APEC ministers agree to extend e-commerce tax moratorium

Asian Economic News, June 12, 2000

DARWIN, Australia, June 7 Kyodo

Trade ministers from the 21-member Asia-Pacific Economic Cooperation (APEC) forum agreed Wednesday to extend a moratorium on imposing customs duties on electronic commerce.

The ministers, in a statement issued after two days of talks in Darwin, northern Australia, announced an "APEC-wide moratorium on the imposition of customs duties on electronic transmissions until the next WTO ministerial conference."

"We encourage others to do likewise," it said.

In May 1998, the members of the World Trade Organization (WTO) agreed to a moratorium on the imposition of tariffs on electronic transmissions.

But the moratorium expired at last December's failed WTO ministerial meeting in Seattle, and there has been no clear-cut agreement on its extension.

The United States, in particular, had pushed for APEC to take the lead in urging other WTO members to extend the moratorium.

APEC also includes Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, South Korea, Taiwan, Thailand and Vietnam.

Australian Trade Minister Mark Vaile told a press conference that the new APEC moratorium "responds to the needs of the globalized economy and recognized the dramatic increase in the use of e-commerce."

Proponents of the extension have argued that the imposition of customs duties for electronic transmissions would slow the rapid growth of the Internet and e-commerce, and would also be exceedingly difficult and costly to enforce.

According to U.S. government figures, the Internet, with three million users worldwide in 1995, now has more than 140 million users, a figure that may rise to a billion by 2005.

E-commerce, which totaled about $200 billion last year, is projected to reach $1.3 trillion in the U.S. alone by 2003, and is also growing rapidly in developing countries like India and Thailand.

The moratorium applies only to duties on products delivered through the Internet, like electronic books, software and music, but not to those ordered through the Internet and physically delivered.

The failure in Seattle to launch a new round of trade negotiations was partly blamed on the failure of developed countries to take fully into account the interests and concerns of developing ones.

But proponents of a duty-free cyberspace argue that e-commerce promises substantial benefits to developing countries since Internet access requires little capital, helps entrepreneurs find customers and suppliers quickly, and eases technical and paperwork burdens that can slow participation in trade.