Notes for India as a Master of Digital Business

Despite 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, the digital trade talks are on their ambitious march. is continuing. , On 14 December, Australia, Japan and Singapore, co-convenors of the Multilateral Joint Statement Initiative on E-commerce, welcomed the ‘substantial progress’ made in talks over the past three years and said they expected a convergence . On more issues by the end of 2022.

holding out

But therein lies the nonsense: even though JSI members account for more than 90% of global trade, and the initiative welcomes new entrants, more than half of WTO members (largely from the developing world) stay out of these negotiations. continue. They are afraid to accept global regulations that could affect domestic policy making and economic growth. India and South Africa have led the resistance and have been the most vocal critics of JSI. India has so far resisted pressure from the developed world to jump on the JSI bandwagon, mainly through coherent legal arguments against JSI and a long-term growth vision.

Nevertheless, given the increasingly fragmented global trade landscape and the growing importance of the global digital economy, can India tailor its engagement with the WTO to better accommodate its economic and geopolitical interests?

Global regulations on digital trade

The WTO emerged in 1994 in a largely analog world. It was only at the second ministerial conference (1998) that the members agreed on the main rules for e-commerce regulation. There was a temporary ban on customs duties relating to the electronic transmission of goods and services. The adjournment has been continuously renewed thanks to continued protests from India and South Africa. They argue that the moratorium imposes significant costs on developing countries as they are unable to benefit from customs revenues.

The members also agreed to establish in the General Council a work program on e-commerce in four issue areas: goods, services, intellectual property and development. Frustrated by the lack of progress in the two decades that followed, 70 members roped in JSI to begin exploratory work on business-related aspects of e-commerce in December 2017. Despite the contrasting views of most JSI members on key issues, several countries, including developing ones, signed in 2019. The surprising entrants, China and Indonesia, argued that they sought to shape rules from within the initiative rather than sit on the sidelines.

India and South Africa have rightly pointed out that the JSI violates the consensus-based framework of the WTO, where each member has a voice and vote, regardless of economic status. Unlike the General Council Work Program, which India and South Africa have attempted to revive over the past year, the JSI does not include all WTO members. For the process to be legally valid, the initiative must either build consensus or negotiate a multilateral agreement outside the auspices of the WTO.

The situation in India and South Africa strikes a chord at the heart of the global trading system: how to balance the sovereign authority of states to shape domestic policy with international obligations that enable them to reap the benefits of the global trading system. Enable it.

a disputed regime

There are many issues on which the developed and developing world disagree. One such issue pertains to international regulations relating to the free flow of data across borders. Many countries within and outside JSI have implemented data localization mandates that force corporations to store and process data within territorial boundaries. This is a major policy priority for India. Several payment card companies, including MasterCard and American Express, were banned from issuing new cards for failure to comply with the Reserve Bank of India’s 2018 Financial Data Localization Directive. The Joint Parliamentary Committee on Data Protection (JPC) has recommended stringent localization measures for sensitive personal data and critical personal data in India’s data protection law. However, for countries and industries in the developed world seeking access to new digital markets, these restrictions impose unnecessary compliance costs, thus arguably hindering innovation and are believed to amount to undue protectionism.

There is a similar disagreement regarding domestic laws that mandate the disclosure of source code. Developed countries believe it hinders innovation, while developing countries believe it is essential to algorithmic transparency and fairness – which was another key recommendation of the JPC report in December 2021 .

India’s options

India’s global standing is reinforced through narrative creation by political and industrial leaders alike. Data sovereignty has been championed as a means to protest ‘data colonialism’, exploitative economic practices, and intense lobbying by Silicon Valley companies. Policy making for India’s digital economy is at a critical juncture. Surveillance reform, personal data protection, algorithmic governance, and non-personal data regulation should be galvanized through proven insights, and work for individuals, communities, and interested local businesses – not just established big players.

Hasty signing of business obligations may reduce the available space for appropriate policy formulation. But sitting out of trade negotiations will mean that the digital trade juggernaut will continue unchecked through mega-regional trade agreements such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP). India could risk becoming an unwitting standard-taker in an already fragmented trading system and instead lose out on opportunities to shape these rules.

Options exist; Negotiation should not mean compromise. For example, exceptions to digital business rules, such as ‘legitimate public policy objectives’ or ‘essential security interests’, can be negotiated to preserve policymaking, while still accepting larger agreements as necessary. Furthermore, any outcome does not necessarily have to be an all-or-nothing system. Taking cues from the Digital Economy Partnership Agreement (DEPA) between Singapore, Chile and New Zealand, India may push for a framework where countries can pick and choose the modules they want to follow. These combinations can be aggregated incrementally as emerging economies such as India work through domestic regulations.

Despite its failures, the WTO plays an important role in global governance and is vital to India’s strategic interests. Negotiating without surrendering to domestic policy-making is the key to India’s digital future.

Arindrajit Basu is the Research Lead at the Center for Internet and Society, India.

Views expressed are personal