WTO e-commerce Moratorium: The last renewal?

On 1 March, during the extra day of negotiations, WTO Members gathered in Abu Dhabi for the 13th Ministerial Conference agreed to extend the current Moratorium on Customs Duties on Electronic Transmissions until the next ministerial meeting, or until 31 March 2026, whichever is earlier. In spite of that, this could be the beginning of the end of the Moratorium: this is likely to be the last renewal.

The Moratorium was introduced in 1998, and has been regularly extended ever since. With the dematerialisation of products, such as music and video, for example, the importance of the Moratorium has grown. This happens because products that used to physically cross borders as goods (such as CDs and DVDs) and could be subject to tariffs, are currently streamed online, on platforms such as Spotify and Netflix.

If streamed music and video are considered services, no tariffs should apply (since customs duties are applicable to goods crossing the border). If they are considered dematerialised goods, tariffs could apply – although, on the internet, the ‘crossing the border’ element is much more elusive. The application of tariffs could increase the revenue of countries, even if the amount of this additional source of income is a hotly debated and contested topic, as discussed here.   

The negotiating positions on the Moratorium ranged from, on the one hand, OECD countries, some developing countries, and China, aiming to make the Moratorium permanent and, on the other hand, some developing countries led by India, Indonesia, South Africa and Indonesia requesting the end of the Moratorium.

Often, the Moratorium was considered a ‘bargaining chip’ in the complex WTO negotiations. This year, it was different. The inability to conclude agreements on other topics, such as agriculture and fisheries subsidies, meant that the Moratorium was one of the few concrete decisions taken by members this year, and this placed the topic in the spotlight.

Although the Moratorium was renewed in Abu Dhabi—according to some commentators, the UAE directly asked India to go along with renewal, taking into consideration the good bilateral relations between the two countries—it is clear that the approval of another renewal beyond 2026 will be unlikely. In this last-minute deal, supporters of the Moratorium got some extra time to miraculously reverse the path towards non-renewal, and to prepare for the Moratorium’s end. Critics of the renewal have managed to establish a firm deadline in which the Moratorium is expected to expire. 

Diplomatic nuances can be noticed by comparing wordings of Moratorium extensions.

Wording from WTO MC 11 held in 2017

We agree to maintain the current practice of not imposing customs duties on electronic transmissions until our next session which we have decided to hold in 2019. 

Wording from WTO MC 12 held in 2022

We agree to maintain the current practice of not imposing customs duties on electronic transmissions until MC13, which should ordinarily be held by 31 December 2023. Should MC13 be delayed beyond 31 March 2024, the moratorium will expire on that date unless Ministers or the General Council take a decision to extend. 

Wording from WTO MC 13 held in 2024

We agree to maintain the current practice of not imposing customs duties on electronic transmissions until the 14th Session of the Ministerial Conference or 31 March 2026, whichever is earlier. The moratorium and the Work Programme will expire on that date.

In 2017, the Moratorium simply got extended until the next Ministerial, which should have been held in 2019, but which was significantly delayed in the context of COVID. There was no reference to a ‘decision to extend’ the Moratorium, showing that this reference is not necessarily an established part of the text, and that its absence did not entail a decision to let the Moratorium expire.

In 2022, an extension was granted until MC13, but fears of another postponement of the Ministerial led Members to call for an explicit renewal by Ministers or by the WTO General Council if the Ministerial got delayed beyond 31 March 2024. This would prevent the Moratorium from sliding into permanence, revealing that the idea of non-renewal was by that time strongly held by some members. 

The language in the Abu-Dhabi decision creates the expectation of non-renewal by dropping the last part of the sentence from 2022: ‘…unless Ministers or the General council take a decision to extend’. The language represents a compromise between countries supporting and opposing the Moratorium.

The Moratorium has always been set to expire at every Ministerial, therefore there is nothing remarkable about the reference to its expiry. WTO decisions are political, and Members gathered at MC14 could renew the Moratorium. However, considering the political context of MC13, it is clear that the chances of renewal are slim. 

In the meantime, all eyes will turn again to the Joint Initiative on e-commerce, since a moratorium on customs duties is also being discussed in the context of these ongoing negotiations, aiming to produce a binding agreement on e-commerce among participants. If a moratorium is approved in the context of the JI, 90 WTO Members which represent approximately 90% of global trade, will continue to be bound by the commitment not to apply customs duties on electronic transmissions, even if the multilateral Moratorium expires in 2026.