House Call for Renewal of WTO Digital Trade Moratorium

A bipartisan group of lawmakers are calling on US Trade Representative Katherine Tai to press for renewal of the long-standing  Moratorium on Customs Duties on Electronic Transmissions transactions at the World Trade Organization’s upcoming 13th ministerial conference.

The moratorium has been in place since 1998, with the U.S. and all other WTO members agreeing not to impose tariffs on electronic transmissions.  If WTO members do not renew the moratorium at next month’s ministerial, countries will be free to impose tariffs on digital goods and services. Many developing countries want to see the moratorium end, arguing that they have lost revenues for years because of it.

In a letter to USTR Tai, 32 lawmakers urged the Administration to push for renewal of the moratorium, saying that the imposition of tariffs would harm US workers and businesses. House Ways and Means Committee members Reps. Suzan DelBene (D-Wash),Darin LaHood (R-Ill), Adrian Smith (R-Neb) and Earl Blumenauer (Ore), led the bipartisan coalition.

Impact on US Companies“The international flow of digital goods and digital services has become increasingly vital to American workers and businesses of all sizes, including the countless small businesses that use digital tools to export products and services across the globe,” the lawmakers wrote. “Failing to renew the Moratorium for the first time in a quarter century would undermine the strength of the American economy, jobs, and innovation.”

The imposition of tariffs would impact the many US industries that transmit products and services electronically and rely heavily on the free flow of data around the globe, including manufacturing, agriculture, entertainment, software, financial services, semiconductors, aerospace, autos, robotics and medical devices, they argued.

The new tariffs also would have a heavy impact on small and medium-sized businesses and entrepreneurs who use digital tools to reach new customers overseas and cannot set up physical operations in every country in which they sell in order to avoid duties imposed on electronic transmissions.

The moratorium covers electronic transmissions of both digital goods like e-books, music, movies and video games and digital services (like software, emails and text messages).

US Chamber Position

The US Chamber of Commerce chided the USTR’s work on Digital Trade in a policy note issued January 19, noting

“The U.S. Trade Representative (USTR) announced in October it was walking back longstanding U.S. support for strong digital trade rules, even though these represent well-established and bipartisan positions that were most recently enshrined in U.S. law in the United States-Mexico-Canada Agreement (USMCA). 

"Specifically, USTR withdrew support for proposals on: 

1. Due process measures with respect to cross-border data flows and data localization restrictions; 
2. Protections for source code vis-à-vis forced access; and 
3. Protections from trading partner discrimination against U.S.-made digital products. 

“Without strong digital trade commitments, a number of large emerging markets could impose data localization requirements that force companies to store data generated or collected in a country on servers located within that country. The added cost and inefficiency would be baked in without advancing privacy, cyber, or other policy goals,” the Chamber concludes.