China joins talks to strike a worldwide digital trade pact

Workers prepare boxes for packaging goods for delivery at a sorting center in Lianyungang, Jiangsu province, China. (Bloomberg pic)

DAVOS: China will join a group including the US and the European Union in negotiating new rules to cover the US$25 trillion e-commerce market.

The EU and 47 other members of the World Trade Organisation launched the discussions, according to a Friday statement. If successful, a digital trade accord hashed out through the Geneva-based trade body would establish a baseline international regime for 21st-century trade and reduce cross-border hurdles to e-commerce.

China, which for years has heavily restricted use of the internet inside its borders, had resisted joining the talks until Thursday, raising concerns over the language in the statement advocating a “high standard outcome,” according to four people familiar with the talks who asked not to be identified because the discussions were private.

In a statement emailed to Bloomberg, China’s ambassador to the World Trade Organisation, Zhang Xiangchen, said China had in the end decided to join the negotiations out of concern over a broader crisis surrounding the WTO, which has been coming under attack from the US and President Donald Trump’s administration.

“The multilateral trading system is in a deep crisis,” he said. “Against this backdrop, the launching of e-commerce negotiation will in a significant way help reinvigorate the negotiating function of the WTO, and shore up confidence in the multilateral trading system and economic globalisation.”

Robert Lighthizer, the US Trade Representative, said in a statement on Friday that the US is seeking an “ambitious, high-standard agreement that is enforceable and has the same obligations for all participants.” He called the digital economy a “powerful force for global economic growth” that should be guided by market-based rules and lowered barriers.The inclusion of China was important because of its scale and role in the global economy, Cecilia Malmstrom, the EU’s top trade negotiator, told Bloomberg. With China on board the negotiations will include WTO members accounting for more than 90% of global trade. But it also served as a sign that the WTO still had life in it.

“It shows that the WTO is still alive and that we can take on board one of the biggest challenges on global trade — e-commerce,” Malmstrom said in an interview.

The new rules will seek to reduce barriers that prevent cross-border sales, ban duties on electronic transmissions, ensure the validity of e-contracts and e-signatures and address forced data localisation requirements, according to Friday’s EU statement.

G-20

Simon Birmingham, the Australian trade minister, said the hope was that some tangible progress could be made in negotiations before a Group of 20 summit in Japan in June and that the negotiations could be wrapped up next year.

“If anything this is an initiative that started too late because the reality is that e-commerce and digital trade are here, they’re big, and there is an inevitability that the way in which commerce occurs around the world is going to be influenced more heavily by the digital economy,” he told Bloomberg in an interview.

The group is expected to hold their first formal negotiating session in March, and movement toward an agreement has been praised by some retailers, including Amazon.com Inc.

“Amazon welcomes the progress made this week by the joint statement group towards a global e-commerce agreement, which has the potential to significantly benefit Amazon’s customers and seller partners by eliminating and preventing barriers to online trade,” an Amazon spokesperson said in an emailed statement.

Largest Market

China, which is expected to surpass the US this year as the biggest retail market in the world, adds greater weight to a potential accord. China will likely register US$5.5 trillion in online sales this year due to the spread of its powerful online companies like Alibaba Group Holding Ltd. and Baidu Inc.

But some in the US fear that China could also seek to water down any eventual outcome and Beijing’s decision to join at the end was tinged with reluctance. “To be very frank, the current text of the joint statement before us, in our view, could have been better drafted if time allows,” Zhang told Bloomberg.

Even though Trump’s administration didn’t send a representative to Friday’s meeting in Davos, the US has been a key contributor to e-commerce discussions ever since they were first floated at the WTO’s 2017 ministerial meeting in Buenos Aires.