By Richard Hill


Data is a source of comparative advantage. Countries need to take control of data in order to ensure not just data privacy, but also the economic welfare of their people. Those who control data capture a higher share of the digital pie.

The discussions in the 2019 WTO Public Forum show that the WTO is not the ideal forum to agree upon any binding rules in this regard. Doing so would lock in the current inequitable paradigm for internet governance, data and financial flows.

It remains to be seen how these contestations are taken up by developing countries during the twelfth WTO Ministerial Conference in June 2020.

The World Trade Organization (WTO) is based on the premise that if we increase trade, everyone is better off. But increased trade only allows big corporations to move goods across different countries more easily. We need to recognize that profit motives cannot be enough to drive trade, and that benefits need to be equitably distributed.

Conversations around digital trade fall prey to such obfuscation of interests. US proposals regarding e-commerce clearly reflect industry interests. To begin with, they miss a key point: for digital trade to succeed, you need affordable internet access. In the developing world, access still costs 30 to 50 times more in terms of purchasing power parity (PPP) when compared to developed countries. 

Furthermore, the many stories about small entrepreneurs making money selling their products on the internet conceal the fact that these are few and far between, constituting an insignificant percentage of countries’ GDP. The reality is that giant tech companies dominate the digital economy.

In one session, a participant from an African country eloquently framed the issues faced by the developing world in relation to the current trade paradigm and the digital economy.

  • Africa faces real challenges regarding digital development. There is a digital divide both in infrastructure (electricity, network connectivity etc) and skills. Given this context, it is premature for Africa to engage in binding rule making. There is an agreed upon WTO program on exploratory work on e-commerce, where the limitations of Africa’s digital infrastructure and digitial industrialization should be addressed.
  • Currently, the nature of rules being proposed in the WTO don’t favor Africa’s development. Rather, they increase inequalities between the developing world and the North. E-commerce is about opening markets. But if developing countries liberalize completely, their industries will collapse.
  • Furthermore, despite binding WTO rules, e-commerce is growing rapidly. So what is the rush for rules? Who will benefit? Why will African countries demand free data flows from the US when they don’t have the necessary capacity or infrastructure to manage the data? Yet, the US demands free data flow from African countries as well as the rest of the developing world, because the major Big Tech companies housed in the US are the ones who benefit from these movements.

What we are hearing regarding e-commerce is largely an ideological perspective which forces countries to adopt deregulated, neoliberal models. This favors Big Tech and other dominant players, and runs counter to the growing recognition that there is a need to regulate data privacy; the distribution of the value derived from the monetization of data; taxation of e-commerce; and abuse of dominant market power. 

What we are hearing regarding e-commerce is largely an ideological perspective which forces countries to adopt deregulated, neoliberal models.

 

Data is a source of comparative advantage. Countries need to take control of data in order to ensure not just data privacy, but also the economic welfare of their people. Those who control data capture a higher share of the digital pie. Others are exploited, in a reiteration of the colonial exploitation of the “natives”.

At present, developing countries are more likely to import digital goods and services than host digital businesses. We cannot allow this situation to be locked in by binding trade rules. It is critical to maintain the policy space to formulate data regulations.

We need to shift the discussion from efficiency to equity. Corporations want to maximize profits. But the role of the WTO is not just to help a handful of men (whether in Silicon Valley or China) to grow richer.

At present, developing countries are more likely to import digital goods and services than host digital businesses. We cannot allow this situation to be locked in by binding trade rules. It is critical to maintain the policy space to formulate data regulations.

 

To move towards a more equitable trade paradigm, a few specific issues are worth highlighting:

  1. Moratorium on customs duties for e-transmissions: In a session on this topic, four industry representatives from developed countries tried to convince others that tariffs on e-transmissions are bad. In general, it’s a good idea to tax things that are bad (alcohol, tobacco) and not things that are good (information). The industry representatives insisted that countries can apply normal sales tax but not tariffs on e-services. It is hard to understand why the impact of a sales tax would be different from the impact of a tariff for countries that are not big producers of e-services: all that changes is the point of collection of the tax. Since most countries are not big producers of e-services, it makes little sense to argue that a tariff is terrible but a sales tax is permissible. Each country should be free to make its own decisions regarding what to tax, and where and how to collect the tax. It is far too early to agree that “e-transmissions”, which remains an undefined field, should not be subject to customs duties.
  2. Spam and security: These are not trade issues. They were brought under the ambit of the WTO as a Trojan Horse to support the free flow of data. Numerous attempts have been made over the past 20 years to arrive at meaningful agreements on spam and cybersecurity in other forums. The US and its allies have rejected these proposals on the grounds that Russia and China will use them to impose censorship. But China and Russia are in the WTO’s Joint Statement Initiative (JSI) along with the US and its allies. More importantly, these are complex technical issues, and rules in a trade agreement are unlikely to solve a problem that has eluded experts in other forums.
  3. E-signatures: The United Nations Commission on International Trade Law (UNCITRAL) has a Model Law on e-signatures. Those negotiating e-signature provisions in the WTO (exemplified in the JSI proposals) say that some countries haven’t transposed these into domestic law. However, the solution to that would be a WTO provision that lays down that all countries should adopt the UNCITRAL Model Laws. There is a detailed UNCITRAL secretariat paper that explains the provisions and limitations. This would strike the right balance and compromise. There is no reason to think that trade lawyers who may be unfamiliar with these issues can redraft these model laws better. But this is exactly what the JSI proposals amount to.

Finally, the proponents of e-commerce negotiations in the WTO (the US and its allies) have long insisted that such matters must be discussed in multi-stakeholder forums with the full participation of civil society and the technical community. But now, the very same countries (the US and its allies) want to discuss these issues in the only intergovernmental organization (the WTO) that has no provisions whatsoever for participation by non-state actors. Worse, many of the key WTO documents are not in the public domain, making the WTO far less open, inclusive and transparent than other forums. The hypocrisy of rejecting discussion in other forums because they are not sufficiently open, inclusive, and transparent, while promoting them at the WTO, is stunning.

The arm-twisting of developing countries by the developed countries when it comes to negotiating free cross-border data flows is not new. The discussions in the 2019 WTO Public Forum highlighted here clearly reflect the growing understanding that the WTO is not the ideal forum to agree upon any binding rules in this regard. Doing so would, in effect, lock in the current inequitable paradigm for internet governance, data and financial flows. It remains to be seen how these contestations are taken up by developing countries during the twelfth WTO Ministerial Conference in June this year. In contrast, the United Nations Commission on Trade and Development’s (UNCTAD) 2019 Digital Economy Report  while acknowledging "the lack of any global agreement for recognizing “ownership” of community data", had stated that "The only way for developing countries to exercise effective economic “ownership” of and control over the data generated in their territories may be to restrict cross-border flows of important personal and community data." For developed nations, the UNCTAD's E-commerce Week in April-May could perhaps prove to be a more conducive platform to explore these issues.