customs moratorium

The WTO: Less Than Half a Glass

The WTO: Less Than Half a Glass

Think about that again for a moment—the World Trade Organization, in 2022, continues to have no explicit rules related to the digital economy and no obvious path to getting something in place either. [The side discussions on electronic commerce did not yield any announcements from participating countries.] Members did agree to start talking about doing something to reform the organization. They have “reaffirmed” the foundational principles and agreed to work towards a solution to a specific challenge on dispute settlement in two more years. Given this dispiriting list of outcomes, why were trade watchers mostly glowingly optimistic? Two reasons come to mind. First, most trade watchers have spent a lifetime building up this institution in one way or another. It’s very hard to witness the slow extinguishment of a dream, passion project, and vocation. Second, because the WTO matters and watching it flounder is genuinely a problem. Given the importance of the global trade body to businesses and consumers, it can feel particularly wrong to kick the organization when it is down. After all, why continue to draw attention to limited outcomes and why not recast the latest outcomes as a historic achievement that highlights continued relevance? It is precisely because a functioning WTO matters so much that it is important to be honest about its pathway and prospects for the future. Sugarcoating a weak package of outcomes doesn’t help focus attention on why the institution has failed to make headway or why members cannot agree on doing important things. Let’s just review for a moment why a functioning WTO is so critical to all of us. It provides a common set of rules and principles that have allowed trade to flourish. It’s like oxygen for the trading system. Extinguish the air and everyone will start to suffer. Without the WTO in place, governments would be free to randomly reset their trade rules on a regular basis. Tariffs could go up or down without notice. Customs checks at the borders could suddenly focus on allowing goods from some locations to pass easily while blocking everything from other firms. It would drive up costs dramatically and the burden would fall most heavily, as always, on the smallest firms.

Repost: Impeding Collapse of a Key Digital Trade Rule

Repost: Impeding Collapse of a Key Digital Trade Rule

But what has not been noticed is that the WTO ministerial [now set to start on June 12, 2022] is likely to spell the end to a critically important digital trade rule. It goes by the innocuous name of the “customs moratorium on electronic transmissions.” It may be that the bland and unfamiliar phrasing has not captured imaginations. Or it may be that this provision has seemed to be under threat for so long that most have forgotten about it. Covid disruptions have not helped anyone focus on much. But now odds are high that the moratorium will actually fall at MC12. Companies and consumers will have an unexpected and potentially rude awakening to this apparently minor rule that did not ever get the support it needed. The WTO has famously few provisions that directly apply to digital trade. After all, the organization was launched in 1995 at the dawn of the internet era. Subsequent efforts to negotiate new rules for the institution have mostly foundered.

The Impending Collapse of a Key Digital Rule

The Impending Collapse of a Key Digital Rule

At the end of November, the 164 members of the World Trade Organization (WTO) will meet. In what was originally billed as an every-other-year obligation but has been less smooth in practice, trade ministers will be gathering in Geneva for MC12. There are a number of outcomes that are meant to flow from the session, including something on the apparently endless negotiations over fisheries subsidies, a few bits and bobs that might be pulled from various plurilateral initiatives, and maybe an announcement on trade and health. (Stay tuned for the Talking Trade update in the wake of MC12.) But what has not been noticed is that 2021 is likely to spell the end to a critically important digital trade rule. It goes by the innocuous name of the “customs moratorium on electronic transmissions.” It may be that the bland and unfamiliar phrasing has not captured imaginations. Or it may be that this provision has seemed to be under threat for so long that most have forgotten about it. Covid disruptions have not helped anyone focus on much. But now odds are high that the moratorium will actually fall at MC12. Companies and consumers will have an unexpected and potentially rude awakening to this apparently minor rule that did not ever get the support it needed.

Unpacking the Digital Economy Partnership Agreement (DEPA)

Unpacking the Digital Economy Partnership Agreement (DEPA)

The DEPA sits in the middle.  It sets out a series of modules covering a range of topics of relevance to firms that trade digital services, ship goods across borders via e-commerce, or are otherwise involved in the digital and technology space.  These modules are meant to be building blocks.  Countries could opt to dock directly onto the DEPA, expanding the agreement with new members.  Or governments could decide to pick up and use modules, in whole or in part, in various settings.  These include slotting them directly into other trade agreements or opting to align domestic policies to DEPA. The significance of DEPA does not sit with the current three members, who have largely already agreed to uphold the same commitments and principles in the agreement under their Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) membership.  Instead, DEPA matters if and when more governments agree to use the modules or align domestic policy with its framework and structure.  The spread of DEPA is key—if non-members who are considering problematic rules on the digital economy could be encouraged to join, the agreement will be seen as a critical turning point for policy on digital issues.

Dueling Views on Trade on Display This Week

Dueling Views on Trade on Display This Week

The latest Trump tariff threat, of course, is designed to facilitate conclusion of the trade negotiations.  Talks are scheduled for Washington DC on Thursday.  It is certainly possible that the impeding escalation of tariffs will concentrate minds once more, leading to a very speedy conclusion of talks.  Or not.  Either way, the coming few days promise more drama on the US-China front than trade watchers have seen in months-- a major escalation of the trade war will happen on Friday or a truce. A second notable set of events takes place early next week that will also help shape global trade for the future.  Dueling meetings are scheduled for Geneva and New Delhi for May 13-15.  The former is the setting for the first round of talks of what is called the “plurilateral” on e-commerce in the World Trade Organization (WTO).  Not all WTO member countries have agreed to join negotiations on the topic, so only a subset of members (74 so far) will sit down to start.