Daily Management Review

Developing Countries Wants Tariffs On Digital Import


Developing Countries Wants Tariffs On Digital Import
According to reports quoting trade officials and documents, people could be forced to pay duties on software and movie downloads if, next week, India or South Africa makes good on threats which would end a 20-year global moratorium on imposing tariffs on digital trade.
Any tariffs on import of the so-called “electronic transmissions”, which is estimated to be about $255 billion a year, have been postponed by World Trade Organization (WTO) members since 1998.
There is a thinking that this arrangement is beneficial for the richer countries considering the fact that such a moratorium on tariffs has found strong support from the United States from the beginning and it is believed that bilk of the loss in customs duty affected the developing economies.
There is however growing pressure to remove moratorium because the loss of revenues is increasing as more books and movies becoming digital.
Rising digitalization compelled “a rethink of the role of the temporary moratorium” last year, said India and South Africa as they also circulated an internal WTO document. The countries also cited the potential of manufacturing products using 3D printing. Renewal of the moratorium at the WTO will require a full consensus and it is to be decided next week.
It was “still consulting on this important decision”, South Africa’s WTO Ambassador Xolelwa Mlumbi-Peter said in an emailed response this week to the media when asked about the country’s position on the issue.
There were no comments available from India.
“At the moment there are a number of countries that feel confident they can stand aside from the global consensus,” said the International Chamber of Commerce’s (ICC) Secretary General John Denton. “It could break the Internet.”
The ban or the moratorium is set to expire at the end of this year and 21 countries including China and Canada have pushed a proposal to at least extend the ban for another six months.
“A large part of the WTO has signaled its support for the Moratorium”, said deal-broker Switzerland.
Analysts and experts predict that it would be difficult to impose such import duties because of the difficulty to ascertain how the rates can be determined and the origin of the digital product and therefore difficulty in deciding on whether it was imported or not.
“How do you put a tariff on a byte? How would you capture millions of data flows from multiple sources flowing across countries’ borders every minute of every day,” asked Denton.
But bow the first possible answers to those questions seem to be emerging out of Indonesia. In 2018, tariff codes for digital goods were created by Indonesia and it has fixed the level at 0 percent for now.
“If someone tries to experiment putting customs duties on even a limited set of products or services, then there is a risk of immediate retaliation absent of the dispute settlement function,” said the ICC’s Andrew Wilson.