WASHINGTON—The World Trade Organization (WTO) since 1998 has maintained a moratorium on customs duties for electronic transmissions of digital products and services. But now, despite a strong consensus among economists and trade policy experts that countries around the world greatly benefit from duty-free e-commerce and digital trade, some countries have begun pushing for the moratorium to end. This would be a terrible mistake, according to new report from the Information Technology and Innovation Foundation (ITIF) and the Global Trade and Innovation Policy Alliance (GTIPA), a worldwide network of independent think tanks that support trade liberalization and integration.
With the next renewal of the moratorium set to be considered in the biennial WTO Ministerial Conference of 2020, the new report compiles evidence from a dozen countries and regions around world on the benefits of duty-free digital trade, which have only become more pronounced during the COVID-19 pandemic. According to the report, online commercial activity must remain duty-free to drive domestic and transnational growth, foster global integration, spark innovation, and narrow the digital divide.
“The moratorium on e-commerce duties needs to be extended, because imposing barriers on electronic transactions would have serious repercussions for the global economy,” says Stephen Ezell, ITIF’s vice president for global innovation policy. “Countries impacted by digital levies would retaliate with tit-for-tat measures, which would undermine digital trade and e-commerce. By adding duties to the flow of information and digital goods and services, governments would only increase their own industries’ costs of accessing a wide array of technologies and data sources critical to growth and innovation, business operations, and the transfer of technology.”
The report put together by ITIF and GTIPA analyzes the benefits of free digital trade for Argentina, Colombia, Germany, Ghana, Greece, Italy, Jordan, Mexico, Poland, South Africa, and the United States. The paper concludes that ensuring global digital trade and e-commerce remains tariff-free is a must, but it is just one part of a broader strategy needed for countries to build a growing digital economy. Other aspects include creating a robust digital payments system, cybersecurity protections, IP protection, data privacy, digital literacy and skills, ICT infrastructure, and other elements.
Keeping the WTO moratorium on digital duties in place fosters certainty and predictability for both domestic digital economic activity and global production networks and supply chains. “It is unclear whether it’s even technically feasible to administer a fair, predictable, and efficient system to identify and collect digital duties,” said Nigel Cory, ITIF’s Associate Director of Trade Policy. “Either way, any effort to collect customs on every digital transaction would disrupt the seamless global flow of information and data via software, digital content, and any number of other Internet-based processes, which would inevitably impact broader economic output as well as the levels of global productivity and innovation.”