Brussels, 9 September 2024
Written by Gisela Grieger.
On 26 July 2024, after 5 years of negotiations, 82 members of the World Trade Organization (WTO) reached an agreement on the first-ever global rules on electronic commerce. The plurilateral talks were led by the co‑conveners Australia, Japan and Singapore, under a WTO joint statement initiative (JSI) that had attracted 91 participants, accounting for more than 90 % of global trade. While the deal is a sign that plurilateral talks have the potential to inject fresh momentum into the WTO’s negotiating function, nine members participating in the talks were unable to support it. This is the likely reason for the text being referred to as ‘stabilised’ rather than ‘final’. Moreover the agreement’s integration into the WTO legal architecture and entry into force is expected to meet challenges similar to those other JSIs have faced before.
Background
As the strictly consensus-driven WTO has struggled for decades to agree on new global trade rules by means of multilateral agreements, at the 2017 WTO Ministerial Conference (MC12) in Buenos Aires, three JSIs were launched to initiate plurilateral negotiations on new trade rules, including for e-commerce. Since 1998, WTO members have also pursued a multilateral track on e-commerce, but its only tangible outcome has been a periodically prolonged moratorium on imposing import duties on e-transmissions (buyer/seller transactions). As opposition to this moratorium has grown, it was renewed, perhaps for the last time, at MC13 in Abu Dhabi in early 2024 until March 2026, or MC14, whichever is first.
Crafting global digital rules is vital since digital trade has seen a meteoric rise and outpaced non-digital trade. The absence of global digital trade rules has resulted in the fragmentation of digital trade rules. Some WTO members have added digital trade rules to bilateral/plurilateral trade deals outside the WTO. The EU has done so in its agreements with Chile, Japan, New Zealand, the United Kingdom, and Vietnam and in pending agreements with Australia, Indonesia, Mercosur, Mexico, Thailand, and Tunisia. The lack of global digital rules deprives micro-, small and medium-sized enterprises of digital trade opportunities and has been an obstacle to bridging the digital divide between developed and developing countries.
Key elements of the plurilateral WTO agreement on electronic commerce
The Agreement on e-Commerce (AEC) has 38 articles spanning eight sections. It creates a framework facilitating the use of electronic transactions with provisions on e‑signatures, e‑contracts, e‑invoicing, e‑payments, paperless trading, and single windows for data submission. It sets out rules on open government data and internet access and, most importantly, a quasi‑permanent ban on customs duties on e‑transmissions, which the European Commission argues ‘is of great commercial importance and a priority for industry worldwide’. The ban is subject to a review 2 years after the AEC’s entry into force. However, since amendments can only be adopted by consensus, a reversal of the ban could be very challenging. The text, moreover, seeks to enhance consumer and business trust in the digital trade environment and therefore includes provisions on online consumer protection, spam, personal data protection, and cybersecurity. It contains provisions on transparency, development and cooperation. Although it grants developing countries an implementation period of up to 7 years, it uses ‘best-endeavour language‘ when it comes to developed countries’ commitments to offering technical assistance and capacity building in support of their implementation of the deal. In addition, it sets out principles to boost a competitive telecommunications market with impartial and effective regulatory authorities. Finally, it lays out a range of exception clauses, e.g. for national security and the protection of indigenous peoples and personal data.
Shortcomings and future challenges
An important setback for the AEC’s material scope occurred when controversial items, e.g. WTO disciplines on cross-border data flows for data protection objectives, on data localisation mandates, and on forced transfer of source code were dropped after the Biden administration decided to withdraw related Trump administration proposals in 2023. This led to a staged negotiating approach harvesting low-hanging fruit first, similar to the multilateral negotiations on an agreement on fisheries subsidies. A major shortcoming of the AEC is that nine WTO members who took part in the talks ultimately declined to be associated with the text. As has already occurred in the broader WTO context, the US, a major player in digital trade, took issue with a narrow interpretation of the essential security exception. US industry, by contrast, raised concern about an allegedly ‘self-judging‘ data protection exception, potentially providing legal cover for authoritarian and/or protectionist governments to restrict data transfers or ‘impose data localisation restrictions or other rules harmful to the open internet and freedom of expression online’. The eight other WTO members (see Map 1) reportedly mainly oppose the ban on customs tariffs on e-transmissions.
For the AEC to enter into force, it has to be incorporated into the WTO legal architecture, i.e. Annex 4 of the WTO Agreement, which lists two ‘closed’ most-favoured-nation (MFN) plurilaterals on civil aircraft and on government procurement. These limit their benefits to the parties (mainly industrialised countries) and predate the WTO’s 1995 creation. The AEC’s inclusion under Article X:9 of the WTO Agreement will be challenging, as it requires consensus. It is expected to face strong opposition from countries such as India and South Africa, which are against WTO plurilaterals as a matter of principle. Some experts argue that two factors could make it even more difficult for the AEC to overcome this opposition than for the agreement on investment facilitation for development (IFDA) – another JSI plurilateral, that has been stuck in limbo since talks were concluded in 2023. One is the AEC’s smaller membership; the other, its likely framing as a ‘closed’ MFN deal in contrast to the IFDA, which is an ‘open’ MFN deal that allows also non-parties to reap its benefits. Given the different nature of the AEC’s new rules, they cannot simply be attached to the parties’ existing WTO goods or services schedules through the WTO certification procedure used to incorporate the third JSI on domestic services regulation into the WTO’s rule book. A WTO decision on the AEC’s incorporation into WTO law could be taken at MC14 set for 2026, or earlier by the WTO’s General Council.
Stakeholder views
The International Chamber of Commerce has welcomed the AEC for its significant potential to tackle barriers to cross-border e-commerce, boost the adoption of digitalised trade procedures and upgrade protection against customs duties applied to data flows. The European Services Forum has similarly welcomed the AEC and encouraged all WTO members to join and endorse its integration into the WTO’s rules book. The global tech trade association (ITI) has encouraged JSI participants to address outstanding issues such as data localisation requirements and source code disclosure. The Swedish Kommerskollegium has criticised the AEC’s regulatory provisions for being generally lacking in strong binding commitments.
In a February 2024 resolution ahead of MC13, the European Parliament stressed the importance of multilateral and plurilateral digital rules. It emphasised that a potential agreement on e-commerce ‘must comply with existing as well as future EU legislation’ and ‘allow for sufficient policy space for digital regulation, in particular when it comes to issues such as data flows, data localisation, data protection, artificial intelligence and source code’. It stressed ‘the need to bridge the digital divide by sharing best practices and enhancing capacity building’. It recalled its position that a potential deal ‘must guarantee fair market access for e-commerce-related goods and services in third countries, as well as the protection of consumer and labour rights, and facilitate business innovation’. Parliament expects ‘WTO reform to create an easier path’ to integrate open plurilateral agreements into the multilateral architecture ‘to ensure progress in areas not mature enough for the entire membership’.
Read this ‘at a glance’ note on ‘WTO agreement on electronic commerce‘ in the Think Tank pages of the European Parliament.