India has asked the WTO members to work on a clear definition of e-commerce trade in goods and services as it would help provide developing countries a policy space to make decisions on the fast-growing sector, an official said.
At present, there is a difference of understanding about the subject between developed and developing member countries of the World Trade Organization (WTO).
The issue came up for discussion during a recent meeting of senior officials of WTO members in Geneva last week.
"India stated that the definition should be clear about digital goods and services because customs duties are there on goods and not on services. The Western world wants no customs duties, and on the other hand, developing countries want that policy space to impose the duties," the official said.
Customs duties help protect domestic industries and provide a policy space to support the growth of MSMEs.
Though certain WTO members have been discussing the e-commerce issue since 1998, there is no clear-cut definition of the subject. A group of 80 countries are discussing an agreement on the subject, but India is not part of that. The US has also recently opted out of those talks to frame global rules on e-commerce at the WTO.
"Now, goods and services are embedded, then there is a definitional problem. For example, Netflix is showing a film in India. So, the film is a product, but the membership that Netflix is taking to show the film is a service. So, it is very difficult to make that distinction between goods and services," the official, who did not wish to be named, said.
The WTO members have agreed not to impose customs duties on electronic transmissions since 1998, and the moratorium has been periodically extended at successive ministerial conferences (MC), the highest decision-making body of the 164-member body.
"There is no clarity on e-commerce trade in services. So, because of the lack of clarity, there is an apprehension...To provide a level playing field, you need to impose customs duties," the official said, adding that India will again oppose the continuation of the moratorium on customs duties on e-commerce trade at the 13th ministerial conference of the WTO in Abu Dhabi in February next year.
Allowing the moratorium to lapse is important for developing nations to preserve policy space for their digital advancement to regulate imports and generate revenue through customs duties.
Think tank Global Trade Research Initiative (GTRI) said the rapid rise of cryptocurrencies challenges the existing WTO e-commerce framework, necessitating urgent discussions on their classification as electronic transmissions.
"Members must prioritise discussions on cryptocurrency and its possible linkages with ongoing e-commerce negotiations before members start taking liberties with interpretation leading to disputes," GTRI cofounder Ajay Srivastava said.
Currently, WTO members discuss e-commerce under a joint initiative on e-commerce and a moratorium on countries from applying customs duties on electronic transmissions.
Both these negotiations need to factor in cryptocurrencies as the exchange of these currencies involves digital transmission, which qualifies it as an e-commerce transaction, he said, adding that WTO members must take a view as worldwide adoption of crypto is increasing.
The WTO defines e-commerce as the electronic production, distribution, sale, or delivery of goods and services. This includes products like books, music, and videos transmitted digitally.