WTO wrestles with relevance in age of ecommerce

WTO wrestles with relevance in age of ecommerce

13/12 - Negotiators reach stalemate but smaller ‘plurilateral’ deals may be way forward

Players of Clash of Clans, an online strategy game, do not usually worry about global trade negotiations. But its global fans almost became collateral damage as the world’s trade ministers gathered in Buenos Aires for a biennial conclave that ended in a familiar stalemate on Wednesday.

Frustrated by the refusal of the US and others to grant it a permanent waiver from World Trade Organization rules for its domestic food support programmes, India blocked a series of initiatives including the normally routine renewal of a 20-year-old moratorium on levying duties on electronic transmissions.

The move was straight out of the negotiating playbook that for years has left the World Trade Organization struggling to deliver meaningful agreements.

But the threatened damage was also an example of why critics are increasingly concerned that the WTO is failing to adapt to a rapidly changing global economy. If the moratorium had expired, WTO members would have immediately had the right to impose new tariffs on any downloads of Clash of Clans from its Finnish maker’s servers, or on streamed music from Spotify and videos on Netflix that cross national borders.

Whether countries would have done so is unclear and in the end India backed down at the last minute. But, in a world where concerns about digital protectionism are growing, the move was emblematic of the blows being taken by advocates of economic liberalisation, and technology companies such as Amazon and Google, whose business models increasingly depend on data travelling the world seamlessly. 

The WTO — facing an existential assault from the Trump administration — is struggling to find ways to deal with issues such as ecommerce, which many of its members believe it must do to remain relevant in a changing global economy.

A bid for broad agreement to begin discussions on new global rules for ecommerce ground to a halt in Buenos Aires. This led 70 of the WTO’s 164 members, including the US, the EU and smaller economies such as Australia, to declare that they would pursue their own deal outside the WTO’s usual negotiating stream. “It’s ridiculous that we don’t have global rules for ecommerce in 2017,” said Kai Mykkanen, trade minister of Finland, which is home to Supercell, the company behind Clash of Clans. “It would be quite problematic and quite hard to make it work if Clash of Clans had to pay duties in some countries and not in other countries. It would mean much more bureaucracy.” 

The push for the WTO to launch ecommerce negotiations — which could help define basic standards for things such as electronic contracts and signatures and consumer protections — has drawn the attention of tech companies such as Amazon and Google. Jack Ma, the Alibaba founder, flew in for the WTO meeting to press the case for new rules.

“We believe in globalisation and free trade. We think this system works,” Mr Ma told an event on the sidelines of the meeting.  But the gathering has also given ammunition to those such as Robert Lighthizer, the US trade tsar, who believe that the WTO system — with rules that need consensus from all members to do anything — does not work and needs severe reforms. Besides ecommerce, WTO members failed to agree on a bid to ban subsidies for illegal fishing.

They similarly could not agree on new discussions over easing investment barriers and making trade easier for micro-businesses.

Optimists say that countries are finding ways to move forward in smaller groups, trying to reach “plurilateral” agreements that many believe could herald a nimbler WTO.

Liam Fox, the UK trade minister, who has staked much of Britain’s post-Brexit trading future on playing a leadership role in the WTO, said the ecommerce discussions marked an important development.

“Current rules are outdated and new rules are long overdue,” he said. “That’s why I’ve been pushing for progress here at the WTO ministerial conference and why I’m delighted to announce the UK’s full participation in these new discussions.” 

Besides the declaration on ecommerce, which included countries representing almost 80 per cent of global trade, separate groups of countries also said on Wednesday that they would try to find ways to facilitate international investment and make rules easier for micro-businesses.

Those efforts still face opposition from developing countries and activists who resist the introduction of “new issues” and argue that the WTO needs to concentrate on delivering the development promises of the long-dead Doha Round.

Advocates of the new approach argue that such a focus would overlook the fast-changing nature of the world economy and how silly it looks for the institution to sit on the sidelines on issues such as ecommerce. 

“Facing the 2020s without assurance of rule-based trade in ecommerce [will look] quite weird later on when the history of this age is written,” said Mr Mykkanen. 

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