Last weekend, good news came from the World Trade Organization (WTO): WTO members negotiating e-commerce rules have released their latest statements and texts on e-commerce agreements, which means that the negotiating parties have agreed to ban tariffs on cross-border data transfers.
Specifically, the Joint Statement Initiative (JSI) for e-commerce was jointly convened by Australia, Japan, and Singapore, with 91 countries and regions participating in the negotiations. After more than 5 years of negotiations, more than 80 member parties reached an agreement on this matter. Australia, Japan, and New Zealand referred to the released text as the "stability text," the EU called it "historic news," and the UK called it "groundbreaking. However, the US side stated that the text has taken an important step forward, but "there are still shortcomings" and more work needs to be done, including in regards to "basic security exceptions".
Cui Fan, a professor at the School of International Business and Economics of the University of International Business and Economics and director of the Research Department of the China World Trade Organization Research Association, stated in an interview with First Financial News that one of the most important developments in the text is the clear definition of "electronic transmission", which states that "electronic transmission refers to the use of any electromagnetic means of transmission, including the transmitted content".
According to the statement, the next steps will include seeking agreement from other WTO members on the proposed rules and incorporating them into the legal framework of the WTO.
All parties agree to prohibit the imposition of tariffs on cross-border electronic transmissions
At present, no WTO member has imposed tariffs on international electronic transmissions, as all WTO members have signed agreements to suspend the imposition of such tariffs. But this is a time limited measure.
The e-commerce agenda of the WTO can be traced back to 1998, when all parties agreed to avoid imposing tariffs on the then nascent digital trade. Subsequently, WTO members have agreed to extend the suspension order at their biennial ministerial meetings.
However, as time went by, some members objected to this, arguing that the Internet has flourished in the past 30 years, and it is reasonable for all parties to reconsider whether the temporary exemption of tariffs on electronic transmission is still in the economic interests of all members.
According to WTO data, digital trade accounts for approximately 25% of all international trade, with a growth rate exceeding that of traditional trade. Taking the European Union as an example, it ranks first in the world in terms of the import and export of digital services. In 2022, the import and export volume of digital services reached 1.3 trillion euros, accounting for 54% of the EU's total service trade.
At the same time, seeing the booming development of digital trade, and the fact that the relevant suspension order cannot guarantee permanent tax exemption, industry groups have been calling for the establishment of a permanent clause to prevent future tariffs on a wide range of categories such as applications, videos, and commercial related information transmission.
The "stable version" reached in this negotiation involves a set of basic rules on digital trade, mainly measures to promote seamless digital trade both domestically and internationally, including electronic signatures and electronic invoices; Provisions to enhance consumer and business trust in the digital trading environment, particularly through strengthening online consumer protection; Terms to make the international digital trade environment more reliable and affordable, including cooperation on cybersecurity risks; Prohibiting tariffs on electronic transmission has significant commercial implications and is a key priority for the global industrial sector; And measures to promote the participation of consumers and companies from developing countries in digital trade.
At the same time, the agreement also involves cybersecurity, transition to electronic trade documents, and improving regulatory transparency. Members also hope to address other unresolved issues in future negotiations.
Cui Fan stated that although the WTO has repeatedly suspended the practice of exempting tariffs, it has not provided a clear definition of "electronic transmission", especially whether tariff exemption only applies to electronic transmission itself or includes the content of transmission. This is also the focus of controversy on this issue. However, it can be seen that there is a clear statement in the text prohibiting the imposition of tariffs on electronic transmission.
Text display, including content such as' No contracting party shall impose tariffs on electronic transmissions between personnel of one party and personnel of the other party '.
Cui Fan explained that the most typical breakthrough in this text compared to previous ones is the issue of duty-free electronic transmission. The provisions reached in this text are higher than the current WTO provisions, clarifying the content of electronic transmission, that is, both the electronic transmission method and the content of electronic transmission are within the scope of duty-free. This is also a controversial point among some member states.
For example, if a movie (electronic transmission content) is transmitted through the internet, should tariffs be imposed on the movie? "Cui Fan gave an example, which was previously a controversial issue. This text clearly states that this transmission content is exempt from tariffs.
At the same time, the text also states, "Considering the continuous development of e-commerce and digital technology, both parties shall review this article in the fifth year after the entry into force of this agreement and conduct regular reviews thereafter to assess its impact and whether appropriate revisions should be made to this article
Cui Fan explained that this is actually a compromise between the two opinions of temporary tariff exemption and permanent tariff exemption. In principle, permanent tariff exemption is required, but it needs to be evaluated regularly for a period of five years. Compared to the previous suspension order, this is already a significant progress.
In addition, it is worth noting that the text includes certain content such as "single window data exchange and system interoperability". Cui Fan stated that the content identified in this text, such as e-commerce single window, electronic invoice, and electronic contract, which are conducive to the development of e-commerce, have been widely used in China's trade practice. Considering China's large volume in international cross-border e-commerce/e-commerce and its leading position internationally, the regulations in these areas are beneficial for stabilizing China's relevant trade environment.
Why does the US oppose it
The statement from Australia, Japan, and New Zealand also stated, "We encourage all WTO members to support and join this initiative. In this context, we will expand our outreach activities to benefit WTO members from this initiative
We recognize that some members involved in the negotiations are still undergoing internal consultations or domestic procedures. We promise to continue to engage with these members in the coming months to expand our participation, "the statement said.
According to the reporter from China Business News, the members who participated in the negotiation of the agreement but did not express support this time included the United States, Indonesia, Türkiye, Brazil and other members.
The US Ambassador to the WTO, Maria Pagan, stated in a statement:; quot; We look forward to working with interested members to find solutions to all remaining issues and push for timely conclusion of negotiations.
She stated in the statement, "The current text is not yet complete and more work needs to be done, including in terms of basic security exceptions
Cui Fan explained that in this regard, the US may want to demand more security exceptions or ensure the right to make independent judgments on security exceptions. According to relevant cases of the World Trade Organization, WTO members have certain conditions when invoking security exceptions. For example, they should be based on good faith, and according to the relevant security exception clauses of the WTO, they can only take necessary measures when it involves issues such as fissile materials, weapons, military conflicts, and other emergencies that affect international relations. The US may hope to expand the national security exception this time to ensure its policy space, but has not yet seen specific statements from the US. Currently, the United States is one of the most frequent members in the World Trade Organization to use trade restrictions on national security grounds.
The relevant provisions of the WTO stipulate that in certain special circumstances, members may make exceptions to the basic principles and rules of the WTO, and these provisions are called exception clauses. This text directly cites these exception clauses and allows for flexible application depending on the situation. This mainly refers to the general exceptions of Article 20 of the General Agreement on Tariffs and Trade and Article 14 of the General Agreement on Trade in Services, as well as the "security exception" of Article 21 of the General Agreement on Tariffs and Trade and Article 14 bis of the General Agreement on Trade in Services.
On December 20, 2023, Singapore, Japan, and Australia, the conveners of WTO e-commerce negotiations, issued a tripartite ministerial statement announcing that 90 WTO members, including China, the United States, and Europe, have substantially concluded some global digital trade rules negotiations. On December 25th of the same year, according to information on the website of the Ministry of Commerce, the head of the WTO Department stated that WTO e-commerce negotiations emphasize the principles of openness, inclusiveness, and transparency, and are based on proposals from members. The Chinese side is an important participant and main proposer in the negotiations, actively and constructively participating in all topic consultations. It has put forward 9 proposals, involving more than 20 specific issues, and most of them have been included in the consensus.
The person in charge of the World Trade Department of the Ministry of Commerce also stated that during the negotiation process, the Chinese side maintained close communication with other participating parties, facilitated negotiations at critical stages, proposed practical solutions to key issues multiple times, and actively bridged differences among all parties. China also plays a bridging role, calling for addressing the concerns of developing members and promoting negotiations to achieve results that benefit developing members. The Chinese side played an important constructive role in the negotiations and received unanimous high praise from all parties.