Digitrade Digest #60
WTO Moratorium on Digital Trade to continue, India and EU discuss trade, UK anti-competition regulator probes Apple and more
WTO MC 12
WTO breaks negotiating slump with package of deals
Politico: Continued free trade on digital goods and services
In another area, the WTO agreed to continue a longtime moratorium on imposing customs duties on digitally-traded goods and services and other forms of e-commerce transmissions. That ban is credited with helping to accelerate the growth of the internet, but a number of developing countries increasingly see it as a source of lost revenue.
As part of the deal, members agreed to intensify discussions about the moratorium, which was first put in place in 1998, when the internet was relatively young. The ban will stay in place until the next ministerial meeting or until March 31, 2024, whichever comes first, unless members decide again to extend.
Allowing the digital duty ban to expire would have been a special embarrassment for a body that prides itself in reducing trade barriers. Business groups launched a furious lobbying effort to keep the moratorium in place and India and South Africa threatened to block its renewal in the weeks leading up to the ministerial conference.
Lawmakers urge USTR to push for extension of WTO's moratorium on digital trade
Reuters: Thirty-four U.S. lawmakers, led by Democratic Representative Suzan DelBene and Republican Representative Darin LaHood, warned that one of the key issues at hand - whether to renew a moratorium on tariffs on digital goods such as e-books, movies and video games and digital services such as emails, texts and software - would have big consequences for the United States.
"Failing to renew the moratorium, as we have done for more than twenty years, would undermine the strength of the American economy, jobs, and innovation," they told Tai in a letter dated Friday that was viewed by Reuters.
DelBene told Reuters extending the ban on e-commerce tariffs should be "low-hanging fruit for the WTO."
One senior USTR official expressed hope the moratorium could be extended, and said U.S. officials had made clear to opponents they would also be harming developing countries.
In their letter, the lawmakers noted trade in digital goods and services had become increasingly vital to U.S. workers and businesses, including many small businesses that used digital tools to export their products and services overseas.
If India and other countries prevailed in their efforts to end the moratorium, countries would be able to slap duties on sectors such as manufacturing, agriculture, entertainment, software, and financial services, which would further disrupt supply chains and jack up consumer prices, the lawmakers said.
IPEF
Why the US’ Indo-Pacific Economic Framework is really all about India
SCMP: Over the past decade, it has become abundantly clear that countries run by populists are not too enthusiastic about committing to multilateral free trade agreements. While Biden is no populist like Trump, he can read the room: the American electorate in the rust belt states of Ohio, Pennsylvania and Michigan no longer want their manufacturing jobs to be shipped to China or Southeast Asia.
As The Wall Street Journal noted in its coverage of the US midterm election campaigns, Democrats and Republicans are trying to out-compete each other by spending on ads targeted towards China. There is a bipartisan odious feeling towards free trade agreements that provide unfettered access to American markets and ship jobs overseas, mostly benefiting large corporations. The IPEF is a product of this development.
The peculiar aspects of the framework not only cater to the needs of the American worker in the Midwest but to the trade protectionists in India. The framework offers no access to American markets, and does not impose tariff liberalisation requirements. Instead, it emphasises supply chain resiliency and offers room for negotiation on regulations pertaining to highly contentious policies in India, such as data localisation.
India can offer the resilient and diversified supply chain that the US seeks to build in the region. A case in point is the American manufacturer First Solar’s US$500 million investment in southern India to build photovoltaic panels. China has long dominated the global supply of solar panels and the investment was a well-directed diversification measure.
Furthermore, the sector predicted to benefit most from the IPEF is the digital one. As a service-sector-led economy, India stands to gain from digital trade. In a country where e-commerce and software companies are the fastest-growing and among the largest contributors to the exchequer, the IPEF will be well received.
The IPEF could be the West’s last attempt to bring India into its fold and into the Asian trade architecture. It will be prudent for the Modi administration to be receptive to this opportunity. If instead, however, it repeats the RCEP style of negotiating a trade deal until withdrawal, it may not have any powerful economic partners by its side.
Singapore
Singapore-UK digital economy agreement to boost digital trade, data flows between countries
CNA: The UK-Singapore Digital Economy Agreement (UKSDEA) will give Singapore businesses the opportunity to grow in the digital economy, the Ministry of Trade and Industry (MTI), Ministry of Communications and Information (MCI) and the Infocomm Media Development Authority (IMDA) said in a statement.
"Benefits to businesses include end-to-end digital trade such as safe and secure e-payments and paperless trading, ... (and) seamless and trusted data flows," they added.
The agreement will also provide greater online protection for consumers and safe and secure cross-border payments.
Singapore and the UK also signed three Memorandums of Understanding (MOU) on digital trade facilitation, digital identities cooperation and cybersecurity.
Digitalising trade will lead to reduced costs for businesses, a reduction in the carbon footprint of trade, and improved access for Small and Medium Enterprises (SMEs) to engage in cross-border trade, said MTI, MCI and IMDA.
The MOU on digital identities aims to develop mutual recognition and interoperability between the digital identity regimes of Singapore and the UK.
EU
India, EU look to make a fresh start for a trade deal in Brussels
BusinessStandard: India and the EU agreed to resume negotiations for a balanced and comprehensive trade pact; this shall be split into three agreements on trade, geographical indications (GIs), and investment. A Broad-based Trade and Investment Agreement (BTIA) was first mooted in 2007 but didn’t move past the negotiating stage. The 16th and last formal round of discussion was held in 2013.
Thereafter, both sides tried to restart formal negotiations after the 2014 Lok Sabha elections in India but failed to make any headway, with some of the key reasons being disagreement over a bilateral investment pact, and tariff reduction for automobiles and alcoholic drinks.
Restarting stalled trade talks shall give fresh impetus to the relationship between India and the EU, amid the change in the geopolitial scenario -- exit of the United Kingdom from the trade bloc and diversification of the supply chain away from China.
“The trifurcation of talks into separate tracks of investment protection, geographical indications, and legacy trade issues is a pragmatic step. Both sides must channelise this positive momentum and invest political capital to conclude the negotiations,” Mehta said.
According to Mehta, the EU will desire enhanced market access in the sectors where India is unwilling to liberalise, seek enhanced IP protection, greater regulation of digital trade, and opening up of India's domestic services markets, all of which India is wary of. India will seek to enhance its services exports, particularly by seeking greater ease of movement for professionals, which the EU will resist. Sustainability issues, including labour and environment, will also be high on the EU's agenda, he said.
At $64.96 billion, the EU made for more than 15 per cent of India’s overall goods exports during the financial year 2021-22, while imports stood at $51.4 billion during the same time period. The EU is also India’s second-largest export destination and third-largest trading partner.
The share of trade with the EU as compared to total bilateral trade has progressively shrunk in recent years. When the strategic partnership was initiated in 2004, export to the bloc was 21.8 per cent of all exports; import was 17.3 per cent of all inbound trade.
Big tech
'Vice-like grip': Why Apple and Google are under UK regulator's probe
BusinessStandard: Apple, the maker of iPhones, and Alphabet, Google's parent company, have " too much control over operating systems (iOS and Android), app stores (App Store and Play Store), and web browsers (Safari and Chrome)". The two companies ‘ecosystems’ stifle competition and 'meaningful choices' to customers, according to UK regulator, Competition and Markets Authority (CMA).
"Apple and Google have developed a vice-like grip over how we use mobile phones and we’re concerned that it’s causing millions of people across the UK to lose out," said CMA chief Andrea Coscelli in a press note released earlier during the probe.
More than half of all smartphones used in the UK in 2020 were Apple iPhones and the rest were versions of Google’s Android operating system (OS)—a share that creates market duopoly, CMA said.
Both Apple and Android phones come with pre-installed app stores that do not support alternative versions. The companies set the rules for app developers to reach users and can include a payment of 30 per cent commissions to these companies.
The CMA has called for the easing of restrictions for other web-app stores on both smartphones.
Apple and Google phones come with inbuilt browsers -Safari and Google- which CMA cites restricts users to choose other browsers thereby restricting options for users.
The ecosystems set up by these two companies make it difficult for other developers to enter/compete in the market and hence CMA plans to set up 'A new pro-competition regime for digital markets' to limit the reach of big-tech firms.