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New threat looms of cross-border data tariffs from WTO

Concern is growing that a World Trade Organization (WTO) moratorium on cross-border tariffs covering data may not be extended, which would hit e-commerce if countries decide to introduce such tariffs.

Representatives of the WTO’s 164 members are meeting in Geneva as part of a multi-day ministerial conference. June 15 was to be the final day but the trade organization today confirmed it is being extended until June 16, to facilitate outcomes on the main issues under discussion.

The current moratorium covering e-commerce tariffs was introduced in 1998, and so far the WTO has extended it at such meetings, which typically take place every two years.

The 1998 declaration stated that “members will continue their current practice of not imposing customs duties on electronic transmission.”

However, it appears that some countries are now threatening to block another extension to the moratorium, with India and South Africa named as being among those that believe the growth of the internet and digital services means that a rethink is called for.

In other words, some countries are eyeing the potential revenue they could make from taxing e-commerce the same way that tariffs are imposed on physical goods traded internationally.

This could lead to increased prices not just for digital services, but also for buyers who make cross-border purchases from sites such as Amazon, partly because it would increase the regulatory burden on companies, experts said.

According to Reuters, the technology industry is pushing for the WTO to continue to exempt data flows from cross-border tariffs, for fear of the damage that could occur to the global economy if some WTO members were to impose tariffs.

Many countries are already suffering from high inflation rates, banks are raising interest rates, and multiple industries are still recovering from the pandemic .

Reuters reports that a number of tech industry associations have written to the WTO urging members to renew the moratorium, claiming that failure to do so would undermine the global economic recovery.

David Henig, UK director for the European Centre for International Political Economy, said he did not believe we will see tariffs being imposed on cross-border data flows.

“The WTO has until tonight to extend a moratorium on tariffs on digitally delivered services, if that doesn’t happen we could then see them introduced by some members,” he commented.

“Typically it will be resolved at the last minute, we’ve had these kinds of crises before, and this does look more worrying than usual. However, I’m still thinking there will be a late deal.”

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source: The Register