WTO to debate tariffs on global e-commerce
GENEVA: For the past quarter century, the meteoric rise of the digital economy has been exempt from the kind of tariffs that apply to trade in physical goods.
That era may come to a screeching halt this week as a handful of nations threaten to scrap an international ban on digital duties in a game-changing bid to draw more revenue from the global e-commerce market that the United Nations estimated at $26.7 trillion.
If governments fail to reauthorize the World Trade Organization’s e-commerce moratorium, it could open a new regulatory can of worms that could increase consumer prices for cross-border Amazon.com purchases, Netflix movies, Apple music, and Sony PlayStation games. “Absent decisive action in the coming days, trade diplomats may inadvertently ‘break the internet’ as we know it today,” International Chamber of Commerce secretary-general John Denton wrote in a Hill opinion piece last week.
The WTO’s e-commerce agenda dates back to 1998, when nations agreed to avoid taxing the then-fledgling market for digital trade. WTO members have periodically renewed that ban at their biennial ministerial meetings and are considering whether to do so again at this week’s gathering of ministers in Geneva.
But some nations like India and South Africa argue that the growth of the internet justifies a rethink about whether the WTO’s e-commerce moratorium remains in their economic interests. In 2020, they introduced a paper that said the moratorium prevents developing countries from gaining tariff revenue from transformative technologies like 3D printing, big-data analytics, and artificial intelligence.
While nations could draw somewhere between $280 million and $8.2 billion in annual customs revenue, new digital tariffs would also harm global growth by reducing economic output and productivity, according to the Paris-based Organization for Economic Cooperation and Development.
The International Monetary Fund previously calculated that a splintering of the digital economy could ultimately deliver a 6% hit to global economic output over the next decade.
If the moratorium lapsed, “it could set in motion a stampede to impose tariffs on digital flows across borders, put an unnecessary strain on an already battered global economy, and signal to the world that inflation be damned,” according to John Neuffer, the chief executive officer of the Semiconductor Industry Association. To be sure, it’s not immediately clear how exactly a government would impose customs duties on electronic transmissions.