Small Business Innovation and Job Creation Hang in the Balance – Will the World Trade Organization Extend the Moratorium on Customs Duties on Electronic Transmissions?

A foundational international agreement, in place since 1998, that has enabled micro-, small-, and medium-sized enterprises (MSMEs) around the world to grow and compete in the digital economy is currently facing expiration. Its renewal during the World Trade Organization’s (WTO’s) 13^th Ministerial Conference taking place in Abu Dhabi next week (February 26-29) is a must for MSMEs to equitably and efficiently bring their innovations to new markets.

MSMEs are the driving force behind innovation across countless consumer and enterprise use cases, from education to healthcare to gaming. Across developed and developing nations, the global digital economy, valued by the WTO at over US$3.8 trillion, has become the primary channel for affordable and accessible digital products and services that have benefitted countless populations and businesses, as well as providing an unparalleled means of empowerment and equity.

This dynamic is not an accident. Recognizing the incredible potential of the internet, in the late 1990s, world leaders came together at the WTO to agree not to subject electronic transmissions to tariffs and customs formalities. Ever since, the relatively unknown “ecommerce moratorium,” as it is commonly called, has enabled startups and MSMEs around the world to reach new markets. Study after study after study continues to demonstrate the benefits of the moratorium to economies of all kinds and to the MSMEs across those economies.

Yet, a handful of nations continue to work to kill the moratorium because they would like to subject ecommerce to tariffs and customs duties or are at least threatening to do so as a negotiating tactic to achieve other goals. While these countries’ interest in generating further revenues is understandable, overwhelming study and analysis demonstrates that the damage caused to their economies would far outweigh the revenues collected. Further, by fracturing the digital economy with country-by-country approaches to ecommerce, they will unintentionally suppress their own MSME communities’ ability to grow and create jobs – in comparison to larger businesses, an expired ecommerce moratorium’s impact on MSMEs and startups will be far more pronounced and burdensome.

It is also important to underscore that beyond the impact of the WTO’s decision on MSMEs, the WTO’s integrity as an institution is at risk. Should the WTO allow the moratorium to expire in the face of the evidence supporting its continuation, it would be setting policy in contradiction to the WTO’s core purpose of ensuring smooth, predictable, and free trade.

That is why the App Association is proud to have joined a diversity of other MSME and startup associations in a letter calling to support equitable participation in digital trade for each and every startup and MSME and for the WTO to make the Moratorium on Customs Duties on Electronic Transmissions permanent during the World Trade Organization’s 13^thMinisterial Conference.