THE CONTEXT: India is planning to bring about a national e-commerce policy. However, the government has decided to stay away from negotiations at the World Trade Organization platform to set international e-commerce rules due to many concerns. This article discusses WTO negotiations on e-commerce and India’s stand.
BRIEF DESCRIPTION OF NEGOTIATIONS AT THE WTO
The second phase of the final discussion started after 2019 and still date it is going on. India decided to stay away from negotiations.
OSAKA TRACK
- The G20 summit took place in June 2019 in Osaka, Japan. At the sidelines of the summit, a special event on the digital economy gathered G20 leaders and other countries who are currently participating in the informal plurilateral negotiations on e-commerce at the WTO. Together, they issued the Osaka Declaration on Digital Economy, announcing the launch of the ‘Osaka Track’, a process that aims to intensify efforts on international rule-making on the digital economy, especially on data flows and e-commerce, while promoting enhanced protections for intellectual property, personal information, and cybersecurity.
- The signatories of the Osaka Declaration on the Digital Economy hope to ‘provide a political impetus to the negotiations on e-commerce at the WTO’.
- The Osaka Track is inspired by the idea of ‘Data Free Flow with Trust (DFFT)’ proposed by Japanese Prime Minister Shinzo Abe at the World Economic Forum 2019, aiming to eliminate restrictions on cross-border data flows.
- India, Indonesia, and South Africa, among other countries, decided not to sign the Declaration.
INDIA’S CONCERNS
The government has decided to stay away from negotiations at the WTO (World Trade Organization) platform to set international e-commerce rules. It believes that the WTO framework may not safeguard the interest of its fledgling domestic e-commerce sector, hamper its control over cross-border data flow, and undermine its sovereignty over national legislation regarding custom taxation.
Cross-border data flow: India is wary of the demand made by developed countries to ban the regulations that many countries passed to protect the data.
Taxation issues: The WTO has already, for several years, been applying an agreed moratorium on tariffs for goods that are transmitted electronically. Developed countries are arguing for making this moratorium permanent. India fears that as more and more goods shift to the digital domain (in light of developments in digital manufacturing technologies such as 3-D printing), these could mean a substantial loss of revenue for emerging economies like India.
Underprepared MSMEs: Domestic retailers, especially small businesses, are underprepared to compete with large global e-commerce companies.
Digital divide: India is opposed to the formalization of talks on any form of an international treaty prior to the resolution of cross-cutting issues such as the digital divide between developed and developing nations.
Predatory pricing: In the case of B2C, there are issues related to shifting consumers from store to non-store formats, predatory pricing, providing heavy discounts to retain consumers, etc. Indian regulations related to predatory pricing are weak, and it is in fact difficult to prove predatory pricing.
SHOULD INDIA RECONSIDER ON ITS STAND?
Advantageous to the MSMEs:
- One of the key assumptions of the WTO negotiation is that it would help MSMEs by enhancing their scope for participating in international trade.
- It would be cost-effective for small and medium enterprises to use e-platforms to sell their products in wider geographical areas.
- However, here India must argue in favor of the Non-Discriminatory Market Place (NDMP) model as against an inventory-based model. As NDMP models are more favorable to the MSMEs.
Growing e-commerce market:
- With private domestic consumption in the economy showing a secular downward trend from a high of 61% (2013-14) to 55% (2018-19) as per the latest Economic Survey, it must capture the growing e-commerce market to boost exports.
- It can do so effectively by remaining in the WTO framework and negotiating in a way that is to its advantage.
- Most of the countries of Africa and even China is ready to be part of the negotiation; India cannot afford to remain isolated. It will have to join the framework at some point in time.
- However, terms may not be favorable then because consensus could have been reached without India’s participation. Therefore, India must join the negotiation now and put its views prudently and forcefully.
Tax losses:
- India could increase its share in the global e-commerce market by remaining in the WTO framework and thus could offset some of the tax losses through custom duty by the increased revenue (thus corporation taxes) of its domestic e-commerce companies.
Stand of other countries:
- All WTO members recognize that e-commerce will be an integral part of business activities in the future; it will reduce the cost of doing business and connect SMEs to the global market.
- Developing countries are in a state of readiness to welcome international rules and, therefore, global competition. This can perhaps be correlated to the enhanced level of digital adoption by small businesses in many such countries.
- India must learn from China, which has a very strict data-localization policy but is still willing to join the negotiation calling for a ‘global data governance’ mechanism.
Developmental approach:
- The willingness of other G-77 countries to participate in international negotiations on e-commerce indicates that a developmental approach is superior to a regulatory one, to foster competitiveness in new markets.
- The renewed momentum in the domestic policy process is also an opportunity for India to recalibrate its command-and-control ethos. For instance, the previous draft policy sought government access to source codes of e-commerce companies, to ensure a lack of algorithmic bias.
- A focus on standards rather than state control is also a better fit for globalization.
INDIA’S PREPARATION
- The government of India released a draft e-commerce policy on 23 February 2019. The major tenets of the policy are related to data storage and localization, encouraging foreign direct investment (FDI) in the marketplace model, measures to contain the sale of counterfeit, prohibited, and pirated items, and making India’s e-commerce exports competitive and attractive.
- The Consumer Protection Bill 2019, which was passed by Parliament, paves the way for a regulator that could haul up eCommerce companies such as Amazon and Walmart-owned Flipkart if they influence pricing, unfairly promote products or misrepresent the quality of goods and services sold on their platforms.
- The government has also been working on various policies to more strictly regulate data storage by technology companies. For e-commerce, the new regulator will likely define categories of e-commerce data that would have to be stored locally within India.
OTHER INITIATIVES
Digital India: The Digital India program is a flagship program of the Government of India which aims to transform India into a digitally empowered society and knowledge economy. The Digital India program is based on three key vision areas:
- Digital infrastructure as a core utility to every citizen
- Governance and services on demand
- Digital empowerment of citizens.
Make in India: The Make in India initiative was launched to transform India into a global design and manufacturing hub and to reduce dependence on imports of goods such as electronic goods.
Start-up India: Startup India was intended to build a strong ecosystem for nurturing innovation and start-ups in the country to drive sustainable economic growth and generate large-scale employment opportunities.
WAY FORWARD:
- E-commerce has been hailed by many as an opportunity for developing countries to gain a stronger foothold in the multilateral trading system. E-commerce has the ability to play an instrumental role in helping developing economies benefit more from trade.
- Unlike the requirements necessary to run a business from a physical building, e-commerce does not require storage space, insurance, or infrastructure investment on the part of the retailer. The only prerequisite is a well-designed web storefront to reach customers.
- Additionally, e-commerce allows for higher profit margins as the cost of running a business is markedly less.
CONCLUSION:
E-commerce is generally presented in very positive terms but along with the potential benefits come potential problems for developing countries. In this case, the role of government becomes crucial. For example, the Federal Trade Commission of the United States is the nodal agency that regulates e-commerce activities, such as commercial email, online advertising, and consumer privacy. Similarly, India must also have such an agency that can control multiple dynamics of online retail. And should build institutional capacity for WTO negotiations and international competitions.
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