wto.org/english/news_e/spra_e/spra238_e.htm
4. “An Open Letter to WTO Trade Ministers,” Computer & Communications Industry Association; http://www.ccianet.org/
5. “Business Priorities for the WTO,” International Chamber of Commerce; https://www.fsisac.com/article/fs-isac-enables-safer-financial-data-sharing-api
6. “DG Azevêdo Meets Ministers in Davos: Discussions Focus on Reform; Progress on E-Commerce,” World Trade Organization; https://www.wto.org/english/news_e/news19_e/dgra_25jan19_e.htm
7. “Members and Observers,” World Trade Organization; https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm
8. “Davos—Nearly Half of WTO Members Agree to Talks on New E-Commerce Rules,” Reuters; https://www.reuters.com/article/davos-meeting-ecommerce/davos-nearly-half-wto-members-agree-to-talks-on-new-e-commerce-rules-idUSL3N1ZP329
9. “India Refuses to Join E-Commerce Talks at WTO, Says Rules to Hurt Country,” Business Standard; https://www.business-standard.com/article/economy-policy/india-refuses-to-join-e-commerce-talks-at-wto-says-rules-to-hurt-country-119022500014_1.html
10. “ICC Welcomes Breakthrough in WTO E-Commerce Talks,” International Chamber of Commerce; https://iccwbo.org/media-wall/news-speeches/icc-welcomes-breakthrough-wto-e-commerce-talks/
11. “E-Commerce Talks Will Be a Grind,” Politico; https://www.politico.com/newsletters/morning-trade/2019/02/21/house-dems-organizing-first-big-statement-on-usmca-changes-397696
12. “WTO Meeting Spawns a Split, With Multinational E-Commerce Rules Drive,” The Loadstar; https://theloadstar.com/wto-meeting-spawns-a-split-with-multinational-e-commerce-rules-drive/
13. “Launch: WTO World Trade Report 2018,” World Trade Organization; https://www.wto.org/english/forums_e/public_forum18_e/pf18_session_fullpage_e.htm?session=41
14. “Launch: WTO World Trade Report 2018,” World Trade Organization; https://www.wto.org/english/forums_e/public_forum18_e/pf18_session_fullpage_e.htm?session=41
15. “New Initiatives on Electronic Commerce, Investment Facilitation, and MSMEs,” World Trade Organization; https://www.wto.org/english/news_e/news17_e/minis_13dec17_e.htm
16. “Canada’s Future World Trade Organization (WTO) Negotiations on E-Commerce,” Global Affairs Canada; https://www.international.gc.ca/trade-commerce/consultations/wto-omc/form-formulaire.aspx?lang=eng
17. “An Open Letter to WTO Trade Ministers,” Computer & Communications Industry Association; http://www.ccianet.org/
18. “How to Make International E-Commerce Transparent,” HGV UK; https://www.hgvuk.com/how-to-make-international-ecommerce-transparent/
19. “Addressing E-Payment Challenges in Global E-Commerce,” World Economic Forum; http://www3.weforum.org/docs/WEF_Addressing_E-Payment_Challenges_in_Global_E-Commerce_clean.pdf
20. “India Refuses to Join E-Commerce Talks at WTO, Says Rules to Hurt Country,” Business Standard; https://www.business-standard.com/article/economy-policy/india-refuses-to-join-e-commerce-talks-at-wto-says-rules-to-hurt-country-119022500014_1.html

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