Scaled Back eCommerce Agreement Possible at February WTO Ministerial

As World Trade Organization members grapple with the growing inevitability of disappointment at their Ministerial Conference February 26-29 in Abu Dhabi, a small sliver of light has pierced the gloom surrounding meeting preparations in Geneva.

The 90-country Joint Statement Initiative (JSI) negotiations on electronic commerce, considered dead only weeks ago, have unexpectedly come to life.  A pragmatic recalibration of objectives has recentered the negotiations and raised hopes that ministers representing participating countries may strike a deal at the conference.

It has been anything but smooth sailing for these talks. Launched along with a handful of other JSIs at the 2017 Buenos Aires ministerial conference, the e-commerce plurilateral commenced with high expectations. Initially, the idea was to establish what would be global standards for cross-border data flows, data localization, and the forced transfer of source code. But negotiations on these politically charged topics quickly arrived at a stalemate. Ever since, the bulk of the agenda has focused on nuts-and-bolts issues such as e-contracts, consumer protection, e-signatures, and spam.

Washington has long championed an outcome that supports free flows of data, few requirements to hold data on local servers, and a prohibition on the forced transfer of code. China rejected all three ideas, while the European Union leaned toward Washington’s position while seeking greater safeguards for data privacy and security. But in October, the Office of the US Trade Representative pulled an about-face and dropped its support for the positions it once held so strongly.

US trade officials say no one should have been shocked. Agreement among all 90 WTO members on the three contentious issues was never in the cards, thanks to Chinese opposition and deep US reluctance to embrace any outcome in which China sits on the sidelines. True though this may be, the US about face was a body blow for negotiations.

Yet the three ambassadors steering these talks (George Mina of Australia, Kazuyuki Yamazaki of Japan, and Tan Hung Seng of Singapore) kept their cool and skillfully shifted their focus.  While they knew that progress on technical issues did not garner headlines, they also knew smaller companies around the world understood a WTO deal providing a predictable, standardized, and transparent framework for electronic commerce transactions could deliver lower transaction costs and potential access to new markets.

Taking the 12 transaction-linked issues that are largely agreed to and adding clauses on privacy, telecommunications, and electronic payments would constitute a nice little agreement. But as is so often the case at the WTO, there was a discordant note. Virtually all the 90 countries participating in the negotiations wanted to make permanent the temporary WTO-wide moratorium on the application of duties on e-commerce transactions.

Disturbingly, an India-South Africa effort to strike down the 1998 moratorium–which has been rolled over at every ministerial conference this century–seems likely to succeed. Such an outcome could lead many US businesses, long disinterested in an organization they consider dysfunctional, to throw in the towel on the WTO.

Even a pledge among the participants of the JSI negotiations to make the moratorium permanent is unlikely because Indonesia, Turkey, and possibly Brazil favor expiration. Still, a pledge from 87 members to make the moratorium permanent would send a message about which countries are interested in being active in digital trade and which are not.

Advocates for the e-commerce JSI are not celebrating yet. Neither India nor South Africa take part in the e-commerce plurilateral–nor any of the other JSIs–which is one reason these plurilateral negotiations have gone so well while the rest of the WTO negotiating agenda has languished.  Those supporting the e-commerce negotiations downplay the possibility of a big announcement in Abu Dhabi, fearful that New Delhi and Pretoria may employ a legal tool to challenge commitments taken by each WTO member backing the deal.

This could drag things out and create legal uncertainty. But the threatened legal challenges are of questionable viability, particularly since the streamlined, more efficient trading conditions arising from an e-commerce deal would be applied to all WTO members without discrimination, even to those not party to the agreement. Moreover, with the WTO dispute settlement system on ice following US actions to shut down the appeal process, any threat of legal action rings hollow. Given this, many members are prepared to proceed and let the obstructionists take their best shot.

Shooting down the moratorium may have consequences for the broader and long-dormant multilateral e-commerce work program, in which India and South Africa suddenly showed interest once JSI talks were launched. The future of the far less ambitious multilateral talks (which are not negotiations) is uncertain.  The work program, like the moratorium, was agreed to at the 1998 Ministerial Conference and the two issues have been inextricably linked since. Should the moratorium be terminated, the work program could be discarded too.

Many in Congress, the private sector, and trade ministries around the world were disappointed when the e-commerce negotiations were stripped of their most ambitious elements. But what remains within the grasp of negotiators holds significant value, particularly for smaller companies, and should be pocketed. Such a result would enable the WTO to make a decent start at building a foundation for global digital trade rules.