A tax moratorium to enable a foreign AI invasion

Towards the end of the 1990s, artifacts such as books and music/video CDs, which were physical things, and thus subject to customs duties on import, began to also be streamed across borders over the Internet. Importing countries were worried about the lost customs duty revenue. At the 1998 World Trade Organization (WTO) Ministerial, members agreed to a temporary moratorium on customs duties for so-called ‘digitalisable goods’, recognising it as a novel phenomenon. The actual term mentioned in the text however is ‘electronic transmissions’. This ‘E-commerce Moratorium’ has since typically been extended from one Ministerial to the next, currently till the next WTO Ministerial in Yaoundé, Cameroon, Africa, between March 26-29, 2026.

The United States comes to this Ministerial with the top priority of making this Moratorium permanent. Under intense tariff-related and other threats from the Trump administration, opposition to the Moratorium is breaking down among the developing countries. Recently, Indonesia, previously a key opponent of the Moratorium, agreed with the U.S. to make it permanent. In its trade deal discussions with the U.S., India also seems to be under intense pressure to concede. The Yaounde Ministerial will find this issue centre stage.

What the subject matter of the Moratorium is

The Moratorium text says: Members will “continue their current practice of not imposing customs duties on electronic transmissions”. But no one seems certain what ‘electronic transmissions’ stand for, and, therefore, what exactly the customs duty moratorium is applicable to. Developing countries have long argued that the definitions should be clarified first. However, the U.S. and its allies have not engaged with this obvious rational approach, casting doubt on their real motives.

Unfortunately, developing countries have so far been unable to expose this bluff. They have not understood the U.S.’s real intention, which is tied to the AI-driven future, where the primary flow of value across borders will be AI, with AI power hyper concentrated in the U.S. and China. Trade negotiators rely on their IT ministries to advise them on such matters, but IT ministries in developing countries are typically besotted with positive digital and AI possibilities. They take a short-term approach to working off U.S./China cloud/AI, not appreciating the emerging structural digital realities.

The duties in the Moratorium text are meant to be interpreted by the U.S. in the near future as possible border taxes on AI flows. They seek to preempt any such possibilities, which is all what the Moratorium is really about.

Developing countries also hope that by avoiding discussions on clarifications, the subject will, in good faith, remain limited to ‘digitalisable goods’. However, this term is not actually mentioned in the Moratorium text, and in emerging contexts, such an approach risks becoming akin to burying one’s head in the sand. Some key developing countries such as India have huge digital services exports, and they fear discussions going in the direction of taxing them. However, with fast-expanding cloud and AI context, and a likely withering of coding as service and even software as service, their digital trade surplus could soon be deeply in the red. Countries may devise new opportunities, but that requires all options to be kept open.

Digitalisable goods may be an obsolete term

An abiding belief among the Moratorium-opposing nations that this is only about digitalisable goods has now become counter-productive. The Trump administration’s pressure in this matter is severe, and countries face tough choices with immediate concerns in key areas such as agriculture and manufacturing topmost on their mind. In relation to these pressing concerns, they may review their own ‘digitalisable goods’ imports, and the customs duties loss from it, and feel that it may not be that big a deal. This may be why country after developing country has been caving in on the Moratorium issue. It is unclear how long India, Brazil and South Africa can resist such U.S. pressure unless they focus on the real ‘AI invasion’ risks posed by the Moratorium.

In their own bi/pluri-lateral digital trade agreements, the U.S. and its allies are increasingly clear, in their definition sections, that ‘digital products’ subject to customs duty moratorium, include services. With no authoritative WTO or trade deals text using the term ‘digitalisable goods’, it now solely appears in the documents by developing countries and pro-South analyses. This is discordant and distracting, even if the ‘digitalisable goods’ approach was useful in earlier stages. Policymakers should either enshrine it explicitly in the Moratorium text or stop treating this obscure and outdated term as the Moratorium’s main focus, and instead be upfront in dealing with the real issue of digital services.

Even the ‘weights’ of an AI model can be imported via an external drive and run on local data to produce AI outputs. But does this make AI a ‘digitalisable good’? This deliberately pushes the argument to its extreme, highlighting how dubious this category has become. Today, virtually everything digital qualifies as a digital service — streaming movies (Netflix) or music (Spotify) are already considered services under established definitions, including at the WTO.

The moratorium is really about border taxing AI

For the U.S., the Moratorium is about securing the AI-driven future; in any case, no one is currently imposing customs duties on the so-called ‘digitalisable goods’. AI will soon be embedded in nearly all socio-economic activities, with economies reorganising themselves around AI platforms. Current trajectories indicate that almost all of such foundation AI will be owned by the U.S. and China. In 2019, the UN Trade and Development (UNCTAD) estimated that 90% of the capitalisation of the world’s top 70 platform companies lay inside the U.S. and China. This was pre-AI. AI is even more super-concentrated. We may be looking at nearly 100% of the top 10 AI platforms owned by the U.S. and China. Such is the scenario in which developing countries need to locate their Moratorium-related positions.

The least that one can do at this stage is not to give up the right to border tax digital/AI services. Even Big Tech leaders such as Bill Gates, Sam Altman and Elon Musk have spoken about taxing AI profits for universal basic income schemes to offset job losses and wage depression due to AI. But the question for developing countries is this. While the U.S. and China might as well super-tax their AI super-corporations for universal basic income and other welfare schemes, who would they tax, and how; with almost all top foundation AI corporations in the U.S. or China?

Kai-Fu Lee, former head of Google China, and former President of Microsoft Research Asia, observed in an article in The New York Times (2017): “So if most countries will not be able to tax ultra-profitable A.I. companies to subsidize their workers, what options will they have? I foresee only one: Unless they wish to plunge their people into poverty, they will be forced to negotiate with whichever country supplies most of their A.I. software — China or the United States — to essentially become that country’s economic dependent, taking in welfare subsidies in exchange for letting the “parent” nation’s A.I. companies continue to profit from the dependent country’s users. Such economic arrangements would reshape today’s geopolitical alliances.”

Making the Moratorium permanent would permanently pave the way for this scenario. This is exactly why the U.S. is so eager to secure it. Developing nations must terminate and bury the Moratorium in Yaounde, creating space for their own digital industrialisation and enabling them to levy border taxes on the soon-to-be pervasive foreign AI.

Parminder Jeet Singh is a Delhi-based digital society researcher and activist

Published – March 20, 2026 04:22 pm IST