WTO to review domestic e-commerce regulatory issues?

[James Love <love@cptech.org>]

-	WTO to review domestic e-commerce regulatory issues?

This is the July 1999 Progress Report on the WTO Work Program on
E-Commerce, from the Council in Trade in Services.  One thing that
seemed important was the statement that on "Article XIV of the GATS . .
. [regarding] the protection of privacy and public morals and the
prevention of fraud. . . there was agreement that measures taken by
Members must not be more trade restrictive than necessary...[and] it
should be interpreted narrowly."

There are also a separate communications from Japan stating  that while
"Measures for privacy and consumer protection, etc.,  have legitimate
policy objectives in themselves,"  "a balanced approach is important in
order to ensure that such measures do not develop into unnecessary
regulations in view of developing a free trading environment," and a
Canadian proposal for the  "identification of specific issues arising
from domestic regulation affecting electronic commerce."

   Jamie   


WORLD TRADE ORGANIZATION		
	S/L/74
27 July 1999
	(99-3194)
	
Trade in Services	


WORK PROGRAMME ON ELECTRONIC COMMERCE
Progress Report to the General Council
Adopted by the Council for Trade in Services on 19 July 1999

1.   The Council for Trade in Services submitted an Interim Report on
its discussions under the work programme on electronic commerce (S/C/8)
to the General Council on 31 March 1999.  The Report identified issues
on which discussions had progressed closer towards a common
understanding and others requiring substantial further examination. 
Following the Interim Report, the Council for Trade in Services has
continued to discuss the work programme at its meetings of 26 April, 18
May and 22-24 June 1999. At those meetings the discussions focused on
the ten issues identified in paragraph 5 of the Interim Report as
requiring considerable further examination as well as the twelve issues
contained in paragraph 2.1 of the Work Programme adopted by the General
Council (WT/L/274).  Reports on those  meetings are contained in
documents S/C/M/35, 36 and 37.

2.  Since the Interim Report, a communication on the work programme on
electronic commerce by Australia (S/C/W/108) and an informal paper from
the European Community (Job No. 3636) have been submitted.  

3.  This report is structured according to the individual items
contained in paragraph 2.1 of the work programme and provides
information on progress made on each of the items.  Points of common
understanding are reflected under each item, as well as issues which
require further clarification and issues on which there are different
views. It should be noted that it does not constitute a comprehensive
record of the issues raised by individual delegations.

4.  Scope of the GATS with respect to the electronic delivery of
services

5.  It was the general view that the electronic delivery of services
falls within the scope of the GATS, since the Agreement applies to all
services regardless of the means by which they are delivered, and that
electronic delivery can take place under any of the four modes of
supply.  Measures affecting the electronic delivery of services are
measures affecting trade in services in the sense of Article I of the
GATS and are therefore covered by GATS obligations.  It was also the
general view that the GATS is technologically neutral in the sense that
it does not contain any provisions that distinguish between the
different technological means through which a service may be supplied. 
Some delegations expressed a view that these issues were complex and
needed further examination.

6.  It was recognized that services could be supplied electronically
under any of the four modes of supply.  However, there was particular
difficulty in making a distinction between supply under  modes 1 and 2
in the case of electronic commerce, but no conclusion was reached as to
how to clarify the matter, and it was agreed that further work is
necessary.

7.  Several delegations expressed the view that all products delivered
electronically are services and that in the context of the work
programme it would be useful to make clear that the GATS applies to all
products delivered electronically.  Other delegations said that it was
not clear to them that all electronically delivered products are
services and that if there were some which would not be considered
services, rules other than those of the GATS would apply to them.  It
was suggested that further work on this issue was necessary.

8.  MFN (Article II)

9.  It was the general view that all general GATS provisions, including
the MFN obligation, are applicable to the supply of services through
electronic means. 

10.  Members noted that the issue of likeness is central to the
application of MFN and that themain question to be addressed in this
regard is whether electronically delivered services and those delivered
by other methods should be considered  like services .  Members also
noted that the issue of likeness is one of the most complex legal
issues, not only in the GATS, but also in the GATT and that there is
considerable GATT jurisprudence which establishes that the determination
of likeness can only be made on a case-by-case basis.  Some Members
suggested that within the limits of individual sectors and modes of
supply, it should be possible to agree that likeness would not depend on
whether a service was delivered electronically or otherwise.

11.  Transparency (Article III)

12.  The general understanding was that the obligations of Article III
on transparency apply to all laws and regulations affecting the supply
of a service through electronic means.

13.  Increasing participation of developing countries (Article IV)

14.  The common understanding was that the participation of developing
countries in electronic commerce should be enhanced inter alia by the
implementation of Article IV of the GATS throughthe liberalization of
market access in areas of export interest to them and through better
access to technology, including technology relating to encryption and
security of transactions and to efficient telecommunication services. 
In this regard, some Members highlighted the impact on widespread uses
in electronic commerce of existing restrictions on export of
state-of-the-art encryption technology by some Members.  It was also
noted by some delegations that prohibitions on the export of encryption
technology would be viewed in light of Article XIVbis of the GATS. 
Reference was also made to the importance of developing human resources
and physical infrastructure.  Some delegations stressed that it is
important to take account of the revenue and other fiscal implications
of electronic commerce for developing countries and suggested that
advantage should be taken of the work done in UNCTAD and the Committee
on Trade and Development in regard to developing country interests in
the matter.  It was also suggested that efforts to ensure the
development of electronic commerce and internet infrastructure should
also be addressed in development assistance programmes.

15.  Domestic regulation, standards, and recognition (Articles VI and
VII)

16.  It was the general view that the provisions concerning domestic
regulations in Article VIof the GATS apply to the supply of services
through electronic means.  It was the general view that in the area of
domestic regulation it is crucial to maintain a balance between the
right of Members to regulate and the need to ensure that domestic
regulatory measures do not constitute unnecessary barriers to trade. 
Members also recognized the importance of the distinction between the
disciplines of Article XIV (General Exceptions) and any possible
disciplines to be developed  under Article VI:4 of the GATS.  Some
delegations suggested the development of disciplines under Article VI:4
of the GATS in relation to electronic commerce.  Some delegations said
that electronic commerce is an area where rapid economic growth has been
fostered by the existence of very little regulation and that the
emphasis in the field of domestic regulation should be on keeping
regulation to a minimum in order to favour further growth.  It was also
suggested that consideration should be given to the constraints facing
developing countries in fulfilling legitimate regulatory objectives in
this field and to dealing effectively with technical barriers to trade
encountered by developing countries.

17.  Competition (Articles VIII and IX)

18.  The general view was that the expansion of electronic commerce
could help reduce the extent of restrictive business practices, inter
alia, by facilitating market entry for smaller servicesuppliers.

19.  It was noted that monopolies and restrictive business practices
might pose obstacles to electronic commerce and that in this respect it
might be necessary to clarify the reach of existing GATS provisions. 
this issue needed further examination.  Some Members were of the view
that there might be a need to further clarify the applicability of the
principles relating to competitive safeguards (including
interconnection) and allocation of scarce resources) in the
telecommunications Reference Paper to major suppliers of
telecommunication services in relation to electronic commerce.  It was
noted that the competition safeguards in the Reference Paper apply to
major suppliers of basic telecommunications and that in some countries
the Internet access provider is also a major supplier of basic
telecommunications.  A suggestion was also made that improvement of
access to distribution channels and information networks, including the
internet, needed further examination.

20.  Protection of privacy and public morals and the prevention of fraud
(Article XIV)

21.  It was noted that Article XIV of the GATS (General Exceptions)
applies, inter alia, to the protection of privacy and public morals and
the prevention of fraud, and there was agreement that measures taken by
Members must not be more trade restrictive than necessary to fulfill
such objectives.  They also must not constitute a means of arbitrary or
unjustifiable discrimination, or a disguised restriction on trade in
services.  It was also noted that, as Article XIV constitutes an
exception provision, it should be interpreted narrowly, and its scope
cannot be expanded to cover other regulatory objectives than those
listed therein.

22.  Market-access commitments on electronic supply of services (Article
XVI)

23.  Without prejudice to questions concerning likeness of services, Iit
was the general view that  the means of delivery does not alter specific
commitments; they permit the electronic supply of the scheduled service
unless otherwise specified.  It was pointed out that it would be
possible to define the coverage of a commitment, in the
sector/sub-sector column of the schedule, as excluding supply through
certain technological means.

24.  Some delegations argued that it should not be assumed that a
country which has made commitments in basic telecommunications has
automatically committed Internet access services, particularly given the
fact that some Members had explicitly scheduled these services.  Other
delegations argued that the issue of commitments on Internet access
services and networks needed to be further clarified, in the light of
the fact that many delegations regarded their commitments on basic or
value-added telecommunications services as covering Internet access. 

25.  National treatment (Article XVII)

26.  There was a general understanding that national treatment
commitments cover the supply of services through electronic means unless
otherwise specified.

27.  Members expressed the same views on the issue of likeness as for
MFN.

28.  Access to and use of public telecommunications transport networks
and services  (Annexon Telecommunications)

29.  The general view was that the Annex on Telecommunications applies
to access to and use of the Internet network when it is defined in a
Member's regulatory system as a public telecommunications transport
service and/or network in terms of that Annex.

30.  It was noted that the Annex guarantees access to and use of public
telecommunication networks for Internet access providers, but it was not
clear whether it also guarantees service suppliers access to and use of
Internet providers  networks and services.  Since it might be important
for service suppliers to have the right of access to Internet providers 
networks and services, it was agreed that it would be desirable to
further examine this matter.

31.  It was noted that a key question in the determination of the
applicability of the Telecommunications Annex is whether some Internet
related services can be considered  public telecommunications transport
networks , as the Internet is a network of networks, which includes
public and private networks.

32.  Customs duties

33.  Some delegations said that customs duties on electronic
transmissions could affect electronic commerce and the electronic supply
of services.  Other delegations argued that the concept of customs
duties is alien to the GATS and would become a relevant issue only if it
were accepted that a category of electronically delivered goods exists. 
Other delegations maintained  that customs duties could be applied to
services, but saw a need to clarify the implications of applying customs
duties to electronic transactions.  It appeared from the discussions on
this item that Members might wish to address at least the two following
questions: (i) how customs duties could apply to services; and (ii) how
customs duties could apply to electronic transmissions.

34.  Some delegations supported making the current standstill on customs
duties permanent and binding. Some said that unless the classification
issue was resolved they would not be able to consider extension of the
standstill.  Others  said that they could support a  permanent and
binding standstill, but without prejudice to their position on the
classification issue.  Other delegations said that they could only
envisage extension of the standstill on the current basis, possibly
until the end of the forthcoming negotiations, while some were not
convinced of the case for extension. The point was made that a decision
to extend the standstill would be a political one, which could only be
taken by the General Council, while the debate in the Services Council
should focus on the technical and legal issues involved. It was also
said that extension of the work programme itself was an issue for the
General Council to decideIt was also noted that, when reporting to the
Third Ministerial Session, the General Council will review the May 1998
Declaration on Global Electronic Commerce, the extension of which will
be decided by consensus, taking into account the progress of the work
programme.  Some delegations said that the concept of technological
neutrality could be undermined by assuming that customs duties could be
applied to services electronically transmitted and not to services
delivered by other means.  Some delegations suggested the need to
examine the impact of domestic taxation on electronic commerce.  Others
said that matters related to domestic taxation were outside the ambit of
the work programme and should not be discussed.

35.	

36.	

37.  Classification issues

38.  Delegations endorsed the view that all services, whether supplied
electronically or otherwise, are covered by the GATS, and that the GATS
makes no distinction between services provided electronically or by any
other means.  It was also observed that the vast majority of all
products delivered electronically are services.

39.  Some delegations were of the view that all electronic deliveries
are services and could not see any non-services products, which could be
delivered electronically.  Other delegations suggested that it still
remained to be clarified whether there were a small number of
electronically delivered products which should be classified as goods
and therefore subject to the GATT rather than the GATS.  The question
was also raised as to whether such products, even if classified as
services, should be subject to full MFN and, national treatment
obligations and to general prohibition of quantitative restrictions. It
was also suggested that there might be categories other than goods and
services for classifying certain electronically delivered products;  in
some cases a downloaded product might be regarded as neither a good nor
a service.  However, it was pointed out that no suggestion was made to
the effect  that there was any product that would fall outside the scope
of WTO agreements.  It was agreed that further consideration, including
the consideration of concrete examples, should be given to this
question. 

40.  In discussion of the issue of possible new services, it was the
general view that electronic delivery had given rise to very few new
services, if any, but that further work is needed to identify any such
services and decide how they should be classified.  Some delegations
argued that the identification of new services should be done keeping in
mind the existing classification structure based on the Services
Sectoral Classification List (MTN.GNS/W/120) and the UN CPC.

41.__________

-- 
James Love / Director, Consumer Project on Technology
http://www.cptech.org / love@cptech.org
P.O. Box 19367, Washington, DC 20036
voice 202.387.8030 / fax 202.234.5176