Key decision: The Chinatown district in Singapore. The stakes are high for the country, a strong supporter of the open, rules-based multilateral trading system under the WTO. — AFP
SINGAPORE: A 26-year-old trade rule protecting cross-border digital services from Customs duties could expire in March if members of the World Trade Organisation (WTO) fail to renew it this week.
The stakes will be high for trade-dependent Singapore at the biannual Ministerial Conference, which is the WTO’s highest decision-making body.
Now in its 13th iteration, the conference will be held from Feb 26 to Feb 29 in Abu Dhabi, and bring together all 164 members of the WTO to formally discuss and decide on pressing trade issues.
Singapore, a strong supporter of the open, rules-based multilateral trading system under the WTO, will be represented at the conference by Minister for Trade and Industry Gan Kim Yong.
On the agenda is extending the digital trade rule, known as the Customs Moratorium on Electronic Transmissions, or the E-commerce Moratorium, which has come under rising threat since it was last renewed two years ago.
In the light of technological changes and rapid growth in digital trade, concerns are mounting among some member countries over the lack of clarity regarding the scope of the moratorium and the definition of “electronic transmissions”, as well as the potential foregone Customs revenue, the WTO said.
Gareth Tan, a representative of the Coalition for Digital Prosperity for Asia, noted that there is no accepted common definition of “electronic transmission”.
“The term can be interpreted to include almost everything delivered electronically, whether it’s e-mails, or text messages, streaming content or video games.”
Countries with large, emerging economies, such as Indonesia, India and South Africa, are among those most likely to decide against extending the moratorium as they have expressed a desire to maintain policy space, said Tan.
Policy space involves the flexibility to more rigidly control policy regarding data flows, access to data and the transit of digital goods and services. It can also include protectionist tariffs.
While it is “impossible” to define the impact of the removal of the moratorium, failure to extend it “will probably drive up the costs of digital services into and out of many markets, with large compliance costs landing especially heavily on smaller firms and consumers”, said Dr Deborah Elms, head of trade policy at the Hinrich Foundation, a philanthropic organisation in Singapore.
Added Tan: “From the consumer perspective, imagine paying more for a download stored in a data centre abroad because there’s a tax imposed on it.
“For businesses, access to vital software and digital tools might get significantly more expensive. All in, the removal of the moratorium could introduce a lot more friction to trade where there wasn’t any before, which is dangerous for a trade-dependent country like Singapore.”
The eCommerce sector was first introduced at the second Ministerial Conference in May 1998, when WTO members agreed to a practice of not imposing Customs duties on electronic transmissions until the next conference. The moratorium has been renewed at every conference since.
However, as the sales of online books, music and software expanded, some governments grew increasingly concerned about the potential loss of tariff revenue that used to be collected for these offline categories, said Elms. — The Straits Times/ANN
