India & Digital Trade: Joint Statement Initiative

INTERNATIONAL/ ECONOMY

• GS-2: Important International institutions, agencies and fora- their structure, mandate. 

India & Digital Trade: Joint Statement Initiative

Context: Despite the cancellation of the 12th Ministerial Conference of WTO in Dec 2021 due to COVID-19, digital trade negotiations continue their ambitious march forward. 

• In this context, members of plurilateral Joint Statement Initiative (JSI) on e-commerce, welcomed the ‘substantial progress’ made over the past three years

What is Joint Statement Initiative?

• JSIs are a negotiating tool initiated by a group of WTO Members who seek to advance discussions on certain specific issues without adhering to the rule of consensus decision-making of WTO.
• They are open to any WTO Member. 
• JSI aims to produce a binding agreement among its members. 
• On the occasion of the 11th WTO Ministerial Conference, in 2017, JSIs were created on the following issues: 
  • e-commerce
  • investment facilitation for development
  • micro, small and medium-sized enterprises (MSMEs)
  • domestic regulation in services
  • trade and women’s economic empowerment.
  • In 2020, two new initiatives were launched on trade and the environment, focusing on environmental sustainability and plastics pollution.
• The JSI on e-commerce encompasses both traditional trade topics (e.g. trade facilitation) and several digital policy issues, such as cross-border data flows and data localisation, online consumer protection and privacy and network neutrality.
• Some Members see JSIs as key mechanisms to make progress on trade liberalization, in a context in which consensus on rulemaking has been harder to achieve in WTO.
• India and South Africa have led the resistance and been the JSI’s most vocal critics

Why JSIs has been resisted by some countries like India?

• Weakens multilateralism: India and South Africa have rightly pointed out that the JSI contravenes the WTO’s consensus-based framework, where every member has a voice and vote regardless of economic standing. 

• Fear of arm twisting Developing countries: Even though JSI members account for over 90% of global trade, and the initiative welcomes newer entrants, over half of WTO members (largely from the developing world) continue to opt out of these negotiations. They fear being arm-twisted into accepting global rules that are shaped by developed countries.
• Sovereign Rights of States to frame policy: Several countries have imposed data localisation mandates that compel corporations to store and process data within territorial borders. Developed countries believe that this increases compliance costs, hampering innovation and supposedly amounting to unfair protectionism.
  • There is a similar disagreement regarding domestic laws that mandate the disclosure of source codes which developing countries believe is essential for algorithmic transparency and fairness
  • Data sovereignty is championed as a means of resisting ‘data colonialism’ and any policy should benefit not just large players (in developed countries) but also small players in developing countries

What is the way forward?

• Hastily signing trading obligations could reduce the space available to frame appropriate policy. But sitting out trade negotiations will means India losing out on opportunities to shape these rules from being a part of it.
  • China and Indonesia, argued that they sought to shape the rules from within the initiative rather than sitting on the sidelines. 
• Negotiations need not mean compromise. For example, exceptions to digital trade rules, such as ‘legitimate public policy objective’ or ‘essential security interests’, could be negotiated to preserve policymaking where needed 
  • Taking a cue from the Digital Economy Partnership Agreement (DEPA) between Singapore, Chile, and New Zealand, India can push for a framework where countries can pick and choose modules with which they wish to comply

Conclusion

• Despite its failings, the WTO plays a critical role in global governance and is vital to India’s strategic interests. Negotiating without surrendering domestic policy-making holds the key to India’s digital future.

Connecting the dots:

• India Challenges WTO verdict on sugar
• China’s Developing Status at WTO