At the end of March, the internet changed in a way that it hadn’t in more than 20 years. Not – for once – driven by a flashy product launch out of Silicon Valley or even Beijing. Indeed, strictly speaking, it was not anything new at all: This was the end of something – and it happened in Yaoundé, Cameroon.
In that hill-ringed, high-plateau capital city, the governments of the world failed to agree not to charge tariffs for digital transmissions crossing their borders, effectively ending a ban that dated back to 1998.
The World Trade Organization (WTO) implemented the original prohibition – but there was a catch: It was time-limited. Countries had to keep agreeing to extend it every two years. They finally failed to hold the line in Yaoundé.
Still, for such a long-standing arrangement, the ban’s demise appears to have led to more scratching of heads than gnashing of teeth. People Euractiv spoke to for this article on the implications of the rule ending suggested talks may have failed due to poor scheduling.
But what was the ban all about anyway?
Big beautiful tariffs?
US President Donald Trump gave a remarkable demonstration of what the word “tariff” can do to the global economy just over a year ago. On a day last April that he referred to as “Liberation Day”, Trump’s announcement of vaguely calculated tariff rates applied to the US’ friends and allies sent stock markets tumbling around the world.
Now, in the wake of the WTO’s ban expiring, governments across the world are – in theory – free to slap their own wildly calculated tariffs on transactions in the digital economy, a market that’s ballooned in size since the initial ban. More than 60% of global GDP is linked to digital transactions in some way, according to the European Commission.
But despite having data on the overall size of the digital economy, the Commission doesn’t seem to know how much of an impact tariffs levied on digital transactions could have, were any government to be bold enough to step up with their own ‘digital liberation day’ plan.
Speaking during a recent Parliament trade committee hearing, a Commission official admitted: “There’s no figure we can share right now” – but he said the EU’s executive would probably direct more attention to the issue going forward.
It’s complicated
Luckily, for the many businesses that could be affected by digital transaction tariffs, it doesn’t look like a wave of fresh fees is just around the corner.
“It is very unlikely that countries will rush to introduce duties on e-commerce,” Ignacio García Bercero told Euractiv. Bercero researches trade at Bruegel, a Brussels-based think tank.
Even if countries wanted to do so, there are practical problems, he pointed out: tariffs don’t just magically materialise inside a country’s treasury when it decides to charge them. Tax collection takes work and, indeed, costs money.
Governments need people and infrastructure to properly control their borders – the EU, for one, has just moved ahead with a complex reform of its customs bodies.
For something novel like taxing digital transactions, new systems would need to be set up and administered, and enforcement mechanisms established and properly resourced. New legislation may even be required.
It’s even more complicated
But there’s another big blocker to taking such a step in the EU, at least: the bloc has a web of trade agreements with other countries and trading blocs – and many of these treaties include their own bans on digital tariffs.
Last year’s EU trade deals with Singapore and Korea, for example, ban customs duties on digital transmissions, while another currently being negotiated with Canada is expected to do the same.
The EU is also eyeing a digital agreement with the (mostly) Pacific trade bloc CPTPP, which includes both Singapore and Canada as well as Mexico and the United Kingdom, among others (though not the US).
In addition to banning digital tariffs, these deals often include rules against countries forcing companies to disclose the source code of software or imposing requirements on where data should be stored and processed.
More mundanely, they also often attempt to address issues around “unsolicited commercial electronic messages” – aka: spam.
All is not lost
Still, an even broader scheme – involving 66 economies, including the EU – has gained new urgency following the end of the WTO’s temporary ban on digital tariffs.
Those involved managed to negotiate a comprehensive deal on e-commerce between 2017 and 2024, which included a permanent tariff ban. But, so far, they’ve held off on implementing it in the hopes of finding a worldwide compromise.
But with the WTO’s moratorium on digital customs duties out the window for now, these economies are now moving forward with implementing their separate deal to shield digital trade from new customs fees.
There are also hopes that new talks in Geneva could revive the worldwide moratorium soon. But the fact the WTO ban expired at all – even if its demise will end up being a temporary blip – underscores how the old rules are creaking under the strain of an increasingly uncertain world.
(nl, aw)
Source:
www.euractiv.com