WTO draft text takes up e-commerce moratorium

With help from Doug Palmer and Gavin Bade

WTO economies unveiled a draft text that could eventually lead to a moratorium on customs duties on electronic transmissions becoming permanent as countries gear up for the 13th Ministerial Conference from Feb. 26-29 in the United Arab Emirates.

Trade figures that will be released later this week are expected to show a slight decline in the overall goods and services deficit, pulled down in part by declining imports from China.

— Pennsylvania Democrat Bob Casey said he was among the lawmakers who urged the Biden administration to pull back from trade negotiations under the Indo-Pacific Economic Framework in an exclusive interview with POLITICO.

It’s Monday, Feb. 5. Welcome to Morning Trade! It’s come to my attention that a fixture of Americana is only accurate about 40 percent of the time. Sorry Punxsutawney Phil, but if it were up to me, I’d be on the hunt for a new Groundhog Day prognosticator.

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MODEST MINISTERIAL ON TAP: As member economies heat up preparations for the 13th Ministerial Conference later this month, the co-conveners of e-commerce talks at the WTO unveiled the most likely agreements by consensus among the disparate coalition of nations.

Small gains: The 28-page document reflects several issues already hammered out in December negotiations, touting progress on agreements over electronic signatures and contracts, as well as online consumer and personal data protection, cybersecurity and open government data, while skirting other major areas of contention.

Catch up: The co-conveners, which include Australia, Japan and Singapore, brought their draft chair’s text in mid-January in preparation for recent meetings.

Industry corner: The document took up an issue closely watched by business groups: a moratorium on customs duties for electronic transmissions via a permanent commitment. “No Party shall impose customs duties on electronic transmissions between a person of one Party and a person of another Party,” per the text.

That issue was not settled in the JSI on e-commerce as of December, which has more than 80 members including the United States, the European Union and China.

Keep in mind: Some developing countries have opposed the extension as they look for ways to increase tariff revenues and encourage the development of their own industries. And because the WTO operates by consensus, just one member could theoretically kill it.

South Africa, for instance, has gone so far as to propose ending the moratorium at the upcoming conference.

Still outstanding: Over the issues of regulating information and communications technologies that use cryptography, electronic payments, and development, the co-conveners acknowledged that an agreement requires “further small group work.”

Notably omitted: The text also lacks proposals over data flows, data localization, source code and non-discrimination. The United States withdrew its support for related digital trade proposals last year following pushback from progressive lawmakers and interest groups.

SHRINKING CHINESE IMPORTS HELP PUSH U.S. TRADE GAP LOWER: Final U.S. trade figures for 2023 that will be released Wednesday are expected to show a slight drop in the overall goods and services deficit to about $780 billion. That would be down about 18 percent from about $951 billion in 2022, which was the highest on record.

One factor behind the lower trade gap is declining imports from China. Wednesday’s report is expected to show the United States imported about $430 billion worth of Chinese goods last year, down more than 20 percent from 2022. The sharp drop seems to be the result of consumers cutting back on goods purchases after a Covid-19 spending spree and companies diversifying some of their supply chains out of China because of increasing risk.

Already-released trade data for January through November 2023 showed imports from China fell in 86 of the 99 broad categories traced by the Census Bureau on its USATrade Online website. That included machinery, electronics, toys, sporting equipment, tools, railway equipment, aluminum, steel, ceramics, glass and glassware, clothing, footwear, headgear, books, plastics, chemicals, rubber, wood, cosmetics, chemicals and seafood.

Wednesday’s report is expected to show U.S. exports to China were down about 1 or 2 percent in 2023 to around $150 billion. That slight demand coincided with improved Chinese economic growth after the government lifted Covid restrictions. Looking ahead, the World Bank has forecast Chinese growth to slow in 2024 to 4.5 percent, from 5.2 percent last year, which could take another bite out of U.S. exports to China.

PROGRESSIVES BACK UP DIGITAL WTO PIVOT: More than 40 civil society and interest groups are applauding the Biden administration’s decision to withdraw support for “extreme” digital trade proposals that they argue benefit large technology companies.

Progressive groups like Rethink Trade and Public Citizen said in a letter Friday that the move marked “an important first step to ensuring that Big Tech interests cannot commandeer trade negotiations” that undermine progressive policies.

A spokesperson from the U.S. Chamber of Commerce slammed the remarks in a statement to Morning Trade which said “digital trade supports 2 million American jobs in all 50 states, and listening to these fringe views will only put them at risk.” The comments come after Commerce said recently obtained documentation indicates progressive groups share a “privileged relationship” with USTR.

CASEY URGED IPEF TRADE PAUSE: Sen. Bob Casey (D-Pa.) was among the lawmakers who urged President Joe Biden to abandon trade negotiations under the Indo-Pacific Economic Framework, he revealed in an exclusive interview with POLITICO out this morning.

While we’ve known for months that other at-risk Midwestern Democrats pressed Biden to jettison the talks, Casey has so far been silent about his role. But the Pennsylvania lawmaker told Gavin he “expressed the same concern” about the pact, particularly the failure to agree on binding labor and environmental rules.

“It’s part of a larger conversation on trade, whether we’re going to be serious about having a trade strategy — not just a collection of policies that we push intermittently, but a real determined strategy that says that we’re going to center our strategy on workers,” Casey said.

But despite that setback, Casey lays the blame not at the feet of USTR Katherine Tai, but her rivals elsewhere in the administration.

“She’s had to engage in arguments with others in the administration,” he said. “I don’t know if that has any impact on these issues. I don’t think it does, but I just think I want to make sure that we do everything we can to support what she’s been trying to do.”

Pros can read more from Gavin’s exclusive interview with Casey here.

REPORT: TRUMP TARIFFS HURT JOBS, BOOSTED GOP SUPPORT: Billions of dollars worth of tariffs on foreign metals, washing machines and other goods imposed by former President Donald Trump in 2018 neither raised or lowered the overall number of jobs in related industries, according to a nonpartisan working paper. Still, the findings indicate that the tariffs were a political success for the Republican party, and that voters living in areas most affected by the tariffs became more likely to vote for Trump in 2020.

The study was released ahead of Trump’s comments over the weekend, when he was asked about a report from the Washington Post which said the former president is considering a flat 60 percent tariff on Chinese goods. “No, I would say maybe it’s going to be more than that,” Trump said on Fox News’ Sunday Morning Futures.

— The leaders of the House Select Committee on China called to expand a Defense Department list meant to highlight firms allegedly working with Beijing’s military, according to a statement.

— A federal appeals court blocked enforcement of a controversial Florida law restricting Chinese citizens from buying land against two people who sued the state, per Bruce Ritchie.

— Fifty members of Congress are requesting that the Department of Justice share information on illegal marijuana cultivation linked to Chinese nationals across the country, per Natalie Fertig.

— Iran on Sunday denounced U.S. and British air strikes on Yemen as “fueling chaos and disorder” and risking an escalation of the war in the Middle East, per Hans von der Burchard.

THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: [email protected], [email protected] and [email protected]. Follow us @POLITICOPro and @Morning_Trade.

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