Framing future work and negotiations on e-commerce at the WTO

1 December 2017

E-commerce is rapidly becoming a more ubiquitous medium for commerce, bringing with it significant benefits. Like any other form of exchange in modern economies, regulation designed through negotiation is necessary to manage complexity. As the WTO’s Eleventh Ministerial Conference fast approaches, this piece looks at the state of play of multilateral negotiations on e-commerce and how the main issues could inform future work in this area.

 

As WTO members seek to fashion an outcome at their Eleventh Ministerial Conference (MC11), the WTO General Council has been attempting to tease out a result that will inform post-MC11 work on e-commerce. The parties remain far apart. Eight separate proposals are being transmitted to the ministerial meeting in Buenos Aires. It is difficult to envisage a meeting of minds at MC11, considering the distance that divides some of the submitted proposals. Moreover, the submissions do not encapsulate every position current among members. They do, however, give a fairly complete picture of the state of play. The way the discussions are configured allows the key decision points to be divided into three categories. 

The current state of play: setting out the issues

First, there are the substantive issues, which essentially revolve around the e-commerce mandate that MC11 would produce. The questions here are whether to continue in the current mould, expand the scope of deliberations, explicitly explore the basis for negotiations or commit right away to negotiations. Second, there are organisational questions, which are naturally linked to substantive considerations. The essential question here is whether to retain the current 1998 Work Programme framework, as described above, or to establish a new body, such as a Working Party or a Working Group that would assume a more explicit cross-cutting approach. The third cluster of questions relates to the moratorium on import duties on electronic transmissions. Should it be continued along the same lines or revisited?

Table 1 is a simplified depiction of the positions taken in the written submissions on these questions. The distillation of positions on the three questions identified above may get to the essence of what is at stake in the immediate run-up to MC11, but it does not capture a range of nuances contained in some of the submissions.  In effect, it may be possible to intuit positions that are possibly implicit but unstated in some of the submissions.  Finally, it should be remembered that not all members with views on these matters have necessarily submitted position papers.  It is possible that other issues could come to the fore that would materially affect deliberations at MC11.

Substantive options

The authors of Jobs 137, 140 Rev.4, 149, 150 and 156 Rev.1 all believe in varying degrees that the existing Work Programme has not produced enough in the last 19 years. They see a need for the WTO to embrace a more thorough-going and deeper response to the challenges posed by the digital revolution and the opportunities it offers for business. The proposals embrace three different ways of going about this.  One option is simply to expand the range of trade-related issues impinging on e-commerce and include these elements in members’ deliberations without assuming that this implies, at least initially, that negotiations enter the picture (Job 137 – Russian Federation, , Job 149 – Singapore, and Job 150 - China). A second option goes a bit further, making explicit reference to an evaluation of whether modifications in WTO rules might be appropriate, but with no presumption that this is the case (Job 156 Rev.1 – Japan et al.). The third of these approaches is more direct, calling for a negotiating mandate at the outset from MC11 (Job 140 Rev.4 – European Union et al.). 

Each of these options either implies or assumes that the e-commerce deliberations need to step outside the confines of an approach that simply takes existing WTO rules as given and examines the relevance of e-commerce. The submissions in Job 152 Rev.1 – Bangladesh, Job 153 – India. and Job 155 – the African Group do not support this approach. They maintain that work should continue within the confines of the pre-existing mandate and consider that the exploratory exercise is incomplete, leaving some matters hanging that require resolution. 

Although these submissions are not explicit on the matter, the hesitation about pushing forward on e-commerce in all probably reflects in part the conviction that not enough is being done at present to hold up the end of the Nairobi bargain emphasizing the need to address outstanding Doha Round agenda issues. A failure to take these concerns into account will make it very difficult to achieve much of a result in Buenos Aires, and will continue to dog WTO deliberations until tension over the balance of emphasis on progress in different areas of work is dissipated.    

In short, no evidence suggests that the authors of Jobs 152 Rev.1, 153 and 155 believe that nothing should be done in preparing the WTO to play its part in managing the burgeoning digital economy. It is about how this should be done.

Procedural approaches

The procedural choice amounts to deciding between a continuation of existing arrangements or the establishment of a new body. Under the current disposition, substantive contributions are made by existing WTO bodies that feed into a more cross-cutting, coordinating role for the General Council. This is the preferred arrangement for supporters of  Job 149 (Singapore), Job 150 (China), Job 152 Rev.1 (Bangladesh), Job 153 (India), and Job 155 (African Group).

The idea of setting up a separate Working Party or Working Group is mostly favoured by those seeking a more activist stance on e-commerce by WTO members (Job 37 – Russian Federation, Job 140 Rev.4 – EU et. al, , and Job 156 Rev.1 – Japan et al.). It is perhaps easier to segue into negotiations if a dedicated body already exists. A new body may also be seen as a signalling device for a new approach. A dedicated body could also more easily shift the emphasis of the work towards a cross-cutting approach rather than allowing the cross-cutting focus to emerge from separate deliberations across the organisation. On the other hand, the General Council could use the mechanism of a dedicated session to put the requisite emphasis on cross-cutting questions. The Singaporean (Job 149) and the Chinese (Job 150) proposals rely on this idea.

The future of the moratorium

Among the proposals pronouncing on the moratorium, those contained in Job 137 (Russian Federation), Job 140 Rev.4 (EU et al.), Job 149 (Singapore), Job 150 (China), and Job 156 Rev.1 (Japan et. al) support a continuation of existing arrangements, which means an extensions of the moratorium to MC12. The proposals from India (Job 153) and the African Group (Job 155) express reservations regarding a continued renewal on various grounds. India also makes explicit a link between the e-commerce moratorium and the TRIPS non-violation moratorium.

Delivering shared benefits

The relevance of the WTO will diminish if it fails to adjust to new realities in the global economy, including the rapid growth of digitisation. Keeping up is essential, but that does not mean the more traditional side of the WTO’s activities no longer matter. On the contrary, if the WTO turns its back on what it has historically intermediated, it will not be able to contribute to the modern economy either. A comprehensive approach to old and new issues is the only way to ensure that the WTO serves all its members. 

Not only is e-commerce becoming a more ubiquitous medium for commerce, and doing so rapidly, it also brings with it significant benefits. Several studies have shown that e-commerce lowers the costs of trade, as well as increasing trading opportunities and expanding access to new markets. Like any other form of exchange in modern economies, regulation is necessary to manage complexity. The medium that supports e-commerce and many other interactions – the Internet – has a way of binding jurisdictions closer together and making borders more porous. This reinforces the need for international cooperation in regulatory matters. The content and administration of internationally agreed regulation significantly affects outcomes, which is why regulations need to be designed through negotiation.

If e-commerce is to deliver shared benefits to the WTO membership at large proper attention must be paid to the digital divide. The necessary infrastructure and accompanying access must be assured for communities in developing countries that will otherwise be even more marginalised as the rest of the world benefits from e-commerce. An important aspect of such efforts is to ensure connectivity for numerous small and medium sized firms.

 

Patrick Low is Director of the Asia Global Fellows Program at the Asia Global Institute, University of Hong Kong.  He is also a Visiting Professor in the Faculty of Business and Economics and teaches on the MBA Program.