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

Key Phrases: Twelfth Ministerial Conference (MC12), General Council Work Programme, Joint Statement Initiative (JSI), Joint Parliamentary Committee (JPC) on data protection, data colonialism, Digital Economy Partnership Agreement (DEPA)

Why in News ?

• The cancellation of the Twelfth Ministerial Conference (MC12) of the World Trade Organization (WTO) late last year (scheduled date, November 30, 2021-December 3, 2021) due to COVID-19, however, digital trade negotiations continue their ambitious march forward.
• On December 14, Australia, Japan, and Singapore, co-convenors of the plurilateral Joint Statement Initiative (JSI) on e-commerce, welcomed the ‘substantial progress’ made at the talks over the past three years and stated that they expected a convergence on more issues by the end of 2022.

Key Highlights

• 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.
• The developing world fears being arm-twisted into accepting global rules that can result in domestic policy making and economic growth.
• India and South Africa have led the resistance and been the JSI’s most vocal critics.
• India has thus far resisted pressures from the developed world to jump onto the JSI bandwagon, largely through coherent legal argumentation against the JSI and a long-term developmental vision.

Global rules on digital trade

• E-Commerce regulation and WTO: The WTO emerged in a largely analogue world in 1994. It was only at the Second Ministerial Conference (1998) that members agreed on core rules for e-commerce regulation.
  1. A temporary moratorium was imposed on customs duties relating to the electronic transmission of goods and services. This moratorium has been renewed continuously, to consistent opposition from India and South Africa.
  2. They argue that the moratorium imposes significant costs on developing countries as they are unable to benefit from the revenue customs duties would bring.
• E-Commerce major hurdles : The members also agreed to set up a work programme on e-commerce across four issue areas at the General Council: goods, services, intellectual property, and development.
• Frustrated by a lack of progress: 70 members brokered the JSI in December 2017 to initiate exploratory work on the trade-related aspects of e-commerce.
• New entrants: Countries like China and Indonesia, argued that they sought to shape the rules from within the initiative rather than sitting on the sidelines.
• India and South Africa have pointed out
  1. JSI contravenes the WTO’s consensus-based framework, where every member has a voice and vote regardless of economic standing.
  2. Unlike the General Council Work Programme, which India and South Africa have attempted to revitalise in the past year, the JSI does not include all WTO members.
  3. For the process to be legally valid, the initiative must either build consensus or negotiate a plurilateral agreement outside the aegis of the WTO.
• India and South Africa’s positioning strikes a chord at the heart of the global trading regime:
  1. how to balance the sovereign right of states to shape domestic policy with international obligations that would enable them to reap the benefits of a global trading system.

Several issues highlighted

• One such issue concerns international rules relating to the free flow of data across borders.
  1. Several countries, both within and outside the JSI, have imposed data localisation mandates that compel corporations to store and process data within territorial borders.
  2. This is a key policy priority for India. Several payment card companies, including Mastercard and American Express, were prohibited from issuing new cards for failure to comply with a 2018 financial data localisation directive from the Reserve Bank of India.
  3. The Joint Parliamentary Committee (JPC) on data protection has recommended stringent localisation measures for sensitive personal data and critical personal data in India’s data protection legislation.
  4. However, for nations and industries in the developed world looking to access new digital markets, these restrictions impose unnecessary compliance costs, thus arguably hampering innovation and supposedly amounting to unfair protectionism.
• Issues regarding domestic laws that mandate the disclosure of source codes.
  1. Developed countries believe that this hampers innovation, whereas developing countries believe it is essential for algorithmic transparency and fairness - which was another key recommendation of the JPC report in December 2021.
• India’s Stand
  1. India’s global position is reinforced through narrative building by political and industrial leaders alike.
  2. Data sovereignty is championed as a means of resisting ‘data colonialism’, the exploitative economic practices and intensive lobbying of Silicon Valley companies.
  3. Policymaking for India’s digital economy is at a critical juncture. Surveillance reform, personal data protection, algorithmic governance, and non-personal data regulation must be galvanised through evidenced insights, and work for individuals, communities, and aspiring local businesses — not just established larger players.

Way Forward

• Hastily signing trading obligations could reduce the space available to frame appropriate policy.
• But sitting out trade negotiations will mean that the digital trade juggernaut will continue unchecked, through mega-regional trading agreements such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
• India could risk becoming an unwitting standard-taker in an already fragmented trading regime and lose out on opportunities to shape these rules instead.
• Alternatives exist; negotiations need not mean compromise.
  1. 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 while still acquiescing to the larger agreement.
  2. Further, any outcome need not be an all-or-nothing arrangement. 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.
  3. These combinations can be amassed incrementally as emerging economies such as India work through domestic regulations.

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.

Source: The Hindu

Mains Question:

Q. Despite several negotiations happening for e-commerce regulations, the global consensus remains abysmally low in bringing a comprehensive agreement. Analyze the significance of Joint Statement Initiative (JSI) in this regard.(15 marks)