Geneva: As e-commerce behemoths Amazon, Alibaba, and Walmart battle it out for the Indian market, India and South Africa have asked whether it is proper to continue with the current practice of not imposing customs duties on electronic transmissions at the World Trade Organization (WTO).

In a joint proposal circulated at the World Trade Organization on 12 July, India and South Africa said “the realities prevailing in 1998, when WTO members agreed for the first time to the temporary moratorium on customs duties on electronic transmissions, have changed significantly during the subsequent two decades."

“These changes," according to the two developing countries, “necessitate a re-examination of the implications of the temporary moratorium, particularly from the development perspective," particularly on the fiscal side.

Given the manifold increase in the volume of electronic transmissions, which initially covered only “digitized products" such as e-books, music and a variety of services, it is important to re-examine all the issues because of diffusion of additive manufacturing technology through 3-D printing as well as manufacturing physical products.

Both these trends are likely to become more prominent in the near future, thereby bringing electronic transmissions closer to the centre stage of national economies, India and South Africa emphasized.

More importantly, “as more products, which are presently traded in physical form, get digitalized and delivered through electronic transmissions, the moratorium on customs duties would result in higher revenue loss", the two countries argued.

Major industrialized countries, led by the US, along with several developing countries such as Singapore, Korea, and Hong Kong demanded that the temporary moratorium be made permanent under the plea that it would provide predictability and certainty for goods traded through the internet. “Since 1998, WTO members have agreed not to impose customs duties on electronic transmissions. This agreement clearly requires the tariff-free treatment of digital products," US argued, in a proposal circulated on 12 April.

“Trade rules can ensure that governments continue and make permanent the practice of eschewing customs duties on digital products," US maintained.

It called for “non-discrimination treatment of digital products", saying it is “at the core of the digital trading system".

Trade rules can “ensure that these protections against discrimination apply when products are digitized and distributed electronically".

The US also proposed a maximalist “electronics commerce initiative" for free flows of information, protection of proprietary information, digital security, facilitating internet services, competitive telecom markets, and trade facilitation through digital means.

The US’s agenda is also echoed by the European Union and other industrialized and advanced developing countries.

China is also a strong proponent of ambitious liberalization of rules governing electronic commerce.

Against this backdrop, the joint proposal by India and South Africa calling for a re-examination and re-evaluation of issues concerning the e-commerce moratorium is being supported by several developing and poorest countries because of the adverse effect on customs duties, said a South American trade envoy, who asked not to be named.

India and South Africa said there is no clarity on the scope of the e-commerce moratorium as the WTO Ministerial Declaration and subsequent decisions apply the moratorium to “electronic transmissions" but “there is no agreed definition nor common understanding among the membership of what is covered under electronic transmissions."

“The above are issues of critical importance to most, if not all, developing countries, given the role of development and industrial policies in the digital age," the joint proposal suggested.

Earlier, Indonesia had opposed the continuation of the moratorium on electronic transmissions at the WTO’s Buenos Aires ministerial meeting arguing that it has had an impact on customs duties and domestic companies.

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