APEC ministers to agree to extend e-commerce tax moratorium

Asian Economic News, June 5, 2000

BANGKOK, June 1 Kyodo

Trade Ministers from the 21-member Asia-Pacific Economic Cooperation (APEC) forum are expected to agree during talks Tuesday and Wednesday in Darwin, Australia to extend a moratorium on imposing taxes or customs duties on electronic commerce, a senior Thai commerce ministry official said Thursday.

"APEC will lead by extending the moratorium on tax applicable to e-commerce," said the official who spoke on condition of anonymity.

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

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

The official said the trade ministers will "tell the world that for APEC...we will extend moratorium until the next WTO ministerial conference. And that we hope that the rest of the world will follow."

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

The United States and the European Union, in particular, argue that imposition of customs duties on 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 3 million users worldwide in 1995, now has over 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 of APEC such as Thailand.

Aside from Thailand, APEC 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, the U.S. and Vietnam.

The unsuccessful attempt 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 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.

The Thai official said it will not be the first time for APEC to take the lead, noting the forum did so when it facilitated the conclusion in the WTO of the Information Technology Agreement (ITA) in 1996.

The agreement has since contributed to significantly lower costs for construction of the Internet and other basic infrastructure for electronic commerce.

Under the ITA, 46 countries -- representing nearly 95% of the $600 billion worldwide market for information technology products -- will reduce tariffs on these products to zero, generally by the year 2000.