Digital: The WTO E-Commerce JSI's Stabilised Text - what does it deliver, who couldn't support it, and what are its next steps?
One month is a long time in trade policy, particularly in the lead-up to the European summer. Four weeks after the last leaked text in the WTO’s Joint Statement Initiative on Electronic Commerce (E-Commerce JSI), the participants have now released a “stabilised text” with the title Agreement on Electronic Commerce (the Stabilised Text). This marks the end of five years of negotiations and is a major achievement for the WTO.1 It is also a further example of the potential for plurilateral negotiations to keep the WTO’s rulemaking function alive and deliver concrete outcomes for global trade.
While the released text is ‘stabilised’ it is still far from being a legally binding agreement. Participants are now undertaking their domestic processes and are working out how to integrate it into the WTO legal framework (a hard task in the current climate in Geneva). Nine participants were also unable to put their names to the text, including the United States.
In this post, I take a look at what the proposed Agreement on Electronic Commerce would deliver for digital trade, what might be driving the nine participants who couldn’t support the text, and what the next steps are for turning the Stabilised Text into a binding treaty.
The substance: what’s in the proposed Agreement on E-Commerce?
On substance, the Stabilised Text is virtually identical to the 28 June leaked text, except for the removal of “WTO” from the title of the proposed Agreement.
As has been covered ad nauseum, following a change in the United States’ position, the E-Commerce JSI was unable to agree meaningful rules on data flows and data localisation, which will blunt some of its headline impact. However, the Stabilised Text still contains other useful commitments for digital trade and that will facilitate physical trade as well. These include commitments to support the use of electronic signatures, make customs forms available electronically and accept their electronic submission, protect personal data, and adopt consumer protection measures. The Stabilised Text also includes telecommunications commitments based on the GATS Telecommunications Reference Paper (covering matters such as competitive safeguards, interconnection, licensing processes, and regulator independence).2
The most noteworthy outcome, though, is the commitment to not apply customs duties to electronic transmissions (subject to a review after five years). This would prevent participants from imposing ‘import taxes’ on purely digital cross-border transactions (such as streaming a movie or downloading an app on to your phone). In addition to being a meaningful outcome for digital trade, this could also take some of the heat out of the usual Ministerial tussle over renewing the temporary customs duties moratorium that takes place every two years.3
The Stabilised Text also contains a range of “endeavour” or heavily hedged commitments (with 32 references to “endeavour” and 11 to “encourage” according to Chris Horseman at Borderlex). This includes on matters such as adopting the UNCITRAL Model Laws on Electronic Commerce and Electronic Transferable Records, avoiding undue regulatory burden on electronic transactions, accepting electronic invoices, and providing greater access to government data.
There are also a number of ‘recognition’ provisions, which set out agreed principles associated with digital trade and e-commerce (such as on the use of international standards, the benefits of open government data, access to and use of the internet, and the importance of personal data protection). These don’t require action on the part of any participant but will likely support the development of norms around internet regulation and be useful for encouraging a level of regulatory consistency.
While there is not much that is revolutionary in these commitments and provisions,4 their agreement by 80-plus WTO Members is a substantial and important development bringing some level of consistency and certainty for global digital trade. The E-Commerce JSI’s broad and diverse membership will also hopefully help to establish these outcomes as the basis for new global norms on digital trade issues.
Beyond the commitments it contains, it is also worth mentioning that the Stabilised Text contains specific development-related provisions. It recognises the importance of bridging the “digital divide” and of the need for technical assistance and capacity building to achieve this. It provides for a transitional regime for developing and least-developed Parties and encourages Parties to provide them with the support needed to implement the Agreement. This is supported by the proposed institutional arrangements, including a Committee on Trade-Related Aspects of Electronic Commerce, which will also be key to enabling the Agreement to stay relevant as technology and trade continues to evolve.
The nine non-supporters
Nine E-Commerce JSI participants were not able to put their names to the release of the Stabilised Text “due to ongoing domestic consultations and considerations”. These are Brazil, Colombia, El Salvador, Guatemala, Indonesia, Paraguay, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Türkiye and United States (see map below).
Technically these participants have not yet dropped out of the negotiations, and for some their domestic consultations may enable them to ultimately support the Agreement (particularly if they are facing specific domestic political difficulties that may be able to be resolved over time). However, for many of these participants, their non-support of the Stabilised Text is not a surprise.
Most of the nine non-supporters are reportedly concerned by the prohibition on customs duties on electronic transactions, including Indonesia (which has been vocal in the past with its concerns), Brazil and Türkiye. Türkiye has also more recently joined India and South Africa’s opposition to a different plurilateral agreement - the Investment Facilitation for Development Agreement (IFDA) - being incorporated into the WTO Agreement.
Colombia and Taiwan are more interesting cases. Colombia has already agreed to higher standard digital trade rules in the Pacific Alliance-Singapore FTA (signed but not yet in force). Taiwan has agreed to the customs duties prohibition and other digital trade rules in its Singapore FTA as well. While an FTA outcome does not guarantee support for the same rule among a much larger set of economies (particularly for Colombia where the FTA hasn’t entered into force), this may give some hope that their concerns with the Stabilised Text could be overcome. That said, both of these FTAs contain a broader security exception than the GATT and GATS exceptions that are incorporated into the Stabilised Text, so there may also be some alignment between Colombia and Taiwan with the United States’ concerns around security.
On the United States, it’s statement on the Stabilised Text noted that it “remains committed to working with the … co-conveners and participants to achieve a high-standard outcome” and that the text “represents an important step forward for the WTO in a sector of growing importance to the global economy while demonstrating the supportive role that JSIs can play in revitalizing the WTO’s negotiating function”. But it also said that “the current text falls short and more work is needed, including with respect to the essential security exception” and that it hopes to work with Members to find solutions and move the negotiations to a timely conclusion.
It would not appear to be very realistic to expect substantive changes to the Stabilised Text at this stage, with domestic processes underway and participants focusing on next steps. However, even if this was possible, beyond the security exception it isn’t clear exactly what the United States needs to enable it to join the fold.
Looking for higher ambition would be strange given the United States’ role in removing the rules around data flows and localisation. Wanting to lower ambition would also be unexpected given the extent of flexibilities in the text and the content of the binding rules.
The concrete issue identified by the United States’ statement is the security exception and on this you’d assume that it was seeking clearer, broader and more deferential language based on its FTA-practice. This is notwithstanding that it continues to maintain that the GATT and GATS security exceptions (which are both incorporated into the Stabilised Text) are self-judging. What would be interesting to know is whether this is just a matter of principle or if there are actual provisions in the text that are causing concerns5 (noting that China is a JSI participant).
It may also be that the United States has technical issues around specific drafting, or with provisions such as the “Personal Data Protection Exception” (which is based on European Union practice), and that these are holding up the United States’ support.
Ultimately for the United States, though, this move just reaffirms the difficulties it faces domestically in agreeing to new rules on digital trade (and these difficulties are only be amplified in an election year). As former head of the EU Delegation to the WTO and UN John Clarke noted on X/Twitter, non-participation by the United States is not necessarily a cause for alarm for the rest of the participants. However, it is a worry if the United States’ domestic politics continue to prevent it from participating (if not leading) the global development of these rules.
Next steps
Now that the E-Commerce JSI has a Stabilised Text, its participants are undertaking domestic processes “with a view to integrating the outcome of negotiations in the WTO legal framework”. Annex 4 of the WTO Agreement - containing the WTO’s Plurilateral Trade Agreements - would be the most natural fit for the proposed Agreement on Electronic Commerce. However, adding an agreement to Annex 4 requires consensus of all WTO Members, and India and South Africa remain key obstacles to achieving this. Given the cross-cutting nature of the Stabilised Text’s commitments (relating to goods and services) amending GATT or GATS schedules to include it would be messy. So, the route taken by the Services Domestic Regulation JSI is unlikely to be viable.
As I noted in regard to the IFDA, it’s also possible for the Stabilised Text to be done as a standalone treaty. However, this means missing out on the WTO’s institutional backing, including support from the WTO Secretariat and WTO dispute settlement (although the Appellate Body issues mean this is perhaps less of an incentive than it once was).
Also, while others have suggested the proposed agreement would be applied on a Most-Favoured-Nation (MFN) basis (i.e. its commitments would be applied to benefit non-participants as well as participants), I haven’t seen this explicitly stated by the Co-convenors or any participants. Not applying the agreement on an MFN basis would create another hurdle to convincing the WTO membership to add the agreement to Annex 4, and also potentially make it more difficult to implement the Stabilised Text via a standalone treaty.
This all means there is a difficult road ahead for working out how to transform what are currently good rules on paper, into binding ‘trade law’ for the participants.
In the end, getting to a Stabilised Text that around half of the WTO’s Members were able to support is an important achievement that took a great deal of hard work by all participants and particularly Australia, Singapore and Japan as Co-convenors. There are therefore some justifiably celebratory messages doing the rounds. Both concretely for trade and systemically for the WTO, though, here’s hoping the participants can also find a path to having their agreement enter into force soon.
Full disclosure, I worked on the E-Commerce JSI on behalf of Australia, including at a couple of negotiation rounds in Geneva. This post doesn’t reveal any confidences, but my views are likely shaped by my previous involvement.
The Reference Paper itself was only adopted by around 60 or so WTO Members, so including an updated version of its commitments in the proposed E-Commerce Agreement would expand its coverage.
Noting also that the March 2024 Thirteenth Ministerial Conference decision shifted the emphasis to the moratorium ending at or before the next Ministerial Conference: “We agree to maintain the current practice of not imposing customs duties on electronic transmissions until the 14th Session of the Ministerial Conference or 31 March 2026, whichever is earlier. The moratorium and the Work Programme will expire on that date.”
The United Kingdom also has a useful section-by-section summary of the proposed E-Commerce Agreement.
Perhaps it wants greater certainty that it can impose s 232 tariffs on electronic transmissions?