Global Industry Statement on the WTO Moratorium on Customs Duties on Electronic Transmissions

NZIBF has joined 170 international business associations in calling for an extension to the current moratorium on tariffs applying to digital services (like Netflix) at the forthcoming WTO Ministerial meeting.

The undersigned associations urge WTO members to support continuation of the Moratorium on Customs Duties on Electronic Transmissions at the WTO’s Thirteenth Ministerial Conference (MC13).

Allowing the Moratorium to expire would be a historic setback for the WTO, representing an unprecedented termination of a multilateral agreement in place nearly since the WTO’s inception – an agreement that has allowed the digital economy to take root and grow. All WTO members have a stake in the organization’s continued institutional credibility and resilience, as well as its relevance at a time of unprecedented digital transformation.

Continuation of the Moratorium is critical to the ongoing COVID-19 recovery. As detailed by the United Nations, the World Bank, the OECD, and many other organizations, the cross-border exchange of knowledge, technical know-how, and scientific and commercial information across transnational IT networks, as well as access to digital tools and global market opportunities have helped sustain economies, expand education, and raise global living standards.

Continuation of the Moratorium is also important to supply chain resilience for manufacturing and services industries. Manufacturers – both large and small, and across a range of industrial sectors – rely on the constant flow of research, design, and process data and software to enable their production flows and supply chains for critical products.

The Moratorium is particularly beneficial to Micro, Small and Medium-Sized Enterprises (MSMEs), whose ability to access and leverage digital tools has allowed them to stay in business amidst physical restrictions and lockdowns. Failure to renew the Moratorium will jeopardize these benefits, as customs restrictions that interrupt cross-border access to knowledge and digital tools will harm MSMEs and the global supply chain – increasing digital fragmentation. As UNCTAD has explained, such fragmentation “reduces market opportunities for domestic MSMEs to reach worldwide markets, [and] … reduces opportunities for digital innovation, including various missed opportunities for inclusive development that can be facilitated by engaging in data-sharing through strong international cooperation. … [M]ost small, developing economies will lose opportunities for raising their digital competitiveness.”

The risks of ending the Moratorium have been discussed in recent publications by the International Monetary Fund, OECD, World Bank, United Nations, and WTO, and by think-tanks in India, Indonesia, Switzerland, Belgium, and around the world. As the OECD has explained, “[t]he overall revenue implications of the Moratorium are small…, [t]ariffs on electronic transmissions would hit low-income country trade the most… Smaller and women-owned firms could be most impacted…” Other reports predict greater GDP losses due to potential implementation of retaliatory duties and note that goods and services taxes (GST) / value added taxes (VAT) are preferable to tariffs both from the perspectives of revenue collection, economic efficiency, and administrability. Countries that impose such duties also face longer-term harms due to a less predictable investment climate, reduced foreign direct investment, and reduced access to knowledge, information, and digital tools needed by local workers, artists, patients, students, consumers, and other constituents.

Finally, at a time when the G20, seeking to establish “a more stable and fairer international tax system,” has formally endorsed the OECD Inclusive Framework’s Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, it seems unnecessarily disruptive for the WTO membership to abandon a foundational quarter-century old agreement regarding the treatment of electronic transmissions. We also note in this regard the G7 Digital Trade Principles, which state that “[e]lectronic transmissions – including the transmitted content – should be free of customs duties, in accordance with the WTO Moratorium on Customs Duties on Electronic Transmissions.”

We therefore urge all WTO members to show strong leadership and support of the digital economy by supporting continuation of the WTO Moratorium on Customs Duties on Electronic Transmissions.

The list of industry associations supporting this statement can be seen here.