Four Reasons to Oppose Rules on Digital Commerce in the WTO

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1.- E-commerce proposals would promote greater inequality by reducing real competition and promoting monopolistic and oligopolistic behavior.

 

“Is it Time to Break Up Google?” Jonathan Taplin wondered in The New York Times recently:

Google has an 88 percent market share in search advertising, Facebook (and its subsidiaries Instagram, WhatsApp and Messenger) owns 77 percent of mobile social traffic and Amazon has a 74 percent share in the e-book market. In classic economic terms, all three are monopolies.

 

The control of information, media, and retail sales by these three firms is reaping unintended consequences for democracy, innovation, and the public interest. These TNCs are able to invest in new markets and operate at a loss for years in order to establish market dominance, as Uber  and Amazon are doing in India and many of the hundreds of markets in which they operate. President Trump’s new pick for antitrust czar, Makan Delrahim, is extremely weak on antimonopoly regulation. Without strong anticompetitive legislation, companies are consolidating further across sectors through acquisition — “Google buying AdMob and DoubleClick, Facebook buying Instagram and WhatsApp, Amazon buying, to name just a few, Audible, Twitch, Zappos and Alexa,” notes Taplin. In addition, if a country is concerned about anticompetitive behavior, its courts will often require that source code be disclosed. But there is no exception in the EU’s e-commerce proposal for cases in which courts require that source code be revealed. Proposals also call for dominant players to be able to expand their ability to influence regulation of their operations under the guise of “transparency for stakeholders.” How can SMEs hope to get established in a field where governments are restricted from enforcing anticompetitive behavior, and entrenched players are given a leg up in making the rules?

2. E-commerce proposals threaten countries’ futures by mandating the free transfer of their most precious natural resource: data.

Uber’s most valuable asset is not cars or drivers, but its data on how people move around. Once a company dominates a field and is able to process raw data into intelligence, it can maintain its dominance to the exclusion of competitors, as The Economist argued in a recent article, “The world’s most valuable resource is no longer oil, but data. “Free” services like Google or Amazon cloud services are able to access more data than we can imagine, and can transform it into intelligence that can be sold or rented to other companies for more profit. Yet nearly all e-commerce proposals include a mandate to promote cross-border data transfers — which they cunningly refer to as the “free flow of data” — by banning restrictions on data localization (such as the US military uses, which insists that its data be maintained on US servers) and other rules. Why should developing countries give away this valuable resource for free? A digital industrialization strategy would include creating domestic or regional data centers, as countries from China to Sweden have created, and which then can become important hubs for jump-starting software industries, gaming industries, Internet-related industries, and other data-based industries. As Parminder Jeet Singh has argued:

Going by current trends, the level of structural dependency of developing countries in the digital society context is evidently going to be higher than ever. The phenomenon has also been called digital colonisation….Global flows and trade of these vital resources should be on fair terms, ensuring national economic benefits as well as social and cultural protections .… Meanwhile, we must make it clear that we are not advocating digital de­globalisation. What is sought is simply a fair place for developing countries, and for public interest, in the emerging global digital order

 

3. E-commerce proposals are a threat to our personal privacy and data protection.

It is not only developing countries that should be concerned about cross-border data flows, aka “free flow of information.” We have witnessed an explosion of lawsuits by consumers discovering that their data from product or service use — from Bose headphones to email management to sex toys — was sold to other companies, usually without the consumer’s knowledge or consent. That means the personal data was stolen and/or abused; perhaps these “data flows” should be renamed “trafficking in stolen information.” As previously mentioned, the EU has standard-setting rules on personal privacy and data protection that were democratically debated and enthusiastically approved by voters. Many US companies do not meet these standards, and are not allowed to transfer data into the US. A 2017 study, the “Global Survey on Internet Security and Trust,” conducted by the Centre for International Governance Innovation and Ipsos, showed that consumers are reluctant to engage in online purchases because they don’t trust governments (65 percent); companies (74 percent); or that their data will be secure from cybercriminals (82 percent). Last year, European groups sent a letter, as did international civil society,urging the European Parliament to stand up for consumer protection and data privacy in the TiSA — but these same provisions are being introduced in the WTO.

4. E-commerce proposals would promote tax evasion and loss of needed public revenue, resulting in further monopolization at the expense of the public interest in all countries, but particularly in developing countries.

As companies gain “rights” through the proposed e-commerce rules to more easily move labor, inputs, capital, and data across borders, they would be able to increase their transfer pricing practices and locate operations in countries with the least regulatory oversight and the lowest taxes, exacerbating the tax evasion and illicit financial flows that Global Financial Integrity recently identified as having drained US $620–970 billion from the developing world in 2014, primarily through trade fraud.These lost revenues starve developing country governments, particularly in Africa, of the ability to make needed domestic investments to provide health care, education, infrastructure, and the future development of their economies. If a company is not required to have a local presence, how can corporate profits be appropriately taxed? At the same time, efforts are underway to extend the existing moratorium in the WTO on tariffs on e-commerce transactions. Removing the obligation of tariffs on cross-border trade puts brick and mortar stores at a disadvantage compared to e-commerce, and is, in economic terms, a public subsidy for the online businesses, for no apparent social benefit. But given that developing countries depend to a far greater extent on tariffs as a source of fiscal revenue (to pay for education, health care, and infrastructure) than do developed countries (which have more advanced systems of income, sales, and corporate taxes), eliminating e-commerce tariffs permanently would not only highly disadvantage brick-and-mortar stores, but would seriously impair developing countries’ ability to meet public investment needs, stunting their future development and increasing the likelihood of debt crises.

 

Based on the article by

Deborah James is the Director of International Programs at the Center for Economic and Policy Research and coordinates the global Our World Is Not for Sale (OWINFS) network.

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