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A first look at the WTO/JSI discussions on digital trade.

A first look at the WTO/JSI discussions on digital trade.

Discussions around e-commerce and digital trade in the WTO have been relatively quiet over the past year or two. But recently there have been several new reports detailing progress, as well as a leaked early draft of the JSI negotiation text which highlight important areas for attention.

Background

Following the failure of WTO members to push extended e-commerce negotiations during the 2017 Ministerial, a sub-group of members came together to push forward under the Joint Statement Initiative (JSI). The JSI includes 76 nations, and while including larger countries does not represent the full WTO membership. Notably, a significant number of developing countries have chosen to remain outside the JSI, including India and South Africa. These countries argue that the JSI discussions are problematic from the start in terms of them being skewed towards developed country agendas, failing to address previous unresolved WTO issues, and with impacts on domestic policy space.

Recent events across the globe, however, suggest a renewed impetus around the JSI. The COVID pandemic has driven rapid expansion in digital technologies with some countries seeing this as a motive to push forward new rules at the WTO. In the US, President Biden’s appointment suggests more support towards international negotiations. At the WTO, the recently elected DG, Ngozi Okonjo-Iweala is also known to be supportive of pushing digital trade forward. With the 2020 Ministerial now rescheduled for Geneva in November 2021, there is likely to be significant discussion around the JSI in the run-up to this event.

Key issues

1) The nature of the JSI

It is first worth reflecting on the nature of the JSI process as this will likely be core to debates. As a process involving only a sub-group of WTO members, and with the strong resistance of WTO members outside the JSI, how might such an agreement be implemented? As UNCTAD highlight in a recent progress report, there are two options: one to get it agreed within the WTO, the other to spin it out in a similar way to recent Regional Trade Agreements.

While either option is possible, both will require significant political capital from those involved. Any moves within the WTO would be significantly limited by the strong opposition of WTO members who were not part of the JSI negotiation, and although there are workarounds, they appear challenging. Moves outside the WTO would be controversial and given the current scope of the text, such an agreement might itself sit outside other WTO rules. So, perhaps more important than the JSI text itself will be the politics of shaping an agreement, and what this will mean in terms of countries across the globe.

In response to opposition, key nations had sought to affirm that the JSI would embed strong development objectives. Looking at the early texts though, this goal seems to have dissolved. The text is mainly made up of contributions of just a handful of countries – US, EU, China, Japan, Korea, Singapore, China and Canada – and the focus clearly reflects these countries agendas. As highlighted by her analysis of the implications of the text for developing countries, Banga further points out that “out of 43 developing countries which are members of the JSI, not a single proposal on any of the negotiating issues has been received from 30 countries”. While there are nods to “cooperation” and “capacity building” there should be no mistake that, in its current form, this is an agreement primarily crafted by a small number of powerful nations.

2) Positions on key issues

The negotiation drafts outlines the different sections, but given the early stages of negotiation it is difficult to gain insight. It is clear though that key issues (that this site has covered in more detail elsewhere) will be the main area of debate amongst JSI negotiators, such as rules on data localisation, free flows of data, custom duties on digital goods and source code requirements, which are all present in the draft with significant numbers of annotations.

For such texts, much of the implications will be in how they are implemented. What clauses are included that exempt different actions or sectors are liable to have significant economic implications. Already there appears to be issues:

  • Rules requiring free-flows of data and the interpretation of what “legitimate public policy objectives” mean, and who will be able to claim these.
  • How “electronic transmissions” are interpreted within rules on custom duties on electronic transmissions. Suggestions are that the current draft has a problematically wide scope.
  • If rules preventing sharing of source code will include algorithms. With the growing role of algorithms in society, and the need for states to verify, monitor and audit these, any inclusion could be problematic.

3) A shopping list of additions

Many countries are seeking to add on a range of additional clauses. Often these come from outside the rules on e-commerce and digital trade that have been seen in other agreements.

Many of these will not make it to the final text, but some might do. While this approach to ‘add-ons’ is not a surprise, it highlights again the problematics of opaque trade discussions where, with a lack of attention, significant global rules could slip by almost unnoticed.

The table below outlines some selected issues that may require more attention. It also highlights the politics of these by suggesting key actors who are driving such rules forwards.

Selected “additional issues” within JSI draft

Summary

No doubt this site will come back to the JSI as discussions become clearer. The three aspects mentioned above should be important areas of attention, particularly for those concerned about this agreement in terms of equitable global impacts.

Political manoeuvring around implementation will determine the direction of the JSI and which countries are included. More importantly which countries find themselves pulled, voluntarily or involuntarily, into such an agreement.

Specific rules within key areas potentially have major implications for their impact when they are implemented. This requires close attention to how rules are being authored and discussion of their global implications.

Tracking additional ‘tag-on’ rules is vital to avoid later issues. With less precedence, these require further attention to clearly understand the implications and drivers. These rules also suggest more fundamental limitations in creating digital rules within the trade regime – centring on the unclear scope and the lack of transparency in the process.

Further reading

Banga, R., 2021 Joint statement initiative on e-commerce: economic and fiscal implications for the south.

UNCTAD. 2021 What is at stake for developing countries in trade negotiations on e-commerce?

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