This is a guest post from Ines Willemyns, Teaching Fellow and Lecturer in Law at Stanford Law School
Earlier this week, the draft chairs text of the WTO e-commerce negotiations was leaked to the public. The text, dated 15 January 2024, puts forward a “commercially meaningful and inclusive package”, reflecting broadly the views and feedback of all participants with a view to reaching a consensus agreement (which I will refer to as the ‘E-commerce Agreement’) by the upcoming Ministerial Conference.
Many observations can be made on the consolidated draft chairs text. It does not contain provisions on data flows, electronic payments, or non-discrimination, as acknowledged upfront by the chairs. “Best endeavor”-language dominates throughout the text. The provision on the e-commerce moratorium helpfully clarifies that the moratorium covers both electronic transmission and its content, an important point of contention thus far. The negotiating parties also included an escape clause allowing non-application of the agreement between particular parties “if either Party does not consent to such application”. With this provision, the WTO e-commerce negotiating parties seem to throw the MFN principle overboard completely, even among themselves.
While I think these observations are worthwhile diving into and debating about more, today’s post will focus on another element that caught my eye: the provision in the draft chairs text that refers back to the WTO Agreement, and that aims to clarify the relationship of the WTO Agreement to the E-commerce Agreement. For me, this provision raises more questions regarding the interplay between WTO Members’ existing rights and obligations and the E-commerce Agreement than it answers.
The relevant provision (found in the unnumbered section on ‘Scope and general provisions’) reads as follows:
(4) Relation to other agreements
- The Parties affirm their rights and obligations under the WTO Agreement. The Parties further affirm that this Agreement does not create either obligations or rights for Members of the WTO that have not accepted it.
- Nothing in this Agreement shall be construed as diminishing a Party’s rights and obligations under the WTO Agreement, including any market access commitments inscribed in a Party’s schedule of commitments to the GATT 1994 or the GATS, respectively.
The first paragraph seems somewhat superfluous in that it confirms the generally accepted nature of plurilateral agreements under the WTO. These agreements do not create obligations or rights for WTO Members who are not party to the agreement. This follows the reasoning of Article 30(4)(a) VCLT: “as between a State party to both treaties and a State party to only one of the treaties, the treaty to which both States are parties governs their mutual rights and obligations”.
The reasoning that underlies the second paragraph is less obvious. If we focus on the GATS, in what instance would a Party’s rights under that agreement be diminished by the E-commerce Agreement? Should a Party’s lack of commitment to provide market access or national treatment in a certain service sector be considered that Party’s right under the GATS? After all, by not scheduling certain commitments, a WTO Member retains the right to take measures that restrict market access or violate the national treatment obligation in these service sectors. If this reasoning is followed through, does that entail that Parties cannot agree to market access or national treatment obligations with regard to digital services in the E-commerce Agreement that would go beyond what they have scheduled in their Services Schedules?
The implications of such an interpretation could be more far-reaching than they seem at first sight as it practically nullifies any ‘GATS+’ commitments Parties would undertake in the E-commerce Agreement. Whether a commitment qualifies as ‘GATS+’ will be Party-specific, as it depends on the level of liberalization each Party has committed to in its Services Schedule. Potential ‘GATS+’ commitments could include prohibitions on data localization requirements, non-discrimination obligations with regard to digital services, commitments to enable cross-border data flows on a non-discriminatory basis and commitments not to require the transfer of source code as a prerequisite for market access. Granted, none of these provisions have (yet) made it into the draft chairs text, but they have been part of the discussion (see the leaked consolidated negotiating text of August 2023, here).
So why would the negotiating parties include such a provision in the draft, if it would effectively negate any obligations that would further liberalize trade in digital services? I see two possible, but wholly unsatisfactory, explanations, which I elaborate on below.
- The negotiating parties consider digital services not to be covered by the GATS
One explanation could be that negotiating parties consider that there is no overlap in scope between the GATS and the E-commerce Agreement. Put differently, the negotiating parties do not think that digital services are currently covered by (their scheduled commitments in) the GATS. Such arguments are not new. Over the past two decades, some WTO Members (including India, Brazil, Cuba, the Philippines, and Uruguay) have challenged the notion that the GATS is technologically neutral and/or that existing commitments can be “extended” to new business models in the digital environment.
If the GATS does not cover digital services, or at least not the digital services that would be impacted by, for example, obligations on data flows, non-discrimination of digital products and source code, as outlined above, the absolute supremacy of the GATS would pose less of an issue. Where there is limited overlap, there can only be limited conflict.
I wholeheartedly disagree with such a characterization of the relationship between the E-commerce Agreement and the GATS. To me, the argument that measures affecting trade by electronic means (cfr. the scope of the E-commerce Agreement) are not covered by the GATS, seems misguided. For more detailed argumentation on why digital services are covered by the GATS, I refer to my previous research on this (see here).
- The E-Commerce Agreement has degenerated into an ‘Electronic Trade Facilitation Agreement’
I took a quick look at other plurilateral agreements because I did not recall having seen this language elsewhere in a similar context (apart from the by now notorious Art. 3.2 DSU). None of the other WTO plurilateral agreements (whether negotiated in the Uruguay Round or after 1994) contain a similar provision. Interestingly, the Trade Facilitation Agreement (TFA) does. Article 24.6 states:
“Notwithstanding the general interpretative note to Annex 1A to the Marrakesh Agreement Establishing the World Trade Organization, nothing in this Agreement shall be construed as diminishing the obligations of Members under the GATT 1994. In addition, nothing in this Agreement shall be construed as diminishing the rights and obligations of Members under the Agreement on Technical Barriers to Trade and the Agreement on the Application of Sanitary and Phytosanitary Measures.”
The scope of the TFA provision is more limited though, as it only refers to diminishing the rights of Members under the TBT and the SPS agreements, not those in the GATT (or GATS). I would argue that a crucial difference between the ‘rights’ under the TBT and the SPS Agreements and those under the GATS is that the GATS, through its positive list schedules, provides more ‘rights’ to WTO Members than the TBT and SPS Agreements do. Nonetheless, both agreements seem to want to clarify that the ‘substantive’ rights and obligations in the WTO Agreement (whether in the GATS, the TBT Agreement or the SPS Agreement) take precedence over the trade facilitating, red-tape-cutting commitments that WTO Members undertake in trade facilitation agreements.
There is another element in the draft chairs text that drew my attention to the parallel with the TFA. The first section of the draft text (Section A: Enabling electronic commerce) contains provisions on electronic transactions, electronic contracts, electronic authentication, electronic invoicing and paperless trading. While arguably more prevalent in digital trade, none of these practices are necessarily limited to electronic commerce. To me, these provisions look like they would better fit under the auspices of the TFA as they are all aimed at facilitating trade. Why should paperless trading be negotiated as part of the E-commerce Agreement? To use a (perhaps slightly wonky) analogy, that is like the Agreement on Civil Aviation containing a provision on lowering red tape for air freight.
These parallels between the E-commerce Agreement and the TFA, taken together with the lack of substantive obligations in the draft chairs text, prompts the question whether the E-Commerce Agreement has been reduced to an ‘Electronic Trade Facilitation Agreement’. Have the negotiating parties by now abandoned the ambition to further liberalize digital trade through substantive obligations?
