Reconsider Zero Duties on E-transmission, they Hurt Poor Nations: India, South Africa tell WTO

In a move that could shift the current global discourse on the need to liberalise the e-commerce sector, India and South Africa have asked the World Trade Organisation (WTO) members to re-consider continuation of the temporary moratorium on import duties on e-transmission on the ground that it could result in higher revenue losses for developing countries.

“As more products, which are presently traded in physical form, get digitalised and delivered through electronic transmissions, the moratorium on customs duties would result in higher revenue loss,” a joint paper submitted by India and South Africa to the General Council of the WTO pointed out.

The two countries have requested that in accordance with the 1998 work programme on e-commerce the paper should be discussed at the General Council meeting on July 26-27.

The paper cited an UNCTAD analysis which suggests that it would mostly be developing countries, which would suffer loss in customs revenue, if the temporary moratorium on electronic transmissions is made permanent.

“Developed countries have been pushing aggressively for making permanent the temporary moratorium on customs duties on e-commerce (which needs to be periodically renewed). They have been also trying to project it as something that would benefit developing countries. However, the truth is that it is developing countries with limited resources that would suffer most because of increased revenue losses in the form of customs duty foregone as the ambit of e-commerce is continuously widening,” a government official said.

With India and South Africa demanding that their paper be discussed at the General Council, for the first time the focus of discussions on e-commerce would shift on how zero-duties could hurt developing countries, the official added.

A moratorium on customs duties on electronic transmissions could imply that customs duties are not imposed on products exported in digitalised form, even if the bound rate on the same product, if it is delivered in the physical form, is not zero, the paper explains. “Thus, a moratorium on customs duties on electronic transmissions could in effect undermine the existing schedule of tariff concessions of WTO Members. “Given the fact that the average bound tariffs of developing countries are considerably higher than those of developed countries, a moratorium on customs duties on electronic transmissions could significantly alter the negotiated balance of rights and obligations,” the paper 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, the paper said, adding that volumes would have increased manifold.