E-transmission duty: US seeks permanent curbs, India opposes

“A re-consideration of the moratorium  is critical for developing countries, most importantly to preserve policy space and achieve domestic industrialisation,” an Indian representative said as per the minutes of the meeting.

India’s position was sharply contrasting with that of the US, which has not only asked for an extension but has also sought a permanent moratorium, arguing that imposing duty on electronic transmissions would restore “some confidence in the WTO” and its ability to deliver something meaningful and tangible to those stakeholders — “stability and predictability in the digital economy”. The controversial moratorium on customs duties on electronic transmission has been a subject that has divided developing and developed nations and has been renewed every two years since it was first instituted in 1998. However, with the advent of AI-generated products, the significance of rules around digital commerce has rapidly gained prominence.

According to a WTO report, digitally delivered services exports have touched about $5 trillion, nearly double the level they had reached in 2017.

However, the regulations around this sector have been a point of tension between developing and developed nations for a long time.

The US has forced several trade partners to agree to a moratorium under bilateral trade pacts. India has been arguing against any extension to the moratorium because digital trade has been dominated by big tech and developed countries, and the moratorium squarely favours the developed nations. Experts say that India loses about $1 billion in tax revenue annually by foregoing duty on e-transmission.

“In listening to those seeking to address the digital divide, the imposition of customs duties on electronic transmissions would actually undermine the efforts to address the digital divide and other development concerns. Doing so would impose significant administrative burdens and divert resources to enforce it — resources that could be better spent addressing the digital divide. So, we look forward to continuing this conversation with Members, and we look forward to making the moratorium permanent at MC14,” the US representative said during the meeting.

During the WTO meeting in December, India said that concrete actions are needed to address this matter, such as providing technical assistance and capacity-building activities focused on digital literacy and e-commerce skills development, tailored to the specific needs of developing countries and Least Developed Countries (LDCs).

“The actions should include… Facilitating the transfer of digital technologies to developing countries and LDCs to support e-commerce development; creating a mechanism to match developing countries and LDCs’ identified needs for digital infrastructure and technologies with available resources and offers of support,” the Indian representative said.

China has also supported the moratorium, saying it is “vital for development”.

Its representative argued that the moratorium provides great stability and predictability for all WTO members and businesses, especially

the MSMEs in developing members.