Author: Cherise Catwell

Can CARICOM afford to miss the WTO E-Commerce Train?

On the sidelines of this year’s World Economic Forum meeting in January at Davos, Switzerland, 76 Members of the World Trade Organization (WTO) expressed their intention to begin WTO negotiations on electronic commerce (e-commerce). Making up less than half of the WTO’s overall membership, these willing Members entreated other Members to join them in negotiating rules aimed at facilitating the use of e-commerce in trade.

All independent CARICOM Member States, with the exception of the Bahamas – which is presently acceding to the WTO – are WTO Members and therefore eligible to join these negotiations. However, so far none has done so. Given the potential of e-commerce for their development, should CARICOM Member States reconsider their cautionary stance?

Growing importance of e-commerce to global trade

E-commerce, also referred to as “digital trade”, has been defined as “the production, distribution, marketing, sale and delivery of goods and services through electronic and digital means”.  In its World Trade Report 2018, the WTO noted that digital technologies – such as artificial intelligence, blockchain, the Internet of Things and 3-D printing – are reducing trade costs and revolutionizing the structure and patterns of global trade flows.[i]  The United Nations Conference on Trade and Development (UNCTAD) estimated the global e-commerce market to be around US $22.1 trillion in 2015.[ii]  

The WTO Report and numerous studies[iii] highlight the potential of e-commerce to catalyse economic transformation in developing countries by lowering trade costs, increasing market access opportunities for Micro, Small and Medium-Sized Enterprises and individual entrepreneurs, improving logistics, and widening consumer choice. Challenges, however, continue to plague the use of these technologies, including inadequate supportive policies, technology diffusion and regulation.

While more modern regional trade agreements – like the US-Mexico-Canada Agreement and even the CARIFORUM-EU Economic Partnership Agreement – include comprehensive digital trade chapters, the WTO, which was negotiated in 1995, still does not contain a multilateral agreement dealing holistically with e-commerce. Instead, separate disciplines affecting digital trade in goods and services can be found in the WTO’s General Agreement on Trade in Services, the General Agreement on Tariffs and Trade, the Agreement on Trade-Related Aspects of Intellectual Property Rights, and more recently, the Trade Facilitation Agreement.

The multilateral route: The WTO Declaration and Work Programme on E-Commerce

Multilateral discussions on e-commerce involving all WTO Members were launched in 1998 through the adoption of a Declaration on Global Electronic Commerce, and a Work Programme to examine trade-related issues related to global electronic commerce.  The Work Programme has been continuously updated at most WTO Ministerial Conferences since 1998, the last one being the Buenos Aires Ministerial Conference in 2017.  Under that Work Programme, the WTO’s main committees have been reviewing progress on discussions, with general oversight provided by the WTO’s General Council.  Despite fits of activity, and some proposals by select countries, not much has yet been accomplished beyond a temporary moratorium on the application of customs duties on electronic transmissions and the formulation of a working definition of e-commerce.

Although the negotiation of a multilateral agreement or rules among all 164 WTO Members would be ideal, consensus among all Members has been difficult to achieve.  This is in large part due to developing countries’ objections to what they consider to be ambitious proposals being pushed by developed countries.  On the one hand, WTO developing countries, led by India and the African Group of countries, support completion of the more limited mandate under the 1998 Work Programme framework.[iv]  On the other hand, developed countries, such as the US[v] and the European Union, advocate moving beyond mere discussions to actual negotiations to formulate rules aimed at increasing e-commerce opportunities in the twenty-first century.  Where CARICOM stands is unclear as no CARICOM government has to date tabled a proposal on e-commerce at the WTO.

The plurilateral route: Joint Statements on Electronic Commerce at Buenos Aires and at Davos

Without an official WTO mandate to proceed with multilateral negotiations, some WTO Members have begun negotiations on a plurilateral basis, that is, without all WTO Members but among a subset of willing ones.  The plurilateral discussions began when 71 Members signed a Joint Statement on E-Commerce in Buenos Aires in 2017, and was extended at Davos in January this year, when five more countries, including China, agreed to join the plurilaterals.

In their Joint Statement at Davos, the 76 signatories agreed, inter alia, to achieve “a high standard outcome that builds on existing WTO agreements and frameworks with the participation of as many WTO members as possible”.[vi]  The willing countries also agreed to “recognize and [to] take into account the unique opportunities and challenges faced by members, including developing countries and Least Developed Countries (LDCs), as well as by micro, small and medium sized enterprises, in relation to electronic commerce”.

Should CARICOM countries participate in plurilateral negotiations?

As with the multilateral e-commerce negotiations, CARICOM countries’ have remained silent on whether they have an appetite for joining the plurilateral e-commerce negotiations.  A number of factors could account for their apparent hesitation.

Firstly, CARICOM countries may be concerned about their capacity to engage in negotiations on an area of trade which is still relatively new and evolving, and their subsequent ability to implement in a timely manner any obligations undertaken. To allay such fears, it might be worth considering the approach to special and differential treatment taken in the Trade Facilitation Agreement, another WTO plurilateral agreement, where implementation is tied to a country’s capacity and the degree of technical assistance provided.

Secondly, some CARICOM countries may fear that participation in these negotiations will restrict their policy space, particularly their ability to regulate online traffic and cross border data flows, and attendant issues like data privacy and cybersecurity.  They might also be wary of the revenue implications of agreeing to the proposed permanent moratorium on the imposition of customs duties on electronic transmissions.

A third possible red flag for CARICOM may be the reluctance of other developing countries in joining the negotiations. While China joined at the last minute, others like India and the African Group countries have adamantly declined, preferring to focus attention on the multilateral discussions.[vii] These countries argue that e-commerce is monopolised by multinational corporations and that gains from e-commerce will not be realized for developing countries if they are required to cede their regulatory and policy space.

Without a critical mass of developing countries involved in the negotiations, CARICOM countries’ ability to form coalitions with perceived “like-minded” countries may be circumscribed. That said, e-commerce is an area in which CARICOM countries have offensive interests given the predominance of services in their economies.  It may well be that new coalitions will have to be built on the basis of a new alignment of interests.

Issues for Consideration

Given the importance of digital technology in global commerce, missing the e-commerce train at the WTO may not be in CARICOM’s best development interests. But CARICOM countries would be ill-advised to pursue a strategy to negotiations that ignores the following considerations. 

Firstly, a negotiating strategy must be predicated on a sound digital trade policy that is informed by: data analysis of current patterns, scope and scale of e-commerce in the region; a clear-sighted appreciation of how e-commerce can promote the region’s overall economic transformation; and solid regulatory frameworks and infrastructure. Some studies, including one commissioned by UNCTAD on e-commerce legislation in Caribbean countries[viii], already exist.

Secondly, both the digital trade policy and the subsequent negotiating strategy will require the input and feedback of key stakeholders, including the private sector and regulators which will be tasked with administering any rules, and consumer bodies. Canada, which is one of the Joint Statement signatories, has already launched stakeholder consultations.[ix]

Thirdly, CARICOM countries must be tactical.  They should consider reaching out to other similar-minded developing countries to join the ongoing plurilaterals negotiations, and increase the visibility of issues that are unique to smaller developing countries.

What Next?

As CARICOM ponders its next move, negotiations on the plurilateral front are ramping up.  There is no agreement yet among those engaged in the plurilateral as to the legal structure any eventual agreement will take, nor as to its scope.  But there is a willingness to move beyond the “exploratory” phase to actual negotiations.  In fact, the first meeting of the plurilateral e-commerce negotiations is slated to take place on March 6.

That means that there is still an opportunity for all WTO Members to participate in these negotiations, and thereby influence their shape. The 70 plus signatories include the world’s largest trading economies which account for 90% of global trade.[x]  As the rules negotiated will likely serve as the baseline for any future multilateral e-commerce deal, non-participation by developing countries would relegate them, once again, to the status of rule-takers. This is not an area in which CARICOM countries should leave their destinies in the hands of others.