The paper analyzes key digital rules being negotiated that aim at free flow of cross-border data, mandatory legal frameworks for electronic transactions, restrictions on data localization, no customs duties on electronic transmissions, no source code disclosure, mandatory membership of information technology agreement (ITA) and ITA Expansion, and mandatory commitments of national treatment and market access.
The paper cautions that many of these digital rules have high costs of compliance and could adversely impact trade competitiveness of developing countries in the digital economy.
The UN Conference on Trade and Development (UNCTAD) released a research paper that shares progress on negotiations on digital rules under the Joint Statement Initiative (JSI) on electronic commerce. E-commerce encompasses the production, distribution, marketing, sale or delivery of goods and services by electronic means. An agreement would likely have a broad scope that would cover “almost all actions” of the governments in the digital economy.
A group of 86 countries are negotiating digital rules under the JSI on e-commerce. While the World Trade Organization (WTO) is continuing work under the Work Programme on Electronic Commerce, the paper clarifies that countries recognize that any initiative to negotiate e-commerce rules is outside the WTO agreement and its mandates and the JSI negotiations remain “outside the ambits of the WTO.” The outcomes of the JSI negotiations on digital rules will have no legal bearing in the WTO because the rules are not mandated for negotiations there.
The paper titled, ‘Joint Statement Initiative on E-Commerce (JSI): Economic and Fiscal Implications for the South,’ highlights key digital rules being negotiated by the JSI members. Key rules being negotiated aim at free flow of cross-border data, mandatory legal frameworks for electronic transactions, restrictions on data localization, no customs duties on electronic transmissions, no source code disclosure, mandatory membership of information technology agreement (ITA) and ITA Expansion, and mandatory commitments of national treatment and market access. The paper then analyzes the economic and fiscal implications of these digital rules for the developing countries that are JSI members.
The paper cautions that many of these digital rules have high costs of compliance and could adversely impact trade competitiveness of developing countries in the digital economy. On the digital rules related to facilitating electronic transactions, for example, the paper states that acceptance of the proposed rules would “severely restrict regulatory space of the governments in the digital economy” and strengthen the role played by foreign players, such as foreign investors and exporters. Negotiated rules on electronic authentication and electronic signatures would raise the cost of compliance and put domestic firms in developing countries at a disadvantage compared to foreign firms, who already use the digital technologies. On the definition of electronic transmissions, the paper states that the broader the definition is, the higher the potential tariff revenue loss for developing countries. It estimates that developing countries could lose around USD 10 billion per year as a result and that the potential tariff loss to Sub-Saharan African countries is twice that of WTO high-income countries. The paper also notes that WTO least developed countries (LDCs) could generate five times more tariff revenue than the developed countries if the moratorium on customs duties on electronic transmissions is removed.
The UNCTAD Business-to-Consumer E-commerce Index 2020 similarly finds that LDCs make up 18 of the 20 lowest positions in the index, suggesting a need to address weaknesses in the countries trailing behind to ensure inclusive development.
In conclusion, the paper argues that developing countries “need at least the same policy and regulatory space” to build their digital infrastructure and their digital economies as developed countries had at the beginning of their digital advancement. The paper underscores the importance of retaining policy and regulatory space for owning and regulating data. [Publication: Joint Statement Initiative on E-Commerce: Economic and Fiscal Implications for the South] [UNCTAD B2C E-Commerce Index 2020: Spotlight on Latin America and the Caribbean] [SDG Knowledge Hub Story on E-Commerce Negotiations]