Updated February 27th, 2024 at 15:15 IST

Why India is abstaining from extending moratorium on customs duties in electronic transmission? 

India's stance at the WTO Ministerial Conference highlights its commitment to safeguarding the interests of developing nations.

Reported by: Business Desk
WTO | Image:Shutterstock
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India’s stand on electronic transmission: India is set to abstain from extending the moratorium on customs duties for electronic transmissions at the World Trade Organization’s (WTO) 13th Ministerial Conference in Abu Dhabi. India has taken this stance because of a lack of consensus on the scope of the moratorium and its perceived benefit, primarily to developed nations. India, along with South Africa, is also expected to resist attempts by several countries, including China, to establish a plurilateral pact on investment facilitation for development, arguing that it falls outside the WTO's trade-focused mandate.

The reluctance to extend the e-commerce moratorium is because of the concern that developing countries, including India, lose an estimated $10 billion annually due to revenue losses attributed to the moratorium. The lack of clarity on what the moratorium encompasses further complicates matters, with India seeking a clear understanding of its scope before making a decision.

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Studies suggest that the moratorium covers physical goods transitioning to digital formats due to technological advancements, including digitized products and digitally delivered services. India contends that the ambiguity disproportionately favours developed nations, the primary exporters of digital goods, at the expense of developing nations, which are the main importers.

Investment Facilitation

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In addition to the e-commerce moratorium, India opposes the Investment Facilitation for Development (IFD) proposal led by a China-led group of 130 countries. India's resistance is because the proposal could alter the scope of the multilateral forum and impinge on the country's policy space. The appeal and review mechanism, requiring government consultation with investors on investment-related policy, raises worries about potential encroachment on policy autonomy.

India's stance at the WTO Ministerial Conference highlights its commitment to safeguarding the interests of developing nations and maintaining policy autonomy in trade-related matters.

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What happened in the 12th Ministerial Conference?

India initially signaled its intention to oppose the extension of the moratorium on import customs for 'electronic transmissions' at the 12th Ministerial Conference of the World Trade Organization (WTO) in Geneva. 

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India's rationale for imposing import tariffs on electronic transmissions lies in compensating for lost tax revenue, which it argues is retained by developed countries and Big Tech companies. Despite India's historical advocacy for the rights of the developing world, the implementation of customs on electronic transmissions could pose challenges in today's interconnected global economy.

The lack of a clear definition for 'electronic transmission' has been a longstanding issue. India, along with South Africa and Indonesia, has argued that this ambiguity deprives the developing world of potential customs revenue from the digital economy. The WTO's inability to provide a precise definition has led to India's increased focus on the matter.

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Moratorium on customs duties

The moratorium on customs duties for electronic transmissions was established in 1998 to address uncertainties arising from the growing e-commerce sector. However, the absence of a clear definition has left crucial questions unanswered. While the WTO broadly defines electronic commerce, the specific definition of 'electronic transmission' remains elusive.

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Developing countries, including India, assert that the moratorium disadvantages them as net importers of digitally transmitted goods, resulting in significant revenue losses. Despite attempts to extend the moratorium and clarify the definition, progress has been limited.

India's efforts at the WTO have faced skepticism regarding the practicality and impact of imposing customs on digital goods. Some argue that such customs protocols could be technically infeasible and might violate existing free trade agreements. While India's stance reflects concerns about fiscal inequities, the feasibility of lapsing the moratorium and implementing customs on electronic transmissions remains uncertain.

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Published February 27th, 2024 at 15:15 IST