Ecommerce tariffs will kick in from 2026, says WTO chief

Unlock the Editor’s Digest for free

The first customs duties on digital products such as online films and software downloads will hit consumers and businesses in 2026, increasing prices in some countries, the head of the World Trade Organization has predicted. 

Ngozi Okonjo-Iweala said some governments would refuse to extend a 30-year exemption when it expired in two years’ time. A further extension requires unanimity among members. 

“I don’t think the membership is prepared to continue arguing over this every couple of years. So they’ve agreed on this date. It sends a signal to business on what they need to do,” the WTO’s director-general told the Financial Times. “Two years is a very reasonable timeframe.”

Some developing economies such as India, Indonesia and South Africa hope online tariffs will significantly raise their tax revenue but other WTO members argue that the move will increase costs and reduce competitiveness as the levies are passed on to consumers.

Business groups, which lobbied to extend the so-called ecommerce moratorium at the WTO’s biennial ministerial conference (MC13) this month, still hope WTO members will continue it at the next meeting in Cameroon in 2026.

“Customs duties on electronic transmissions would lead to higher costs for all digitally enabled trade and decrease competitiveness for businesses adopting digital tools, especially small and medium-sized businesses,” said the Global Services Coalition, a pan-sectoral business group. 

But Indonesia only agreed to the two-year extension after a late-night call between Okonjo-Iweala and finance minister Sri Mulyani Indrawati as the conference was closing on March 2, according to officials in the room. The two are former World Bank colleagues.

India, which has consistently called for the moratorium to end, also only acquiesced to the extension in the final hours. 

Along with other developing countries such as South Africa and Pakistan they believe they are losing tax revenue because most digital products are imported from richer countries. Indonesia is already designing a system to impose duties on digital goods.

Okonjo-Iweala stressed that most governments would continue to exempt ecommerce duties even after 2026. The US, China, EU member states and most of Latin America are among more than 80 countries negotiating a voluntary moratorium. “Those that wish to continue . . . not charging customs duties on electronic transmissions can do that. Nothing stops them.”

She urged member governments through their WTO missions in Geneva to advance work on which ecommerce products should face duties. “Decisions should be made based on facts,” she said. Studies by the OECD and other groups suggest that developing countries would suffer more than developed ones if duties were introduced as they would lose access to productivity enhancing online tools.

Okonjo-Iweala suggested annual ministerial meetings would help avoid the climactic horse-trading witnessed at MC13 in Abu Dhabi. “The long gap leads to more drama,” she said.

Ministers must also find time “to discuss the issues that affect trade”. These include not only digital trade but also climate change and the rise of states using economic security concerns to restrict trade.

However, she rejected criticism of MC13, which failed to achieve breakthroughs on issues such as a ban on subsidies for overfishing and a reduction in agricultural subsidies, pointing out that members had agreed to phase in tariff increases for poorer countries that exit “least developed country” status to aid their development.

Okonjo-Iweala said she was “optimistic” about hitting a year-end deadline for reforming the WTO’s dispute resolution function. The US in 2019 blocked appointments of arbitrators to appeal panels, allowing member states to avoid binding penalties.

After elections in India and the US later this year, she was optimistic there would be “overall much more leeway and a more constructive approach” on the appeals body and other issues.

Letter in response to this article:

Plea to WTO: please retain ban on ecommerce tariffs / From Christine Bliss and others

Source link

Ecommerce tariffs will kick in from 2026, says WTO chief #Ecommerce #tariffs #kick #WTO #chief

Source link Google News

Source Link: