Why Abandoning the WTO E Commerce Moratorium is a Terrible Idea

Services stakeholders around the world are banding together as never before in a last-ditch effort in the lead up to the 12^th WTO Ministerial Session in Geneva on 30 November.

Many issues are at stake, but one stands on a pedestal of its own; the WTO moratorium on customs duties on electronic transmissions. If it is toppled from that pedestal, two decades of digital innovation and growth in the most dynamic component of international trade - trade in digital services - will be completely undone.

As my colleagues and I argued in a THINK 20 Policy Brief released in September this year:

“For 20 years, the global trading system has benefitted from the absence of tariffs on e-transmissions. The Moratorium allowed business innovation to take place everywhere, at all levels of firm size and in all countries, spurring participation in global services outsourcing and many other types of business services exports … Extensive economic and anecdotal business evidence points to the importance of the Moratorium for continued global growth of digital trade.”

At a time when the multilateral trading system is already far behind business reality in the new digital age,

“the WTO Moratorium has stood as a global beacon of hope that governments will continue to find ways of avoiding beggar-thy-neighbor policies as the shift to digitalization intensifies.”

But protectionist digital industrial policies have led the Moratorium to become contested, despite more than 20 years of constant renewal by consensus. The beacon of hope may be flickering.

This month, 55 WTO members [including EU(27)] have signed on to a formal proposal to extend the Moratorium, as has been agreed over the last 20 years, until the 13^th Ministerial Session. Likewise, services industry associations around the world are rallying to this cause and the release of a Joint Industry Statement is imminent. For the rapidly digitalizing services sector, and especially for start-ups and micro, small and medium-sized firms as well as small remote economies, dependent on online delivery of growing digital services exports, this issue is a matter of stark business survival.

The stakeholder message to WTO Ministers is very clear. Allowing the Moratorium to expire would be a major blow to WTO credibility and relevance. It would also be a major blow to COVID-19 recovery given the highly intensified global consumer and citizen dependence on access to digital solutions in all aspects of daily life including health and education.

This week the Institute for International Trade published the latest TIISA Working Paper “Building Competitiveness in Digital Services: Policy Do’s and Don’ts for Developing Countries” by Professor Rupa Chanda of the Indian Institute of Management in Bangalore. Her paper presents evidence on the association between the regulatory environment and digital services exports that highlights the critical and urgent importance for all economies of avoiding protectionism in digital services trade. Professor Chanda considers, interalia, the latest literature on the Moratorium and concludes that the current Moratorium should be continued.

Jane Drake-Brockman is Industry Professor, Institute for International Trade, Convenor of the JM Network, Trade & Investment in Services Associates (TIISA), Member of the G20 Trade and Investment Research Network (TIRN) and Founder and Director of the Australian Services Roundtable.

The views expressed here are the author’s, and not intended to represent views of the Institute for International Trade.