Digital Trade in 2024: Key Developments in International Trade Rules1 October 2024

In recognition of the increasing importance of digital trade and digitally enabled trade to the global economy, governments have been actively negotiating digital trade rules. These rules aim to govern and promote cross-border digital trade through consistent and align approaches to regulation, removal of barriers, and cooperation between regulators. They also aim to help equalise access to the benefits of digital trade and create opportunities for more inclusive digital trade growth.

The last twelve months have seen digital trade rules developments in North America, Africa, the Indo-Pacific, and in multilateral institutions such as the World Trade Organization (“WTO”). In this article we look at the key developments in these areas over the last twelve months and some of their implications for governments and business.

The United States’ October Surprise

The abrupt change of position by the United States in October 2023 on rules protecting cross-border data flows, limiting the use of data localisation requirements and prohibiting the forced disclosure of source code, was a defining feature of the last twelve months in digital trade policy. Whilst the US had previously been an advocate for these rules in the WTO Joint Initiative on E-Commerce (“E-Commerce JI”) negotiations (and had signed up to some of these rules in agreements with Japan, and also Canada and Mexico), in October 2023 it announced that it would no longer support these rules in the E-Commerce JI. The Office of the US Trade Representative (“USTR”) justified this move by referring to a need for greater “policy space” to regulate so-called Big Tech, and the on-going evolution of the US’s domestic policy on privacy, digital and competition issues.

This significant change of policy by the US – if followed by others – would undermine a key benefit of digital trade agreements. It is also contrary to broader policy interests of supporting a free and open internet. Perhaps of greater concern, though, is that the US has so-far not set out its own vision for the on-going development of international digital trade rules. In the absence of a clear policy articulation from the US, the change of position is largely seen as the US taking a step back from leading on digital trade issues. The policy shift has been roundly condemned by many industry groups, but enjoys strong support from many civil society groups.

The 13^th WTO Ministerial Conference – a mixed bag or ticking time bomb?

The WTO’s 13^th Ministerial Conference in February 2024 saw two key developments for those concerned with digital trade.

First, despite India, Indonesia and South Africa’s strong opposition to extending the moratorium on customs duties on electronic transmissions (which effectively prevents WTO Members from imposing tariffs on cross-border e-commerce), in the final hours ministers were able to agree to an extension. India acquiesced on allowing the extension as a personal favour from India’s Trade Minister Piyush Goyal to Emirati Trade Minister Thani bin Ahmed Al Zeyoudi (who hosted this year’s Ministerial). The ultimate Ministerial Decision extended the moratorium to 31 March 2026 or the next Ministerial Conference (whichever is earlier). However, the Decision also adopted a harder line on the moratorium expiring at that point in time. Ministers are always free to agree a further extension (or indeed a permanent moratorium), however this change in rhetoric is not a positive sign. More positively, developments on the moratorium in the E-Commerce JI may make this battle less important in 2026 (see below).

Second, and more concerningly, opponents of so-called ‘plurilateral’ negotiations at the WTO (which are between a subset of WTO Members) successfully pushed back against the incorporation of the Agreement on Investment Facilitation for Development into the WTO Framework. Whilst the substance of the agreement is relatively uncontroversial, it was opposed on largely ideological and principled grounds (both around process and also whether it is appropriate to negotiate investment issues at the WTO). This outcome does not bode well for the integration of the results of the E-Commerce JI, raising question in regard to how its participants will implement the results of their negotiations.

WTO plurilateral e-commerce negotiations produce a stabilised text

The one positive of the US change of heart on digital trade was that it removed some key contentious rules from the E-Commerce JI negotiations, enabling the WTO plurilateral to enter its final phase of negotiations and produce a ‘stabilised’ text in July.

The E-Commerce JI is the broadest digital trade negotiations currently underway. It covers over 90 per cent of global trade and has 91 WTO Members participating. The balancing of the ambition level of the negotiations with the desire for broad and diverse membership has been difficult. However, the stabilised text indicates that participants have been able to agree to meaningful outcomes on matters such as electronic contracts and invoicing, paperless trading, online consumer protection and transparency. The stabilised text also contains a moratorium on customs duties on electronic transmissions, albeit with a review after five years. This is a promising development that should de-escalate the bi-annual debate over the moratorium at the ministerial level.

However, nine E-Commerce JI participants have indicated they were not able to support the stabilised text “due to ongoing domestic consultations and considerations”. For some, such as Indonesia, the inclusion of the moratorium customs duties on electronic transmissions is likely a key driver for this. The US was also unable to support the stabilised text, saying that it “remains committed to working with the … co-conveners and participants to achieve a high-standard outcome” but “the current text falls short and more work is needed, including with respect to the essential security exception”. The lack of US support at this time is disappointing but not necessarily a surprise, given the difficulties it faces domestically on digital trade policy and also its upcoming election.

With the substance now largely agreed, E-Commerce JI participants still face a difficult challenge in working out how to implement their agreement and bring it into force. Incorporation into the WTO framework has always been the goal, but this has faced opposition from India and South Africa and requires consensus from all WTO Members. Forging that consensus will be difficult. While the E-Commerce JI could instead opt to establish a standalone agreement outside of the WTO, this would require a range of changes to the agreement and mean losing out on support from the WTO Secretariat, the WTO committee structure and WTO dispute settlement. This is unlikely to be an attractive proposition to most participants who have promoted the E-Commerce JI as an important part of maintaining the WTO’s on-going relevance and centrality to international trade discussions.