WT/GC/W/798  
 
11 March 2020  
(20-1899) Page: 1/7 
General Council  Original: English  
 
 
WORK PROGRAMME ON EL ECTRONIC COMMERCE  
THE E -COMMERCE MORAT ORIUM: SCOPE AND IMP ACT 
Communication from India  and South Africa  
The following communication, dated 10 March  2020, is being circulated at the request of the 
delegations of India  and South Africa . 
 
_______________  
 
 
1  SCOPE OF THE MORATOR IUM 
1.1.  The 1998 Declaration on Global Electronic Commerce1, contained the following operative text 
on moratorium on electronic transmissions: Members will "continue their current practice of not 
imposi ng customs duties on electronic transmissions". This wording has been replicated in 
subsequent Decisions renewing the moratorium.  
1.2.  What is the scope of the Moratorium? We believe that there are two main interpretations 
regarding its scope:  
a. The moratorium o n 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 understandin g 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 In donesian Head of Delegation 
shared this understanding with the Director -General and his team yesterday and 
today, in which they responded with a positive 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 
1.3.  The implication of this interpretation is that since the moratorium is only applicable to the 
transmission, Members would be able to put customs duties on the t ransmitted content. The 
prohibition of customs duties therefore only refers to the 'transmission ' – the bits and bytes. Any 
possible revenue implications will be limited in nature given the scope of the moratorium.  
1.4.  Indonesia has also expanded its HS code ( Chapter 99) to include goods which can be digitized 
i.e. intangible goods.  
 
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/798  
 
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  b. There is in literature a number of studies that define the scope of the moratorium on 
customs duties on electronic transmissions as applicable to physical goods which have 
become digiti zed, or which are  digitizable . Indeed, studies on the impact of the moratorium 
since 1998 have focused on the tariff revenue losses resulting from the digiti zation of 
physical goods. These studies have included (non -exhaustively):  
- Schuknecht a nd Pérez -Esteve (1999)3 – they used a list of goods that included 
cinematographic film, newspapers and videogames to provide upper bound estimates of 
possible tariff revenue losses when these products are digiti zed.  
- WTO (2016)4 – the Secretariat updated t heir 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 
'digitizable ' goods and thus the revenue losses.  
- UNCTAD (2017)5 and UNCTAD (2019)6 also calculated tariff revenue los ses from goods 
that have become digiti zed and which are digitizable . 
1.5.  Due to technological developments, there is a rapid rise in the growth of online trade of 
digitizable goods. This explains the concern around the impact of digiti zation of goods on tariff  
revenue.  
2  IMPACT OF THE MORATO RIUM  
2.1.  If the scope of the moratorium is restricted to the "transmission ", it is technologically feasible 
today to impose duties on content and the impact of the moratorium will be of a limited nature.  
2.2.  However, if the scope of the moratorium includes digiti zed and digitizable goods, the literature 
identifies a list which includes cinematograph film; books, pamphlets, maps; newspapers, journals 
and periodicals; postcards, personal greeting message or announcement cards; other pri nted 
matter; video games; computer software; musical records, tapes and other sound or similar 
recordings; and other recorded media. These can be classified into five broad categories: Films, 
Printed matter, video games, software and sound & music. More im portantly, this list will expand as 
the digital economy grows. Thus,  its implications are very serious. The rest of the paper will consider 
these implications.  
2.3.  In 1998 when the Moratorium decision was taken, the digital economy was at its earliest 
inceptio n. At that time, the world wide web was only starting to be used by the general public. There 
was no clarity regarding how the economy would be transformed by digital advancements.  
2.4.  Today, the digital economy is growing rapidly. This is radically changing trade as we knew it. 
With the advent of the new technologies - 3D printing, Big Data Analytics, Artificial Intelligence, our 
economy is being further transformed. With regards to traditional trade in goods, 3D printing is 
expected to be a game changer.7 
2.5.  What are the implications (mostly unforeseen in 1998) arising from the Moratorium as the 
digital economy grows at an exponential rate?  
2.6.  The main impact is the loss of the use of tariffs as a trade policy. Tariffs are a tried and tested 
policy tool for support ing infant and even mature industries. All successful economies have arrived 
at higher levels of development because they started off first giving domestic industries the 
protection through tariffs to grow and gain competitiveness.8 Oftentimes and even up till today, 
tariffs are still being implemented to support industries that may not be so competitive (including in 
 
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 ', JOB/GC/114, 20 December.  
5 UNCTAD 2017 'Rising Product Digitisation and Losing Trade Competitiveness ' 
https://unctad.org/en/PublicationsLibrary/gdsecidc2017d3_en.pdf . 
6 UNCTAD 2019 'Growing Trade in Electronic Transmissions: Implications for the South ', UNCTAD 
Research Paper, No. 29.  
7 EY 2019 '3D Printing: Hype or Game Chang er?' A Global EY Report.  
8 Chang Ha -Joon 2002 'Kicking Away the Ladder: Development Strategy in Historical Perspective ', 
Anthem Press.  WT/GC/W/798  
 
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  developed countries, for example in agriculture, or the steel and aluminium sectors) as there are 
other policy imperatives such as employment  and ensuring that the economy does not lose 
productive capacities. If tariffs are important to developed countries, what about developing 
economies?  
2.7.  The loss of the use of tariffs for the digiti zed goods as a result of the moratorium therefore 
poses very profound challenges for developing countries including:  
- Impact on Industrialisation due to the Loss of the Use of Tariffs as a Critical Trade Policy 
Instrument  
- Tariff Revenue Losses  
- Loss of other duties and charges.  
2.1  Impact on Industrialisation due to the L oss of the Use of Tariffs as a Critical Trade 
Policy Instrument  
2.8.  Currently the world is characterized by a massive gap between the under -connected and the 
hyper -digitalized countries.9 The participation of developing countries in exports of digitizable good s 
has been marginal. In 2000, developed countries accounted for 91% of exports of digitizable 
products, while developing countries ' share was only 9%.10 Today, with the exception of China, the 
situation has not changed to any significant degree. Three count ries account for 80% of the 
cross-border e -commerce in the world: US, China and the EU.11 Clearly the benefits of digital 
economy are highly uneven and it does not serve all people equally. Under the current configuration 
of policies, rules, market dynamics  and corporate power, economic gaps are likely to increase.12 
Box: How Ready are Developing Countries for the Fourth Industrial Revolution?  
Studying various developing countries including India; China; Korea; Thailand; Indonesia; Brazil; 
South Africa; Mexico; Turkey; Malaysia; Vietnam; Bangladesh; Egypt, UBS in their 2016 study 
noted that  
 
'Many of these economies have still not dealt with th e challenge of previous industrial revolutions. 
Their output and employment are still largely driven by agriculture, small -scale manufacturing 
and low -skilled services, large parts of which are in the informal economy. These are economies 
with low capital stock and high population growth rates. They will face the threat of the Fourth 
Industrial Revolution compromising low -skilled jobs via extreme automation, but may not have 
the technological ability to enjoy the relative gains that could be re -distributed via extreme 
connectivity. When the Fourth Industrial Revolution arrives, a country 's present state of industrial 
technology and demographic patterns will together determine how successfully it adapts, 
economically and politically, to extreme automation and  extreme connectivity. The Fourth 
Industrial Revolution will take the emphasis away from demographic quantity to demographic 
quality. ' 
 
The Study concluded that many developing countries 'have not yet adapted even to the Second 
and Third Industrial Revolut ions'. These included Mexico, Turkey, Egypt, India, South Africa and 
Brazil, amongst others.  
Source:  UBS 2016 'Extreme automation and connectivity: The global, regional, and investment implications 
of the Fourth Industrial Revolution ' January, White Paper  for the World Economic Forum Annual 
Meeting 2016  
2.9.  Digitalization affects different countries in different ways, and individual governments require 
policy space to regulate the digital economy in order to fulfil various legitimate public policy 
objectives. UNCTAD Trade and Development Report 2018 found that the asymmetric composition of 
markets, the pricing power of firms from developed countries makes it very difficult for individual 
 
9 UNCTAD 2019 'Value Creation and Capture: Implications for Developing Countries ', Digital Economy 
Report, p 8.  
10 Teltscher S. 2000 ibid, p. 17.  
11 UNCTAD 2017, ibid. 
12 UNCTAD 2019, Digital Economy Report ibid. WT/GC/W/798  
 
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  developing countries to regulate the digital economy and to have a signifi cant economic role in Global 
Value Chains.13 
2.10.   The vast majority of developing countries are net importers of digital products. If they are to 
develop, and make progress on the Sustainable Development Goals (SDGs), these countries require 
the implementation of active industrial policies to get some benefits of E -commerce, including the 
use of tariff policies for the digital sector.  
2.11.   However, the moratorium will exactly prohibit countries from putting in place these needed 
tariffs. Further, with the advent of industry 4.0 and the advance of 3D printing technologies in the 
near future, carefully negotiated GATT bound rates which are typically higher in developing 
countries, will be brought to zero for their digitized counterparts. With zero tariffs , the moratorium 
is likely to make developing countries even more dependent on imports of digital products from 
developed countries. This will have huge negative impacts on industrialization, particularly digital 
industrialization and trade competitiveness . It will inhibit the ability of developing countries to 
protect their nascent domestic digital industries resulting in loss of jobs and increasing poverty. All 
in all, this will have catastrophic effects on industrial development and the attainment of SDG s. 
2.12.   The removal of the Moratorium by 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 domestic digital industrialization and the generation of local job s in the era of Industry 4.0.  
2.13.   The importance of tariffs as a trade policy instrument for building domestic industries and the 
catastrophic effects when tariffs can no longer be used can be seen in the example of India and the 
Information Technology Agreeme nt I. 
Impact of Tariff Elimination Under ITA  I on India 's Domestic Output of ITA Products  
The OECD's Trade in Value -Added (TiVA) database indicates that out of the total domestic demand 
for computers, electronic products and optical equipment in India in t he year 2000, almost 60% 
was met by domestic production and value -addition. However, the share of domestic production 
and value -addition in total domestic final demand of this product category dipped sharply to 
around 40% in the years 2004 -2005. This coinc ided with India completing the tariff elimination 
on products under ITA I. The share of domestic production/value -addition in the total final demand 
of this product category was around 30% by 2015 (the latest year for which information is 
available in TiVA ). 
 
This precipitous decline can be attributed to India's commitments under ITA I. While the product 
coverage under this analysis cannot be taken to be comprehensive, it is nevertheless indicative 
of the impact of ITAI on a broad product category - compute rs, electronic products and optical 
equipment.  
Source:  Centre for WTO Studies, using statistics from OECD 's Trade in Value -Added Database  
2.2  Tariff Revenue Losses  
2.14.   As cited above, several studies have looked into this issue. We will highlight the results of the 
most recent one - UNCTAD 's Research Paper (2019).14 The paper would seem to have provided the 
most comprehensive coverage of digiti zed and digitizable goods.  
2.15.   Based on the identification of a small number of digitizable goods in five areas, n amely, 
printed matter, music and video downloads, software and video games, the Paper estimated a loss 
of tariff revenue of more than $10 billion globally because of the moratorium, 95 per cent of which 
is borne by developing countries. It is also importan t to keep in mind that the estimate of $10 billion 
as the potential tariff revenue loss per annum is only the tip of the iceberg, as this estimate is based 
on only a small number of 49 HS -6-digit products. More details of the findings are as follows:  
 
13 UNCTAD 2018 'Power, Platforms and the Free Trade Delusion ', Trade and Development Report. 
p.70-71. 
14 UNCTAD 2019 'Growing Trade in Electronic Transmissions: I mplications for the South ', UNCTAD 
Research Paper, No. 29.  WT/GC/W/798  
 
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  - The p otential tariff revenue loss to developing countries is estimated at US$ 10 billion per 
annum (using average bound tariffs). Tariff revenue loss to WTO LDCs is estimated at US$ 
1.5 billion while for Sub -Saharan African countries the loss is around US$ 2.6 billion.  
- WTO high -income countries experience a tariff revenue loss of only $289 million, as their 
average Bound duties are at 0.2%.  
- 55% of global imports of the identified digitizable goods are electronic transmissions, while 
45% are physical imports.  
- If the trend in digitizable goods continue at the same rate UNCTAD estimates that the 
market for such goods would be half a trillion dollars for 2026.  
2.16.   As more goods are getting digitized with the advent of industry 4.0 and the advance of 
3D printing technol ogies, this estimate of fiscal revenue foregone will snowball. One study notes that 
the 3D printing market has grown by a compound annual growth rate of 29% since 2016.15 With 
3D printing, the moratorium will erode the existing GATT bound rates yet further,  which are typically 
higher in developing countries, and bring them to zero for digitized goods. This could have a 
catastrophic effect on the ability of developing countries to protect their nascent domestic digital 
industries resulting in loss of jobs and  destitution.  
2.17.   A background Paper of the World Development Report (2020) noted that "3D printing 
particularly benefitted exports of upper middle -income economies and high -income countries, while 
it had a negative impact on exports from low -income economies ". The study concluded that 
"3D printing is leading to a reshuffling in comparative advantage – from labour abundant /developing 
economies to capital abundant / advanced economies ".16 
2.18.   Are developing countries ready to let go of the use of effective and time  tested trade policies 
in goods like customs duties which even the developed countries have used and continue to use 
tariffs (including tariffs beyond their bound levels) in order to improve competitiveness and to protect 
certain domestic industries and lo cal employment? Are our goods industries able to compete on 
equal grounds vis -à-vis other economies in the context of the digital economy?  
2.19.   It is often argued that exporters from developing countries need the imports of digitizable 
products like software fo r improving their production and export of many goods and services. Custom 
duties on digitizable goods will increase the costs of their production and exports (e.g. software 
etc.). However, as stated above, the removal of the Moratorium in no way means tha t Members will 
necessarily impose customs duties across the board. The key is policy space and to use such policy 
space appropriately for domestic digital industrialization and the generation of local jobs in the era 
of Industry 4.0.  
2.3  Loss of other duties a nd charges  
2.20.   Various Members have also made the point that customs duties are not the only losses, but 
when customs duties are not collected, other taxes and charges which are charged to physical goods 
are also not collected. One estimate is that these charg es can be up to 23%.17 Hence it is not only 
tariff revenue that is lost, but Member should also be cognizant of revenue from other charges 
forfeited.  
3  ARE DEVELOPING COUNT RIES ENJOYING THE BE NEFITS OF THE DIGITA L ECONOMY?  
3.1.  What about the positive impacts of the digital economy for developing countries? Should these 
not also be taken into account in the discussion on losses and the impact of the moratorium? After 
all, it is often said that new digital technologies can provide developing countries with new inco me 
generation opportunities, including for their Micro and Small and Medium Sized Enterprises (MSMEs).  
 
15 EY 2019 '3D printing: hype or game changer? A Global EY Report 2019 ' 
https: //assets.ey.com/content/dam/ey -sites/ey -com/en_gl/topics/advisory/ey -3d-printing -game -changer.pdf . 
16 Freund et al (2010) "Is 3D Printing a Threat to Global Trade? The Trade Effects You Didn 't Hear 
About ", Background paper in World Development Report 2020.  
17 UNCTAD 2019 'Growing Trade in Electronic Transmissions: Implications for the South ', UNCTAD 
Research Paper, No. 29.  WT/GC/W/798  
 
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  3.2.  There have indeed been gains but these are not being distributed evenly. The reality, as noted 
earlier, is that most developing countries are experiencing profound challenges due to the 
infrastructure / technological divide, the skills divide, and the rising concentration in digital markets, 
particularly the market power of global digital platforms.  
3.3.  In terms of the infrastructure and digital div ide, 2018 marked the year where half of the global 
population was using the internet – 3.9 billion people were online. In LDCs, however, only 1 in 5 
people had internet access, compared to 4 out of 5 in developed countries.18 ITU has also projected 
that by 2025, 5G connections will be close to 60 percent in some of the more developed economies. 
However, it is expected that 5G penetration will only be 8 per cent in Latin America and 3 percent 
in sub -Saharan Africa.19 
3.4.  Further, ownership of platforms is the new critical factor measuring success in the digital 
economy. The platform has emerged as the new business model, capable of extracting and 
controlling immense amounts of data. However, with 'platformisation ', we have seen the rise of large 
monopolistic firms.20 UNCTAD 's Digital Economy Report (2019) highlights that the US and East Asia 
accounts for 90 percent of the market capitalization value of the world 's 70 largest digital platforms. 
Africa and Latin America 's share together is only 1 percent. Seven 'super platforms ' - Microsoft, 
Apple, Amazon, Google, Facebook, Tencent and Alibaba - account for two -thirds of total market 
value. In particular, Africa and Latin America are trailing far behind.21 
3.5.  UNCTAD 's Digital Economy Report observes also that local firms in  developing countries can 
benefit from being able to use services offered by the global platforms e.g. selling their products on 
these platforms. In some cases, local knowledge may also give an advantage to locally rooted 
platforms. 'Yet, due to the compet ition dynamics  … developing -country platforms that are trying to 
scale typically face an uphill battle '. The report concludes that 'the dominance of global digital 
platforms, their control of data, as well as their capacity to create and capture the ensuin g value, 
tend to accentuate concentration and consolidation rather than reduce inequalities between and 
within countries. '22 
4  CONCLUSIONS  
4.1.  Today Members are only waking up to the weighty impact of the moratorium assuming the 
scope of the moratorium is centere d on digiti zed and digitizable goods i.e. interpretation 'b' in Section 
I above. We are still at the cusp of the digital revolution. The challenges of this digital revolution are 
even more daunting than anything we have seen before. Thus developing countries need even more 
support to industrialise including access to technology, infrastructure (including related to the digital 
divide), education of the labour force, and of course policy space and the use of tried and tested 
instruments to build production capacities including trade policies such as tariffs.  
4.2.  The mor atorium will be equivalent to developing countries giving the digitally advanced 
countries duty -free access to our markets. All countries trying to catch up need time for their 
industries to become competitive before full liberalisation can be optimal. To do so whilst industries 
are still struggling will consign many developing countries to be only consumers. This will be 
catastrophic for economic growth, jobs, and the attainment of SDGs.  
 
18 ITU 2018 'Measuring the Information Society ', Geneva.  
19 ITU 2018 'Setting the Scene for 5G: Opportunities and Challenges ', Geneva.  
20 Srnicek N 2017 'Platform Capitalism ', Polity.  
21 UNCTAD 2019 'Digital Economy Report ', p. xvi.  
22 UNCTAD 2019 'Digital Economy Report ', p. xviii.  WT/GC/W/798  
 
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  5  SOME FURTHER REMARKS  
5.1.  Today, some institutions are assuming that the scope of the moratorium includes some 
services.23 This is not our understanding. If services are also included, such an interpretation would 
mean that WTO Members are agreeing to a completely duty -free trading environment, in other 
words, a fully liberalise d digital economy.  
5.2.  This view is not supported by the historical discussions and understanding on the moratorium. 
In addition, it would imply a complete paradigm shift from anything the GATT /WTO has ever been 
about, and there has never been any discussion for such a paradigm shift. Due to the importance of 
tariffs and trade policy instruments, until now, liberalisation commitments in GATT/WTO have 
occurred gradually, with tariffs being negotiated line -by-line, and services have been liberalised 
sub-sector b y sub -sector. All Members, including the most economically powerful carefully safeguard 
access to their markets, even in the context of their economic supremacy.  
5.3.  The moratorium covering digitizable  goods is already a major challenge since it is about 
bringing a large portion, and in time, maybe even the majority of NAMA tariffs to zero. For this 
reason, the moratorium must be reconsidered as digiti zation becomes the mode of commerce. It 
would be unthinkable for the scope to go beyond this to also include o ther forms of digiti zed trade, 
an issue which has not been discussed . 
__________  
 
23 The ECIPE Policy Brief (No. 3/2019) notes that the following services could also be subjected to a 
tariff: online retailing services; internet publishing, web search portals, directories and information services; 
motion picture and video industries, sound recordings; software publishing, programming; data hosting, 
processing, systems and data communications; ad vertising. These fall under wholesale and retail trading 
services; recreational and other services; communications; and business services.