The flow of digital data between borders will remain free of customs duties and tariffs according to the World Trade Organization (WTO), for now.
In a draft ministerial document, the 12th Ministerial Conference held in Geneva, 76 member-states of the WTO including the Philippines agreed to maintain the current practice of no customs duties on digital transmissions until the 13th Ministerial Conference.
Some of the digital data that stream unimpeded across borders are online music streaming like Spotify, movies on demand such as Netflix, millions of eBooks, and Software-as-a-Service (SaaS).
Since 1998, WTO members have agreed not to impose customs duties on data transmissions. This allowed exponential growth in the use of the Internet and the flourishing of the digital economy.
The International Chamber of Commerce (ICC) noted that the Internet has unleashed the creative potential of humanity, leading to innovative products and services that have greatly benefited society and led to productivity gains in all aspects of the global economy.
But in 2019, India, Indonesia, and South Africa vowed to end the moratorium and begin unilaterally imposing tariffs on cross-border data flows. They argued that the digitalization of previously physical goods such as CD-ROMs to mp3s, DVDs to online streaming, and printed books to eBooks have led to losses in customs revenue.
“No country to date has been able to explain how it would even be possible to collect customs duties on data flows without causing significant disruption to the digital world.” said the ICC.
“In fact, a number of recent papers have revealed that the unilateral imposition of customs duties on electronic transmissions will have: distortive effects on the growth of the digital economy; be cost-prohibitive and technologically unfeasible; and will likely fall foul of several existing free trade agreements under the most favored nation principle,” added the ICC.
In a recent statement, the US-ASEAN Business Council (US-ABC) expressed its support for extending WTO’s e-commerce moratorium as it plays a significant role in driving digital trade, job creation, and economic growth.
It added that with such a large and rapidly growing e-commerce consumer base, ASEAN has an important voice for raising these concerns and helping to drive the conversation for protecting the e-commerce industry with a renewal of the moratorium.
However, out of the eight ASEAN members of the WTO, only 5 countries have voted against imposing customs duties on electronic transmissions, as evidenced by the draft ministerial document. These countries are Brunei, Malaysia, the Philippines, Singapore, and Thailand. Missing are Cambodia, Vietnam, and Indonesia.