WT/GC/W/833  
 
8 November 2021  
(21-8430) Page: 1/6 
General Council  Original: English  
 
 
WORK PROGRAMME ON ELECTRONIC COMMERCE  
THE MORATORIUM ON CUSTOMS DUTIES ON ELECTRONIC TRANSMISSIONS : 
NEED FOR CLARITY ON ITS SCOPE AND IMPACT  
The following communication, dated 5 November  2021, is  being circulated at the request of the 
delegation s of India  and South Africa . 
 
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1  SCOPE OF THE MORATORIUM  
1.1.  The 1998 Declaration on Global Electronic Commerce1, stated that Members will "continue their 
current practice of not imposing customs  duties on electronic transmissions". This language has been 
replicated in subsequent decisions renewing the moratorium.  
1.2.  We quote  from our earlier submission, WT/GC/W/798 dated 11 March 2020.  
1.3.  We believe  that there are two main interpretations regarding its  scope:  
a) The moratorium  on customs duties applies to the 'transmission' but not the content of the 
transmission. This line of thinking has been taken up by Indonesia. In statements at MC11, 
Indonesia had said:  
 
"In regards  to the discussion on the moratorium on customs duties on electronic 
transmissions, it is our understanding that such moratorium shall not apply to electronically 
transmitted goods and services. In other words, the extension of the moratorium applies 
only to the electronic transmissions and not to products or contents which are submitted 
electronically. The Indonesian Head of Delegation shared this understanding with the 
Director -General and his team yesterday and today, in which they responded with a posit ive 
confirmation."  
 
For this reason, we would like to insert a footnote in the outcome document which states 
"it is understood that such moratorium shall not apply to electronically transmitted goods"2. 
1.4.  The implication of this interpretation is that sinc e the moratorium is only applicable to the 
transmission , Members would be able to put customs duties on the transmitted content. The 
prohibition of customs duties therefore only refers to the 'transmission' – the bits and bytes. Any 
possible revenue implic ations will be limited in nature given the scope of the moratorium.  
1.5.  Indonesia  has also expanded its HS code (Chapter 99) to include goods which can be digitized 
i.e. intangible goods.  
b) There is in literature a number of studies that define the scope of th e moratorium on customs 
duties on electronic  transmissions as applicable to physical goods which have become 
digitized, or which are digitizable. Indeed, studies on the impact of the moratorium since 
 
1 WTO 1998 WT/MIN(98)/DEC/2, 25 May.  
2 WTO 2017 'Statement by Indonesia: Facilitator's Consultation on Electronic Commerce, MC11 
declaration, and other relevant plenary sessions', delivered on 13 December, WT/MIN(17)/68, 20 December.  WT/GC/W/833  
 
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  1998 have focused on the tariff revenue losses resulting  from the digitization of physical 
goods. These studies have included (non -exhaustively):  
 
• Schuknecht and Pérez -Esteve (1999)3 – they used a list of goods that included 
cinematographic film, newspapers and videogames to provide upper bound 
estimates of p ossible tariff revenue losses when these products are digitized.  
• WTO (2016)4 – the Secretariat updated their analysis of tariff revenue losses. Using 
a list of 30 HS 6 -digit goods and their applied rates, they looked at the reduced 
imports on 'digitizabl e' goods and thus the revenue losses.  
• UNCTAD (2017)5 and UNCTAD (2019)6 also calculated tariff revenue losses from 
goods that have become digitized and which are digitizable.  
1.6.  Due to technological developments, there is a rapid rise in the growth of onl ine trade of 
digitizable goods. This explains the concern around the impact of digitization of goods on 
tariff revenue.  
1.7.  A submission  by 13 WTO Members, WT/GC/W/799/Rev.1 dated 29 June 2020, relying on 
OECD  (2019), presumes the scope of the moratorium to include foreign value -added ICT enabled 
services like business services. These recent submissions seem to have expanded the scope of the 
moratorium to include services without giving any rationale/argument to support this understanding.  
2  THE IMPACT  OF THE MORATORIUM  
2.1.  In our submission, WT/GC/W/798, we had stressed that re -consideration of the moratorium is 
critical for developing countries to preserve policy space to regulate imports, generate revenue 
through a simple and direct instrument such as customs duties and achieve digital industrialization.   
2.2.  WT/GC/W/799/Rev.1, on the other hand, argues that the overall benefits of duty -free 
electronic transmissions outweigh the potential forgone government revenues due to the 
e-commerce moratorium. Rel ying on OECD (2019), it outlines the role of the use of foreign 
value -added ICT enabled services like telecommunication services, financial services or other 
business services, in achieving positive economic outcomes.  
2.3.  There are certain conceptual and metho dological issues in the arguments made in 
WT/GC/W/799/Rev.1, as well as in OECD (2019), hereinafter referred to as 'the submissions '. We 
elaborate on these issues below:  
2.2  Tariff Revenue Loss  
2.4.  In our previous submission, WT/GC/W/798, we highlighted that based  on the identification of 
a small number of digitizable goods in five areas, namely, printed matter, music and video 
downloads, software and video games, UNCTAD estimated a loss in tariff revenue of more than 
US$10 billion per an num globally because of the  moratorium, 95 % of which is borne by 
developing  countries.  
2.5.  These submissions attempt to make the revenue foregone on account of the e -commerce 
moratorium  seem insignificant by showcasing this revenue loss in terms of its share in customs 
revenue and total  government revenue. However, even compared in this manner, it is evident that 
the percentage of government revenue lost for developing countries is higher than that for the 
developed countries. The percentage of customs revenue lost for developing countri es is 4.35% 
while that for the developed countries is a mere 0.24%. It is evident that the cost of the moratorium 
 
3 Schuknecht, L and Pérez -Esteve 1999 'A Quantitative Assessment of Electronic Commerce', Staff 
Working Paper ERAD, No. 01, WTO, Geneva.  
4 WTO 2016 'Fiscal Implications of the Customs Moratorium on Electronic Transmissions: The Case of 
Digitisable Goods', J OB/GC/114, 20 December.  
5 UNCTAD 2017 'Rising Product Digitisation and Losing Trade Competitiveness' 
https://unctad.org/en/PublicationsLibrary/gdsecidc2017d3_en.pdf  
6 UNCTAD 20 19 'Growing Trade in Electronic Transmissions: Implications for the South', UNCTAD 
Research Paper, No. 29.  WT/GC/W/833  
 
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  is almost completely borne by the developing countries for extending duty free quota free market 
access, largely for the developed countries.  
2.6.  These submissions conclude that the amount of physical trade replaced by 3D printing is 
expected to be limited. UNCTAD (2019) provides a deeper analysis on the status of 3D printing 
though. It indicates that while 3D printing is currently at a nascent stag e in developing countries, 
its market has grown annually by 22% in the period 2014 -2018 and it is estimated that if investment 
in 3D printing is doubled, it could potentially replace almost 40 % of cross -border physical global 
trade by 20407. Such a growth  is expected to significantly increase the potential tariff revenue  loss. 
2.3  Impact on SMEs and Digital Industrialization  
2.7.  Interestingly, when assessing the total trade of electronic transmissions, these submissions 
consider only digitizable goods and conclude  that these remain modest but when estimating the 
impact of the moratorium on exports, especially of SMEs, these submissions considers the extended 
scope of the moratorium by including services8 and find the impact to be huge. Defining the scope 
of the mo ratorium is therefore important in order to estimate its impact.  
2.8.  These submissions state that the use of 3D printing is growing slowly since the opportunities 
for mass production  and economies of scale are limited and the inputs, materials and time required 
for 3D printing further constrain its use for manufacturing com plex items. In this context, it is 
highlighted that with recent technological advances, namely high -speed sintering, mass production 
is becoming possible with 3D printers, where mass -producing up to 100,000 (smaller) components 
in a day will be possible at  a speed which is 100 times faster9. According to D 'Aveni (2015)10, the 
advent of additive manufacturing in the US hearing aid industry meant that, in less than 500 days, 
100% of the industry was transformed and not one company stuck to the traditional mo de 
of manufacturing.  
2.9.  These submissions do not reflect the impact that new technologies such as 3D printing can 
have on domestic industries especially MSMEs in developing countries. As outlined before, while 
3D printing is currently at a nascent stage in de veloping countries, its market is expected to grow 
at a rapid pace. The most affected sectors could include sectors such as textiles and clothing, 
footwear, auto -components, toys, mechanical appliances, and hand tools, etc. which generate large 
scale emplo yment for low skilled workers and are sectors in which most MSMEs operate. This could 
have a catastrophic effect on the ability of developing countries to protect their nascent domestic 
industries including MSMEs11. 
2.10.   If, "customs duties on electronic transm issions " cover not only digitised and digitizable  goods 
but also digitally transmitted services, as asserted by a couple of institutions recently, then the 
negative impact  of continuing with the moratorium on developing countries would be even greater. 
Effectively, this implies that the economy of the future (the digital economy) is totally liberalised. 
History has shown that trade policies are integral to successful economies ' development trajectory 
and are critical in advancing industrial policy.  
2.4  Methodol ogical  concerns  
2.11.   OECD (2019) mainly quotes studies that use Computable General Equilibrium (CGE) Models 
and those that use partial equilibrium models like SMART simulations. An important caveat in these 
studies is that they estimate the impact of tariff lib eralization on only physical goods which are 
digitizable  but are still being imported physically. However, as the UNCTAD Research Paper 29 has 
argued, the moratorium applies on customs duties on electronic transmissions, and not on the 
physical imports of products. Therefore, the results of these studies do not hold for 
electronic  transmissions.  
 
7 UNCTAD Research Paper No 47 (2020) . 
8 UNCTAD Research Paper No 58 (2021) . 
9 Ibid. 
10 Richard D 'Aveni, 'The 3 -D Printing Revolution ' (2015) Harvard B usiness Review 
https://hbr.org/2015/05/the -3-d-printing -revolution  accessed 1 June 2021 . 
11 UNCTAD Research Paper No 58 (2021) . WT/GC/W/833  
 
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  2.12.   OECD (2019) quotes ECIPE (2019) which uses CGE models to provide the broader economic 
impact of the moratorium on consumption, investment, revenue, welfare and GDP.   Using studies 
based on CGE modelling is problematic in itself given the well -recognised fact that most of these 
models are based on unrealistic assumptions which do not hold true in the real world. The models 
are based on the assumption of perfect compet ition in all sectors and in all countries, which implies 
that monopolies do not exist. Existence of monopolies in the digital arena like Google, Microsoft, etc. 
is a well -known fact. Further, the models are based on the Armington assumption according to wh ich 
foreign and domestic products are not perfect substitutes and increase in tariff on a product would 
imply a fall in the use of the product, resulting in production losses and the associated losses in 
employment, investments and overall welfare. A detai led critique of the studies using CGE models 
can be found in Banga, R. (2019)12. 
2.5  Impact on Policy Space  
2.13.   These submissions do not address concerns of the developing countries with respect to the 
importance of preserving their policy space. Customs duties are used by countries to support nascent 
domestic industries, regulate an unwanted surge in imports and fa cilitate industrialization. The 
development  experience of nearly all countries across the world makes it evident that tariffs are 
amongst the most effective policy tools for achieving these objectives. Customs duties have been 
resorted to by developed coun tries to provide protection to their industry and to enable them to 
become internationally competitive. It is only fair that the developing world be given a similar 
opportunity. Thus, retaining the policy space to impose customs duties becomes an important  
objective in itself.  
2.14.   These submissions argue that digital technologies such as 3D printing are unlikely to have 
far-reaching  implications on trade in the near term. As indicated before, 3D printing is expected to 
grow rapidly. Hence, it can jeopardize two  decades of negotiated tariffs on industrial products under 
Uruguay Round, further constraining the policy space of the developing countries.  
2.15.   It is also argued that that exporters from developing countries need to import digitizable 
products in order to im prove their production and exports of many products and services. Removal 
of the moratorium in no way means that Members will necessarily impose customs duties across the 
board. The key is policy space and to use such policy space appropriately for domesti c digital 
industrialization and generation of local jobs in the era of Industry 4.0.  
2.6  Application  of Internal Non -Discriminatory Taxes as an alternative to Tariffs  
2.16.   The submissions suggest that instead of imposing tariffs on electronic transmissions, 
governments  could consider imposing non-discriminatory  internal taxes for raising revenue.  
However, a large body of literature, as highlighted in Devika et al (2020)13, suggests that the tariff 
revenue losses may not be recovered by governments in developing countries, and especially in 
low-income countries, due to the presence of a large informal sector which tends to remain out of 
the tax net. This finding confirms earl ier work by Emram and Stiglitz (2005)14. Further, according to 
Devika et al (2020) a 1% decline in effective tariff rate is associated with a 1.98% -3.22% decline in 
total tax revenue.  
2.17.   Internal taxes are not an alternative to customs duties and serve a diff erent purpose. For 
countries that want to promote digital industrialisation, customs duties should remain part of the 
toolbox to be deployed based on the strategic objectives of each country in pursuit of 
industrial  policy.  
 
12 "Modelling Impact of Moratorium on Electronic Transmissions using CGE: A Critique " published in 
Advances in Social Sciences Research Journal, 6(8) 391 -400. 
13 Devika Dutt, Kevin P. Gallagher and Rachel D. Thrasher, "Trade Liberalization And Fiscal Stability In 
Developing Countries: Does The Evidence Te ll Us? ", Global Policy Insights; See also, Emram and Stiglitz (2005 
'On selective indirect tax reform in developing Countries ', Journal of Public Economics, vol. 89, no. 4, pp. 
599-623. 
14 Emram and Stiglitz (2005 'On selective indirect tax reform in develo ping Countries ', Journal of Public 
Economics, vol. 89, no. 4, pp. 599 –623. 
 WT/GC/W/833  
 
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  3  ARE DEVELOPING COUNTRIES ENJOYIN G THE BENEFITS OF THE DIGITAL ECONOMY?  
3.1.  It is often claimed that new digital technologies can provide developing countries with new 
income generation opportunities, including for their Micro and Small and Medium Sized Enterprises 
(MSMEs ). As noted in our su bmission WT/GC/W/798, most developing countries are experiencing 
profound challenges due to the infrastructure/technological divide, the skills divide, and the market 
power of global digital platforms.  
3.2  Digital divide  
3.2.  The rapid growth of digital technology has reshaped our daily lives and the internet has become 
one of the most fundamental infrastructures around the world. According to the World Economic 
Forum, each additional 10% of internet penetration can lead to a 1.2% increase in per capita GDP 
growth i n emerging economies. During the pandemic, the digital connectivity has kept people, 
governments and businesses connected. Yet half of the world 's population is without internet access, 
with the vast majority concentrated in developing countries and LDCs.  
3.3.  The digital divide manifests itself in terms of lack of digital infrastructure, which includes 
broadband infrastructure and data infrastructure, along with lack of digital skills. According to ITU 
data, 87% of people are using the internet in developed cou ntries, compared with 44% in developing 
countries. Connectivity  gaps in rural areas are especially serious in LDCs, where 17% of the rural 
population live in areas with no mobile coverage at all, and 19% of the rural population is covered 
by only a 2G netw ork. The COVID -19 pandemic has exacerbated existing digital divides both between 
and within countries. With many essential services pushed online, there is a real and present danger 
that those without broadband internet access could be left ever further be hind. 
3.4.  The capacity to store and process data is an important aspect of data driven economy. 
According to the Digital Economy Report, UNCTAD (2019)15, out of a total of 4,422 so -called 
colocation  data centres, 80 % are in developed countries, with one countr y alone accounting for 
about 40 %. Africa and Latin America together account for less than 5 % of the world 's colocation 
data centres. The Cloud market is also highly concentrated where the share of top five providers, 
with 4 out of the five based in one country, exceeds 75 %. 
3.3  Anti-competitive  practices  
3.5.  The narrative that online sales help MSME vendors to expand their sales and exports by linking 
with online retail platforms, as reflected in WT/GC/W/799/Rev.1 and OECD (2019), may not be 
entirely accurate . This narrative completely ignores the considerable challenges that the third -party 
vendors, including MSMEs, face in selling their products through online retail platforms due to the 
rent-seeking and other practices followed by many of these large platforms . The report of a 
bipartisan investigation in the US by the Committee on the Judiciary, Subcommittee on Antitrust, 
Commercial and Administrative Law, titled 'Investigation of Competition in Digital Markets ' outlines 
some of these practices that pose challe nges to MSMEs. It is apprehended that on account of these 
practices, followed especially by the super online retail platforms, most MSMEs may not be able to 
sustain their online businesses.  
3.6.  Developing countries and LDCs are facing multiple challenges in t he digital age which have 
become more severe due to the ongoing pandemic. Given most developing countries and LDCs are 
net importers  of digitised and digitizable goods, the moratorium can have significant implications for 
digital industrialization of these  countries.  
3.7.  In the backdrop of the challenges posed by the prevalence of digital divide and anti -competitive 
practices of some of the dominant players, it is critical for the developing countries and LDCs to 
focus on improving domestic physical and digital  infrastructure, creating supportive policy and 
regulatory frameworks and developing digital capabilities to develop strong domestic digital industry 
and a conducive ecosystem around it.  
 
15 Digital Economy Report, UNCTAD (2019) . WT/GC/W/833  
 
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  4  CONCLUSION  
4.1.  World Bank (June 2020) has estimated that COVID -19 will pu sh 71 million people into extreme 
poverty in 2020 largely from LDCs and developing countries16. This highlights the importance for 
LDCs and developing countries retaining their policy space to develop a viable domestic digital 
industry. Customs duties are a simple and effective policy tool in the hands of the governments, 
especially in times of crisis.  
4.2.  It is important for member states to review the decision taken in 1998 to have a moratorium 
on customs duties  on electronic transmissions. This decision was taken with no consensus on the 
scope of the moratorium and no notion on how the digital revolution will unfold.  
4.3.  In December 2019, members had agreed to extend the moratorium for six months up to 
June 2020 and re -invigorate the work under the Work Program o n Electronic Commerce which 
requires structured discussion on trade related issues related to global e -commerce, taking into 
account the economic, financial and development needs of the developing countries.  
4.4.  In order to enable the WTO Membership to take an  informed decision in MC12 on whether or 
not to extend the moratorium on customs duties, it is necessary to have complete clarity on the 
definition of electronic transmissions, consensus on the scope of the moratorium and a 
comprehensive understanding of t he impact of the moratorium.  
 
__________  
 
16 https://blogs.worldbank.org/opendat a/updated -estimates -impact -covid-19-global -poverty