Getting to yes: The e-commerce JSI reaches landmark at the WTO

While most of the news from the World Trade Organization (WTO) has been gloomy, Friday saw a rare breakthrough. More than 80 members of the group working on digital trade reached an historic agreement, albeit with an awkward phrasing. Leaders released a "stabilized text" for the Joint Statement Initiative (JSI) on Electronic Commerce.¹

This is not the sort of language that makes anyone outside policy circles stand up and take notice, but it profoundly matters. Digital is the future of trade.

The WTO does not have rules that explicitly cover digital trade. The JSI text, by contrast, covers six areas: enabling electronic commerce; openness; trust; transparency, cooperation and development; telecommunications; and exceptions.³

This coverage broadly mirrors digital trade commitments that some JSI members have made in other bilateral and regional trade agreements. The potential application of consistent rules to manage digital trade across more than half of the WTO members is critically important. The digital economy does not fit easily within geographic boundaries. A company in one location can quite easily use digital tools to buy and sell goods and services anywhere else in the world.

Early reviews of the text have largely focused on five issues:

• a JSI text that is about rules and does not have market access schedules;
• an insufficient commitment to data movement and data hosting requirements;
• ambiguous wording about making the customs moratorium permanent;
• a final text that does not include all members of the JSI; and
• a lack of clarity on the way that this text will be incorporated into the WTO.

First, the focus in the early stages of the JSI negotiations included both the expansion of trade rules to explicitly cover digital issues and the creation of specific market access commitments or schedules. This is especially important as existing schedules, such as for services sectors, may be read as extending to include digital services trade. But, equally plausibly, existing schedules may not clearly include digitally delivered services.

There was scope, therefore, for negotiations to adjust existing schedules or to negotiate new schedules related to the JSI. However, the stabilized text has dropped references to potential schedules or market access, focusing instead on the crafting of rules for digital trade.

Perhaps more problematic, the list of permitted exceptions is lengthy, with one in particular, Article 25, providing a significant loophole on the movement of personal data across borders. However, given the lack of support by the United States for the WTO deal and a range of extant divergent views on the regulation of personal data and privacy among jurisdictions from China to the European Union, it was never going to be easy to bridge these gaps.

Third, a key request from businesses for the JSI from the outset was to make the customs moratorium on electronic transmissions permanent. We have examined this issue extensively in the past.⁷ For now, simply note that the text does not clearly provide for a permanent extension of the moratorium. The general WTO membership has extended the moratorium through the next Ministerial Conference, but businesses were looking to the JSI to make the moratorium permanent. Instead, the text provides for a review after five years. This review could be a simple look or it may not.⁸

Finally, a legal issue of weaving the latest JSI agreement into the WTO architecture of rules: although there has been relatively muted early attention to the vexing issue of incorporation, the WTO has not had a lot of success lately in getting commitments in the various plurilateral agreements added to the overall set of legal commitments.⁹ Another JSI, on investment facilitation, for instance, had a fourth attempt at inclusion fail in July.¹⁰ Unless and until the JSI rules are incorporated into the WTO, including with greater clarity on whether the provisions apply to non-members, the agreement will provide only weak guidance towards future digital policy alignment.

It may seem, then, that the JSI is not a terribly useful agreement, given the assessments from early commentary. But these issues should not determine the true utility of this agreement. As digital trade continues to spread and become the dominant form of trade, the risk of regulatory fragmentation has only increased. The JSI provides a common platform – perhaps soon a de facto global standard – for more than 80 countries to better insure regulatory consistency.

If trade is to work for most, digital trade rules are critically important frameworks. It is especially notable for smaller firms that are least able to manage inconsistent rules. The release of a stabilized text is therefore a welcome addition to the WTO and global trade agenda.

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[1] There is a note in the stabilized text to say that further negotiations may still take place, leading to the potential inclusion of topics that had been on the negotiating table including scope, exceptions, and dispute settlement.
[2] 86 JSI members are (currently) included in the stabilized text, with 11 participants withholding approval. See https://www.wto.org/english/tratop_e/ecom_e/joint_statement_e.htm
[3] https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/INF/ECOM/87.pdf&Open=True
[4] See, for example, https://www.oecd.org/en/topics/policy-issues/digital-trade.html and  https://www.oecd.org/en/publications/of-bytes-and-trade-quantifying-the-impact-of-digitalisation-on-trade_11889f2a-en.html
[5] In particular, see Why does the US hate digital trade? | Article | Hinrich Foundation and International Economic Law and Policy Blog: The U.S. Changes Its Mind in the WTO E-Commerce Negotiations (worldtradelaw.net).
[6] Singapore has digital rules in ASEAN’s 2018 E-Commerce Agreement, in ASEAN-Australia-New Zealand FTA (AANZFTA), the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the Regional Comprehensive Economic Partnership (RCEP), the Digital Economy Partnership Agreement (DEPA), and four bilateral Digital Economy Agreements (DEAs) with Australia, the United Kingdom, South Korea and now the European Union.
[7] See https://www.hinrichfoundation.com/research/article/wto/e-commerce-deal-at-the-wto-is-back-in-play/ and https://www.hinrichfoundation.com/research/article/trade-policy/prepare-to-pay-more-for-digital-services/
[8] The review clause (11.5) says members will examine the impact of the provision and whether adjustments are appropriate.
[9] See the paper on plurilateral versus multilateral trade agreements at https://www.hinrichfoundation.com/research/policy-brief/challenge-of-getting-to-yes-at-the-wto/
[10] https://tradebetablog.wordpress.com/2024/07/22/128-fail-4th-try-plurilateral-investment/

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