Every couple of years since 1998, ministers at the World Trade Organization have renewed a moratorium on digital customs charges. It’s kept online transactions — a Netflix movie streamed in South Africa, an international Zoom call with a doctor in India free of tariffs throughout the internet age. The WTO meets in Abu Dhabi next week with the latest moratorium set to expire in March, as per a Bloomberg report.
At least three large developing economies are signaling they’ll oppose another extension. Because the WTO operates on consensus, all it takes is one to kill it, the report states.
The tariff ban has helped fuel the fastest-growing segment of world trade: digital goods and services. They’re key to the success not just of tech companies like Amazon.com Inc. and Netflix Inc. but also the growing number of traditional firms that collect data and conduct e-commerce in foreign markets.
Now, emerging economies cite concerns about the dominance of US-based Big Tech – and other worries including risks from artificial intelligence, the need to protect data privacy, and the loss of customs revenue into the ether of the digital economy.
“It’s not a done deal,” John Denton, secretary general of the International Chamber of Commerce, said of efforts to renew the arrangement. He cited Indonesia, the largest economy in southeast Asia, as a major holdout, with South Africa and India likely to follow.
“We think this will go down to the wire,” Denton said.
It’s not the first time countries have threatened to let the moratorium lapse to win concessions from major exporters of digital services like the US. But there’s a sense they’re not bluffing this time.
Indonesia believes governments need to be free to impose tariffs in response to rapid change in the digital world, said Askolani, director general of customs and excise at the country’s Ministry of Finance. India has signaled a similar position. A spokesman for South Africa’s trade ministry declined to comment.
One difficulty is the lack of an international legal framework or standard definitions for digital trade. That means it’s not clear how governments would apply tariffs — whether they’d charge per transaction, per byte or per digital product, like a song, for instance.