What Developing Countries Should Know About Negotiations for a New Global Agreement on E-Commerce

Since January 2019, a subset of World Trade Organization (WTO) members has been negotiating a new plurilateral trade agreement on e-commerce. After more than 5 years of negotiations, the participants crossed an important milestone: they delivered a "stabilized text," bringing the agreement to the finish line. How will the deal change the global e-commerce landscape, what does it mean for developing countries, and what issues remain unresolved?

Why does the agreement matter?

This agreement, known as the Joint Statement Initiative (JSI), could become a cornerstone in the trade agreement landscape. Currently, trade rules on e-commerce are developed at the bilateral and regional levels through traditional free trade agreements or digital economy agreements. Because of the number of countries involved, this plurilateral agreement is the first attempt at creating a more global trade agreement on e-commerce. It could set the benchmark for the minimum level of rules countries are expected to adhere to regarding e-commerce.

Which countries are participating in the negotiations?

As of August 2024, 91 WTO members are participating in the JSI, though not all have indicated their acceptance of the "stabilized text." While this represents a little more than half of the overall WTO membership, trade among these participants accounts for more than 90% of global trade. They include economic heavyweights, such as China, the European Union, and the United States, all developed economies, and many emerging markets.

However, the participation of developing countries and least developed countries (LDCs) is relatively low, with just five LDCs, nine countries from Africa, and no countries from the Pacific and Caribbean regions. Most of those engaging are from Asia and Latin America. This contrasts with the other major JSI negotiations-such as the Investment Facilitation for Development Agreement, where more than 125 WTO members are involved.

What's in the draft agreement?

For a comprehensive understanding of the agreement, see IISD's latest report. The different types of articles in the agreement are highlighted below for quick context.

Many of the obligations in the agreement can be characterized as enabling regulatory obligations. Parties must establish certain regulatory measures or frameworks that are regarded as having an enabling instead of a restrictive function, helping to create the foundational basis upon which digital markets can operate. For instance, parties agree to take steps to foster an environment of trust, fair competition, and legal predictability, enabling different actors to engage and operate in the digital economy. Examples of such obligations include setting up online consumer protection measures, setting up a legal framework for personal data protection, recognizing the legal validity of transactions that use electronic formats (e.g., e-contracts, e-signatures), and recognizing principles to promote competition among telecom service provisions, among others.

Articles focusing on tariff issues are relatively rare in the agreement. The only relevant article is on customs duties on electronic transmissions, in which parties agree to not impose tariffs on electronic transmissions, foregoing duties on both the carrier medium and the content carried within. This clarifies that digitized products such as e-books or the streaming of music will not have tariffs applied to them. The maintenance of the moratorium is not linked to the formal WTO decision processes that determine whether a similar multilateral-level moratorium should be extended. However, 5 years after the agreement enters into force, a review process will be started and maintained periodically, in which parties will assess the moratorium's impact and consider whether amendments are needed. s

Other obligations include trade facilitation commitments, requirements around improved transparency, and efforts to cooperate on select e-commerce issues.

What flexibilities does the agreement offer for developing countries and LDCs?

The agreement includes an article on Development, which clarifies the benefits and flexibilities granted to developing countries and LDC parties when implementing the agreement. Here are the main elements of this article and the debates surrounding them.

A longer timeline for implementation

Developing countries and LDC parties can access a longer period to implement the provisions in the agreement: they can take 5 or, if needed, up to 7 years to do so.

However, it is unclear whether this additional time would be enough for them to ensure compliance. Implementing changes to regulatory measures and frameworks, notably regarding digital economy matters around which developing countries have limited experience, is a time-intensive and resource-intensive effort (especially as it requires working across different government departments). Additionally, LDCs are not granted access to longer implementation periods than developing country members, as they usually are in WTO treaties. The Trade Facilitation Agreement (TFA) model, which would allow developing countries and LDCs to determine for themselves the additional time they would need, seems to have been considered but discarded.

Proponents of the agreement, however, argue that it is in the best interest of developing countries and LDCs to implement the provisions of this agreement as soon as possible. They note that one reason the digital economy has yet to develop in poorer countries is insufficient enabling legal and regulatory frameworks. Implementing the agreement would enable developing countries and LDCs to establish secure and stable conditions for digital trade to occur.

Another reason cited for choosing short and generic implementation times is the concern that additional time, including for each country to determine its implementation time frames, could result in indefinite delays in implementation.

With all of this said, the reality is that many of the provisions in the agreement are best-endeavour obligations (i.e., countries can undertake efforts to implement but are not beholden to do so); countries already have the flexibility to delay or forego implementation if they absolutely must.

Technical assistance and capacity-building support

Developing countries and LDC parties can potentially access support to conduct needs assessment studies. These studies assess to what extent a country's domestic framework already complies with the obligations of the agreement. The analysis can be used to schedule a longer implementation period or justify the request for extensions. Developed countries and developing countries in a position to do so are encouraged to provide support to carry out or update such studies.

Another benefit is that developing countries and LDC parties can access technical assistance and capacity-building support to help implement the agreement. The agreement does not explicitly state who is expected to provide this support but clarifies that such support "should" be provided on mutually agreed-upon terms. The lack of clarity on which parties should provide support, however, leaves the obligation hanging.

Substantial financial, technical, and institutional resources will be required to establish the regulatory frameworks outlined in the agreement. The TFA model was raised again here as a way for developing countries and LDC parties to make their timelines for implementing certain provisions contingent on receiving capacity-building support. Select developing country participants made proposals to that effect during negotiations and were disappointed such an approach could not be agreed on.

It remains to be seen whether the lack of clarity on who will support implementation, or the absence of a direct link between capacity building and implementation, could discourage other developing countries and LDCs from joining the agreement. Addressing these concerns could be an important element in efforts to encourage non-participants to join the initiative.

What can we expect next?

Is there room for more technical negotiations?

Releasing the stabilized text normally indicates that the technical negotiations have ended, with the articles finalized and the overall legal text agreed upon. But in this case, it is likely the negotiations are not quite finished.

Not all participants have endorsed the stabilized text, including Brazil; Colombia; El Salvador; Guatemala; Indonesia; Paraguay; the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu; Türkiye; and the United States. For some non-supporters, the issue centres on substance, as they disagree on some key articles, notably on the issues of custom duties and the essential security exception. For a more detailed explanation of their concerns, see this article.

The next few months will likely be dedicated to getting non-supporters on board, but it is unclear if more technical negotiations can sort out the outstanding issues and what the timeline for these negotiations would be.

The Sword of Damocles: The legal architecture issue

The decision to add the Agreement on E-Commerce to the WTO system of treaties (and therefore for it to be subject to the WTO's dispute settlement system) requires consensus among WTO members, even the non-signatory countries. In practical terms, this means no member formally objecting. However, achieving this consensus is a formidable task. The Investment Facilitation for Development Agreement has been striving to incorporate its plurilateral agreement into the WTO treaty framework for over a year, but India, South Africa, and Türkiye have officially blocked the road to consensus.

Two debates frequently arise around the JSI plurilateral negotiations and the legal architecture issue. The first centres on the legal mandate for launching new negotiations at the WTO. Some members question whether subgroups of WTO members have the authority to initiate new negotiations without the consensus of the entire WTO membership. Another question is whether certain topics, notably investment facilitation, can be negotiated at the WTO if a multilateral decision has been taken previously that the broader issue of investment should not be negotiated. See the articles here and here for insights on the legal mandate discussion.

The second debate centres on whether the WTO should become a more flexible system that facilitates many more plurilateral negotiations involving subgroups of its membership and what this shift could mean for multilateralism and inclusivity.

Advocates of a more flexible system argue that the WTO risks irrelevance if it continues its current model of prioritizing multilateral negotiations-where progress is often stalled year after year due to the intractable needs and interests of a single country, or factions of countries, with increasingly diverging interests. To keep the system relevant and effective, large groups of countries should have the flexibility to negotiate more contemporary rules that address the needs of a modernized economy. Proponents believe a flexible system would also be useful for creating rules that better serve global public policy objectives, including urgent environmental concerns. They also argue that developing countries and LDCs would benefit, as it provides more opportunities to advance their needs and interests through specific agreements.

Those who argue against plurilateral agreements worry that countries will get into the habit of prioritizing these negotiations, shifting attention away from multilateral negotiations-such as those dealing with agriculture and subsidies-which are of greater interest to developing countries and LDCs. Furthermore, they note that in multilateral negotiations, all members, even the least economically powerful, in theory, have an equal voice in influencing the outcome of negotiations and are in a better position to advocate for more development-focused rules. These countries, may be unable to engage in plurilateral negotiations due to limited resources and risk being increasingly sidelined. As a result, while more agreements may be produced, they would primarily reflect the needs and interests of the most powerful countries.

It is not clear how these debates will play out and whether a long-term deadlock around these debates could eventually result in JSI participants seriously exploring the possibility of establishing plurilateral agreements outside the WTO. This report on the different options for incorporation both inside and outside the WTO explains what the latter would entail.

In closing

The e-commerce negotiations have crossed an important milestone, but their journey is far from over. In the meantime, outreach to non-participant countries will likely increase, meaning more developing countries and LDCs will be asked to consider endorsing the JSI e-commerce outcome. In doing so, they will have to review whether committing to the obligations of the agreement will help them achieve their economic and development objectives and address the significant digital divide challenges they face. They will have to determine whether the flexibilities in the agreement are sufficient to help them implement it in line with their administrative and resource constraints. Finally, they will have to consider the legal architecture debate, including whether a more flexible WTO system will best advance their interests.

Photo credit: ©WTO

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