The Moratorium on Customs Duties on Electronic Transmissions

The moratorium on customs duties on electronic transmissions should be made permanent.

The Digital Trade Network, whose supporters collectively represent millions of businesses of all sizes in more than 173 countries, support the renewal of the moratorium on customs duties on electronic transmissions. In fact we believe it should be made permanent.
Given the discussion of the moratorium amongst WTO Members to take place at the World Trade Organisation on 27th November 2018, we would like to stress the following points.

The moratorium covers both data per se but also content transmitted
electronically.

First, the moratorium covers both data transmissions per se (“electronic transmissions”) but also content transmitted electronically. Interpretations which suggest otherwise don’t make legal or logical sense especially given that state practice in subsequent FTAs routinely makes this explicit. Moreover, this has been reaffirmed by the WTO Secretariat: JOB/GC/114 reviews how the moratorium protects digitisable goods with a physical analogue such as digital books, music, and video. The moratorium also covers digitally native products, such as software and apps: as a result these have never been subject to tariffs in any format, anywhere.
According to the WTO Secretariat there are 56 FTAs incorporating the moratorium, including 19 where all parties are developing countries. The CPTPP stipulates that Parties may not impose duties on electronic transmissions, “including content transmitted electronically.” In fact, the majority of related FTA provisions explicitly prohibit duties on digital products, content, or other electronic deliveries. In addition, there are regional efforts underway within APEC to make the moratorium permanent.

We do not believe that harmonising tariffs upwards is the right approach to raising revenue.

Second, Some Members have highlighted a difference in tariff rates between a digitally delivered product (such as an eBook) and its analog physical equivalent resulting in a loss of revenue. We do not believe that harmonizing tariffs upwards is the right approach to raising revenue given that all available evidence suggests that any limited revenue from duties lost is at most tiny compared to the value of
digitized products more broadly. Moreover, Members may, for example, levy taxes
on consumption or sale within the domestic market to ensure equivalent treatment. Moreover, doing so is far less complex given that assessing duty on an intangible would be very difficult to do. It would likely be paid by the importer – and that entity would already be liable for tax on sales in the domestic market. Instead of creating two separate obligations, it would be far more efficient to have only one.

A failure to retain the moratorium would send a terrible message to the
world: that increasing tariffs on an ever-increasing volume of world trade is OK. A mountain of evidence over decades of analysis confirms the opposite is true.

Last, but definitely not least, we believe that the moratorium represents something fundamentally important: it is the first time an entire area of economic activity has been tariff-free worldwide from inception. As a core objective of trade policy is to reduce tariffs to further economic development, a failure to retain the moratorium would send a terrible message to the world: that increasing tariffs on
an ever-increasing volume of world trade is OK. A mountain of evidence over decades of analysis confirms the opposite is true.