Startups need foundational digital trade policy made permanent

At the end of this month, a critical digital trade policy relied upon by startups is set to expire unless policymakers act. March 26–29, the World Trade Organization's (WTO) 14th Ministerial Conference (MC14) will convene in Yaoundé, Cameroon, where the WTO Moratorium on Customs Duties on Electronic Transmissions will expire if it is not renewed. While most people have never heard of this mouthful of a policy that prevents digital tariffs, its disappearance would have serious consequences for startups and the digital economy. Instead of continuing the cascading uncertainty of per-ministerial conference renewals, it should finally be made permanent.

Since 1998, the moratorium has prevented WTO member nations from imposing customs duties on “electronic transmissions”—digital products and services delivered across borders via the Internet. This includes software, SaaS subscriptions, streamed content, app downloads, cloud services, APIs, and more. The moratorium has been renewed at every ministerial conference since its inception, as allowing digital markets to develop without regulatory friction has become a foundational pillar of the international economy. At MC14, ministers will be debating whether to extend the moratorium for another two years, making it permanent, or letting it lapse. 

The moratorium is foundational for startups. In testimony before Congress, CEO and founder of Arcascope, a circadian science startup that makes apps for users to, e.g., get over jet lag, Dr. Olivia Walch explained how it is essential for startups' competitiveness that “digital goods are not subject to tariffs in the same way as physical goods.” Without the moratorium in place, the company’s users could face increased prices based on where they travel, and the company would need to make decisions about where to operate. That would come with uncomfortable practical consequences for their users, she said, because “no one wants to use a jet lag tool that works when you take off from Dulles but doesn't when you land in Delhi.” For startups whose entire business model depends on selling digital goods and services across borders, the moratorium isn't background noise—it's their backbone.

Historically, India, Indonesia, South Africa, and other less-developed countries have opposed the moratorium—or only reluctantly allowed it to continue—arguing that the shift from physical to digital goods has hollowed out the tax base of import-dependent economies. Their argument rings hollow, as a report from the International Monetary Fund, Organisation for Economic Co-operation and Development, World Bank, and WTO underscored the importance of digital trade to economic growth and found that other means of taxation are significantly more efficient for generating more revenue with less economic distortion. Regardless, due to WTO rules requiring consensus, any one country can in theory block extension or permanence of the moratorium. 

If the moratorium does expire, countries could opt to impose digital tariffs. Participants in the Joint Statement Initiative (JSI), a coalition of 90+ countries representing roughly 90% of global trade, would likely not impose such tariffs and would serve as something of a backstop. However, countries outside the JSI—which include large potential markets for U.S. startups, like India—could still impose digital tariffs, impacting startups' ability to access those markets and hampering their global competitiveness. 

The Trump administration has worked to reduce this opposition to the moratorium and build support for making it permanent. On February 20, the U.S. reached an agreement with Indonesia that included provisions to support a permanent moratorium—a notable shift, as Indonesia had been an opponent of extending the moratorium and had tariff codes ready to activate the moment it expired. Similar language has not made it into all of the agreements with moratorium-skeptical nations, though. A joint statement between the United States and India merely emphasized a commitment to address barriers to digital trade, and did not include mention of the moratorium. 

Making the moratorium permanent and locking in tariff-free electronic transmissions across all 166 WTO member nations would be ideal to create certainty for startups. The U.S. and 18 other countries released a proposal to this end late last month. It would maintain zero-duty rules on electronic transmissions, and make clear that term covers both the transmission and its content. This is significant because some countries have argued that content should be separated from the transmission itself and taxed like its physical counterpart. That distinction, however, falls apart under scrutiny—a streamed movie and a DVD contain the same content, but treating them identically for tariff purposes ignores the fundamental nature of digital goods. 

For startups, a renewal is better than a lapse, but only a permanent moratorium would signal to startup founders that the global digital economy is open for business, not subject to renegotiation every two years. Each short-term renewal adds another layer of uncertainty, making it difficult to plan for global expansion when entering into foreign markets could become more expensive overnight. This continued uncertainty is its own tax on growth. 

The WTO’s MC14 in Yaoundé is the moment that determines which of these futures we get. Startups will not be in the negotiating room, but the outcome will land directly on their bottom line. The moratorium has been the invisible infrastructure of the global digital economy for nearly three decades. Making it permanent is not just good trade policy—it is essential for startups to build, scale, and compete globally.