It will provide a level playing field to the domestic industry

Moratorium on customs duties on electronic transmissions has got another lease of life at the World Trade Organisation’s 12th Ministerial Conference (MC12). Some say this has happened due to pressure exerted by the United States, others think that India has bargained this for other gains.

It’s noteworthy that India had pronounced that it would oppose this moratorium, as it causes a huge loss of revenue, apart from hurting our digital development, as domestic players face intense competition from global tech companies.

Significantly, at the time of the start of the WTO, trade in electronic products was very limited. In such a situation, the tariff on the trade of electronic products was temporarily suspended and it was decided in the Second Ministerial Conference of the WTO in 1998 to study the issues related to the global electronic trade with reference to the development needs of the developing countries. It was proposed that tariffs on electronic products be postponed till the next ministerial conference.

It is unfortunate that the developed countries kept suspending the decision on imposing tariffs on the import of electronic products, on several pretexts. Today the situation is that more than $30 billion of electronic products are being imported into India alone. That is, even if 10 per cent tariff is imposed, the government will get revenue of more than $3 billion.

According to a recent study, developing countries could have generated $56 billion from imports of just 49 digitalised products in the period 2017-19. Least developed countries could have generated $8 billion in this period, which is double the amount they need for giving double dose of Covid vaccine to their populations.

The issue here is not only about loss of revenue, it’s a much larger issue for a country like India, where our start-ups and software companies are able to make a variety of electronic products, where we can make movies and other entertainment products in our own country, but when all such products are imported undeterred, without tariff, there is little incentive to produce them indigenously.

Tariff moratorium on e-products is actually killing our efforts of Atmanirbhar Bharat, benefitting the US, European countries, and China.

At the beginning of MC12, India started with a bold stance and Commerce Minister Piyush Goyal said: “I think this moratorium, which has been continuing for 24 years, must be reviewed and re-looked at.”

However, the decision on moratorium in MC12, is read as follows: “We agree to maintain the current practice of not imposing customs duties on electronic transmissions until MC 13, which should ordinarily be held by 31 December 2023. Should MC 13 be delayed beyond 31 March 2024, the moratorium will expire on the date unless Ministers or the General Council take a decision to extend.”

In the earlier Ministerial Conferences of WTO, in the last 24 years, the developed world had been easily getting the moratorium. MC12, was the first such conference where they faced some resistance from the developing countries. With this, a hope had arisen that the moratorium would end ultimately. But this battle was also lost.

Since 1998, the digital revolution has changed a lot in the world. There are digital products which are fast replacing physical products. Many of the digital products in health, fintech, public services, etc., incorporate artificial intelligence and 3D printing. Failure to tax them in innovative ways is likely to impact the government finances adversely.

We have started developing our own digital products; the production linked incentives (PLIs) scheme has been designed to nurture our infant digital products industries. Imposition of custom duties can help them by providing a level-playing field.

Though MC12 is over, India should leave no stone unturned to end this moratorium.

(The author is Professor, PGDAV College, University of Delhi)