In the latest Trade and Customs Group (TCG) meeting on 30th November, where ESC, FEPORT, WSC and ESPO have delivered a presentation on temporary storage, the Directorate-General for Trade (DG TRADE) brought to the attention a crucial development that directly impacts global trade : the upcoming renewal of the World Trade Organization (WTO) moratorium for customs duties on electronic transmissions. This matter is scheduled for discussion at the WTO Ministerial Conference in February 2024.
For over two decades, the WTO Moratorium has played a pivotal role in establishing a stable, predictable, and duty-free environment for digital trade to flourish. It ensures that customs duties are not applied to electronic transmissions, fostering innovation, supporting small and medium-sized enterprises (SMEs), and promoting economic growth.
The forthcoming Ministerial Conference will delve into discussions on the scope, definition, and impact of the moratorium. Understanding the potential risks associated with the lapse of the moratorium is crucial, especially considering the ongoing debates among WTO Members.
Some Members question whether the Moratorium applies to the ‘content’ or the ‘carrier-medium’ of electronic transmissions. Additionally, concerns have been raised about its potential effects on internal taxation and other WTO commitments.
The Analysis about e-commerce reveals that the majority of countries independently commit to not imposing customs duties on electronic transmissions. They often clarify that these commitments do not cover internal taxation and largely apply to content.
Recent evidence, as highlighted by the Organization for Economic Co-operation and Development (OECD), suggests that the potential fiscal implications of the Moratorium are relatively small, representing a minimal percentage of total government revenue. The foregone customs revenue can be offset by rising VAT/GST revenue on digital services imports.
While attention has focused on potential revenue costs, little has been said about the benefits foregone in the event of the Moratorium not being renewed. Electronic transmissions reduce trade costs, enhance consumer welfare, and boost export competitiveness.
As GSA, we have an opportunity and a responsibility to inform third-country governments about the potentially disruptive risks for businesses if the renewal is blocked. Countries such as India, Indonesia, South Africa, Pakistan, Argentina, and Brazil are key stakeholders in this discussion.
ESC advocates for the Moratorium’s renewal, emphasizing its crucial role in sustaining digital trade, global economic harmony, fiscal resilience, and inclusive growth. The renewal would be benefitting businesses, consumers, and economies worldwide.