Notes for India as the digital trade juggernaut rolls on

News:  In December 2021, Australia, Japan, and Singapore, have stated that they might schieve convergence on more issues linked to the Joint Statement Initiative (JSI) on e-commerce by the end of 2022. These 4 countries are co-convenors of the Joint Statement Initiative (JSI) on e-commerce.

How present rules existing on digital trade progressed?

In the Second Ministerial Conference (1998) of WTO, member countries agreed on core rules for e-commerce. A temporary moratorium was imposed on customs duties relating to the electronic transmission of goods and services. This moratorium was opposed by India and South Africa because it imposes significant costs on developing countries.

Hence, a work programme was set up on e-commerce but due to lack of progress, JSI was initiated in 2017 to work on the trade-related aspects of e-commerce. China and Indonesia joined with a justification that it is better to shape the rules from within.

What are the issues associated with JSI?

One, over half of WTO members have opted out of JSI negotiations. The developing countries fear that accepting these rules will affect their digital sovereignty.

Two, JSI does not include all WTO members, like General Council Work Programme. Thus, India and South Africa have said that it is against the WTO’s consensus-based framework, where every member has a voice and vote regardless of economic standing.

Why there is a disagreement between the developed and developing worlds?

First, free flow of data across borders: several countries are imposing data localization rules. But the developed world is finding it as a restriction on access to new digital markets, and it is causing unnecessary compliance costs. Hence, it is discouraging innovation and results in unfair protectionism.

For instance, In India, Mastercard and American Express were prohibited from issuing new cards for failure to comply with a 2018 financial data localization directive of RBI. Also, the Joint Parliamentary Committee (JPC) on data protection has recommended strict localization measures.

Second, domestic laws of some countries mandate the disclosure of source codes. Developed countries believe that this discourages innovation, but for developing countries, it is essential for algorithmic transparency and fairness.

What are the options available for India?

One, advocating data sovereignty, which aims to resist ‘data colonialism’. Policymaking in India should focus on surveillance reform, personal data protection, algorithmic governance, and non-personal data regulation. They should work for individuals, communities and promote local businesses.

Two, India should avoid signing trading obligations in a hurry to preserve the space available to frame appropriate policy. Also, it should avoid sitting out of trade negotiations to keep a check on digital trade rules. For example, RCEP.

Three, exceptions to digital trade rules should be negotiated. For example, ‘legitimate public policy objective’ or ‘essential security interests’, could be negotiated.

Four, India should take lessons from the Digital Economy Partnership Agreement (DEPA) between Singapore, Chile, and New Zealand. India should push for a framework where countries can pick and choose modules with which they wish to comply.

Lastly, the WTO plays a critical role in global governance and is vital to India’s strategic interests. Hence, India should negotiate without surrendering the domestic policy-making space.

Source: This post is based on the article “Notes for India as the digital trade juggernaut rolls on” published in The Hindu on 8^th Feb 2022.