Stage set for India's clash with richer nations on e-commerce rules at WTO

Know why the rules under discussion by rich nations may be extremely important for India

The upcoming December ministerial conference of the World Trade Organization (WTO) in Argentina is set to see a clash between richer nations ( the United States and the EU) and India over the push for a proposed set of global rules on e-commerce.

The adoption of the rules is expected to form the basis of a globally binding set of guidelines for e-commerce in the areas of investment, retail, taxation and distribution.

"The idea behind the guidelines is to be the basis of any later international agreement on e-commerce, which will undoubtedly favour richer nations owing to the nature of their developed market systems and penetration by online firms in the retail space", a senior Indian government official said under conditions of anonymity.

Past agreements at the WTO on similar matters had pushed India back by decades, the official said, adding that the globally-bound Information Technology Agreement, under which India agreed to abolish tariffs on all forms of hardware imports is killing the domestic electronics manufacturing industry.

Fears of unrestricted foreign entry into Indian e-commerce market

India fears that new rules could provide the pretext for unfair mandatory market access to foreign companies. This will hurt the rapidly growing domestic e-commerce sector, which is still finding its niche. Also, there are significant business interests involved with global e-commerce giants looking for an official route to tap the lucrative markets of the developing world, especially India.

“While India should accept technology as it comes, we need to know which segments it will hurt most. A disruptive move like this will see tech-driven commerce displacing a significant number of players in the traditional market like small traders as behemoths stand the chance of gobbling them up,” said Biswajit Dhar.

“In 2015, internet penetration in the least developed and low-income countries were about 12.6% and 9.4%, respectively. Even for low-middle income countries, the figures were well below the global average. These disparities in internet penetration should make it clear as to who would be the likely beneficiaries from e-commerce rules," he added.

Specific rules in the sector could also curtail the space available to the Indian government to regulate the market to protect consumer interests, address anti-competitive practices and prevent market failures, said Abhijit Das, head of the Centre for WTO studies.

According to the WTO, in 2015, global e-commerce in goods and services was about $22 trillion and has grown the fastest in emerging economies.

But developed nations are moving fast

Currently, WTO procedures mandate that any new resolution must garner the unanimous support of member countries before being adopted. Even so, some nations including Australia, Switzerland, and Norway have made fresh arguments on WTO's behalf.

WTO's brush with the subject started during the second ministerial conference in 1998 whereby it had been decided to put a moratorium on customs duties imposed on digital transactions. Now, a key demand by the developed countries is to make the current ban permanent.

In February 2017, WTO Director-General Roberto Azevedo visited India and warned that discussions on the matter would move forward. Apart from having a series of discussions with the government in New Delhi, he also attended meetings with e-commerce players where several indicated that they were apprehensive of losing out on the opportunity of global majors investing in them.

Where talks stand

Barely two months after this, deliberations on e-commerce picked up at WTO among nations. An international grouping was formed in this regard, composed of Latin American nations Argentina, Chile, Colombia, Costa Rica, Uruguay along with others called the 'Friends of e-commerce'. 

The growing support for the rules also sideline the older development-based issues from the Doha round of negotiations, which developing nations consider their priority. At the recent 'mini-ministerial' WTO meet in Morocco earlier this month, the Indian government reiterated its stance, saying such unresolved issues needed to be uniformly reaffirmed before jumping to new ones.

Recently, in his first brush with the WTO system Prabhu opposed the rules. He stressed that older issues based on agriculture should be sorted before member nations move on to newer issues such as a proposed set of global rules for the e-commerce industry.