WORLD TRADE
ORGANIZATIONWT/GC/16
G/C/2S/C/7
IP/C/16
WT/COMTD/17
12 February 1999
(99-0576)
Original:  English
WORK PROGRAMME ON ELECTRONIC COMMERCE
Submission by the United States
The following submission, dated 11 February 1999, to the General Council, the Council for
Trade in Goods, the Council for Trade in Serv ices, the Council for Trade-Related Aspects of
Intellectual Property Rights and the Committee on Trade and Development has been received from
the Permanent Mission of the United States with the request that it be circulated to Members.
_______________
In the General Council’s May 1998 “Declaration on Global Electronic Commerce,” WTO
Members agreed to examine all trade-related issues relating to global electronic commerce and report
to the third session of the Ministerial meeting with any recommendations.  Members also agreed to
review at that session their commitment  to continue the practice of not imposing customs duties on
electronic transmissions.  The work of the WTO in the intervening months since May 1998underscores the importance Members have accorded to these issues and revealed the breadth of issues
to be discussed.
Electronic commerce is re-creating the United States’ and the world’s economy as
liberalization and increased competition transform information-based industries. The open globaleconomy places a premium on characteristics inherent to electronic commerce--the ability to respond
to markets without concern for geography and time through a medium that is ubiquitous and
instantaneous.  The rate at which electronic commerce brings benefits to any particular country will
depend on how fast it liberalizes its market and adopts a predictable trade regime–the essential
conditions for encouraging the enormous investments in technology required by electronic commerce.
How the WTO can contribute to this goal should be the main object of the “Work Programme on
Electronic Commerce.”
Given the undefined nature of electronic commerce and its potential to affect most aspects of
trade, Members agreed to undertake elements of the Work Program in a parallel fashion, among the
various WTO bodies with different competencies.  Precisely because electronic commerce is so
difficult to categorize, however, the oversight of the General Council remains essential--to ensure thatno relevant elements go unexamined, that cross-cutting issues are examined from a broad perspective
and that any conflicts of jurisdiction are resolved.  The duty-free status of electronic transmissions is
obviously a cross-cutting issue.  So, too, are certain definitional questions, such as how elements of
electronic commerce do or do not fit into established categories of goods and services.
Various WTO bodies are now examining the trade-related aspects of electronic commerce
within the framework identified for the Work Prog ram, adopted at the September 30 General CouncilWT/GC/16, G/C/2,
S/C/7, IP/C/16,
WT/COMTD/17
Page 2
(WT/L/274).  The range of WTO disciplines that could affect electronic commerce is broad, involving
services, intellectual property, goods, government procurement, TRIPS, and technical barriers to trade
(standards). While these general disciplines may be broad enough to embody the trade-relevant needsof electronic commerce, the evolving nature of this medium may also reveal shortcomings of
traditional approaches.
In terms of the framework set out at the September 30 General Council, there are a number of
unanswered questions for consideration by Members.  The United States is circulating this paper to
stimulate further direction in our discussions during the WTO Work Program.  We invite Members to
comment on the issues raised below and welcome additional discussion on issues raised bydelegations.
1. Increasing Participation by Developing Countries
A key issue for developing countries is building an infrastructure that supports electronic
commerce.  It may be useful for Members to explore what are effective strategies for attractinginvestment (domestically and from abroad) in information technology equipment and
telecommunications infrastructure, and the trade regimes supporting such strategies.
Some countries have sought to restrict market access and competition in an attempt to
guarantee the returns on investment in infrastructure that provide the bandwidth for electroniccommerce.  However, there is evidence that such  a strategy only keeps the price of bandwidth high,
reduces the variety of services offerings relevant to electronic commerce and impedes economic
development.  Similarly, we should ask ourselves (1) whether there is the risk that governments will
underestimate the demand for bandwidth and the amount of investment that is needed, and (2)
whether this risk is not eliminated when decisions are based on a fully competitive, privatemarketplace.  We should also look at the emerging evidence that Members have committed to broad
market access, a competitive basic telecom regime, and low tariffs in information technology are
reaping the greatest benefits from electronic commerce.
To complement WTO activities and commitmen ts regarding infrastructure, each WTO
Member should consider development assistance initiatives that foster the growth of infrastructure,
access to information technology and technical know-how relevant for electronic commerce.   Bothapproaches will assist in making electronic commerce a truly global enterprise.  In November, 1998,
the U.S. Government launched an initiative on the Internet and developing countries.  The U.S.
initiative seeks to assist in policy reform that is aimed at liberalization, open competition and
universal access.  The key for successful initiatives will be a focus on the ability for small- and
medium-sized enterprises to use the Internet in a way that allows them to “leap frog” into the
information age and reap the benefits early rather than late. The Committee on Trade and
Development Secretariat Note (WT/COMTD/W/51 of  19 November 1998) highlighted a few of those
benefits.
During the course of the Work Program, delegations might recognize that the promotion of
the Internet is one of the most effective ways of facilitating technology transfer as it provides users
instant access to a wealth of technical information, publicly available software, and interactive
learning opportunities.
Electronic commerce may empower less developed countries in the same way it empowers
individual consumers with increased bargaining pow er through greater access to information and the
ability to better judge market conditions.WT/GC/16, G/C/2,
S/C/7, IP/C/16,
WT/COMTD/17
Page 3
2. Customs duties
The most unambiguous way to ensure liberalized customs treatment of electronic commerce
is to make permanent the moratorium on customs duties on electronic transmissions.   
Are there any compelling reasons why Members would be unable or unwilling to take this
simple, unambiguous step to place electronic commerce in a liberalized context?
It has been suggested that duty-free treatment of electronic transmissions could be trade
distortive, as it diverts trade that may otherwis e have occurred through physical medium into an
electronic medium.
Is there any evidence that electronic commerce is trade diverting? If it did prove to be
diverting, is it not likely that it would result in a greater overall level of trade, both in narrow
products directly connected to electronic commerce, and in the ancillary products and services
indirectly connected to electronic commerce (e.g. computers, telecommunications services,software, etc.)?  That being the case, would this not be a positive development?
3. Scope
Most market access commitments for electronic commerce activities fall under Members’
service commitments.  Apart from narrow exceptions (for example in GATS Article I), all servicesectors are currently covered by the GATS.  As specific market access and national treatment
commitments in services depend on Members’ explicit schedules, and since electronic commerce may
give new importance to a broad range of services, Members may find it useful to review the extent to
which the range of their GATS commitments and those of their trade partners capture electronic
commerce-related services.  However, there should be no question that where market access andnational treatment commitments exist, they encomp ass the delivery of the service through electronic
means, in keeping with the principle of technological neutrality.
In terms of further issues to be explored rela ting to the scope of service commitments relating
to electronic commerce, Members may want to consid er some of the following approaches to examine
the range of issues:
Which services become inherently more “tradable,” particularly on a cross-border or
consumption abroad mode, through electronic commerce?  Has the Internet, for example,
brought economic viability to the international provision of retailing, which was previously
inhibited by different time zones and the high price of international phone calls?  Are
cross-border auction services now meaningful in ways not thought of previously?  Asnetworked appliances and machines become a reality, is remote monitoring, metering, and
diagnostics likely to become an important trade activity?
What services related to electronic commerce are undisputably “new” and, thus, could benefit
from Members making new commitments to bring them under WTO disciplines?  Forexample, do Web-hosting services, electronic authentication services or data “push” services
fall under any traditional categories such as value-added services or data processing, or would
more explicit commitments provide valuable certainty for the provision of these services?WT/GC/16, G/C/2,
S/C/7, IP/C/16,
WT/COMTD/17
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4. Modes of Delivery
While the most complete way to ensure a liberalized service regime in electronic commerce is
to make commitments and minimize restrictions across all four modes of delivery, countries’commitments differ depending on the specific mode that is scheduled.  As noted in the WTO’s 1998
“Special Report on Electronic Commerce and the WTO,” electronic commerce appears to have
particularly important implications for expanding trade in modes 1 and 2.  Based on data in this
report, service commitments on Mode 2 appear, in general, to be more comprehensive.
Given this fact, what are the implications of  considering services delivered electronically,
accessible from another member’s economy, to be mode 2 service, based on the fact thatconsumers can “visit” foreign web sites electronically, and initiate transactions at those sites?
Is there any disadvantage to characterizing an electronic commerce service involving access
to a foreign-based Website as “consumption abroad”?  Since it is not feasible or practicable to
limit consumers’ access to Websites based on a site’s location, are Article VI limitations on
such access even meaningful?
It might be that electronic commerce will expand the scope of services traded on a
“cross-border” and “consumption abroad” basis.
Will this phenomenon replace the currently held preference for establishing a commercial
presence in a foreign market?
5. Procurement
It would be useful for Members to examin e how electronic commerce is influencing areas
where governments interact commercially with the private sector.  The use of electronic commercemay have increased opportunities for bidding on government procurement contracts, particularly for
small and medium sized companies.  This might logically contribute to lower costs for governments.
6. Intellectual Property
The advent of digital technology, with its ability to create perfect reproductions of works at
minimal cost, creates a major challenge for IPR holders.  They face an even greater challenge from
the networked environment typical of electronic commerce, where IPR protection via control over themedia (e.g. a CD) or the player may no longer be possi ble. If content is freely distributable through an
open network and accessible by computers based on open standards, new and unique problems are
created.
How is the emergence of new distribution channels based on electronic commerce changing
the economics of content distribution? What solutions are emerging to both protect IPR of
content holders and exploit the efficiencies of the electronic distribution medium?  How can
such solutions be integrated into existing international disciplines?
Would it not be helpful to examine the responsiveness of the current framework to additional
needs for effective protection of intellectual property rights, bearing in mind the interests of
all members and the work undertaken in other international fora?WT/GC/16, G/C/2,
S/C/7, IP/C/16,
WT/COMTD/17
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7. Classification
While some have suggested that all commerce based on electronic transmission is a service,
this conclusion needs further examination.
For example, are there products which tend be distributed electronically and generally are not
marketed in tangible form?  For example, el ectronic greeting cards, clip-art, Web-pages,
Java-based “applets,” and certain industrial designs might be created, distributed and used
entirely within a network, without never acquiring a tangible form.
While the transmission of these products can certainly be characterized as a service, the
products themselves are not consumed in their transmission, but rather retain a permanence analogous
to the goods world.  And yet, some may argue that these are not quite goods or services.  Perhaps in
the GATT context, before we approach the question of “goods or services,” the critical question is
whether the item is an “importation” for tariff purposes.
What would be the relevant approach in the WTO if  there is no importation for tariff
purposes? 
While such products have only recently become widely available, is the range and value of
such products not likely to become a major component of electronic commerce?
It is not clear, as some would maintain, that anything intangible should be considered a
service.
In contrast, for example, what are the implications of the long-standing practice of some
WTO Members to classify “electricity” (clearly an intangible) as a good in their tariff
schedules?
The United States is not arguing that intangibles should be classified as “goods” in the
traditional sense.  Given the broader reach of WTO disciplines accorded by the GATT (i.e. market
access and national treatment are not dependent on specific commitments) there may be an advantage
to a GATT versus GATS approach to such products which could provide for a more trade-liberalizingoutcome for electronic commerce.
8. Transparency and Domestic regulation
Members should examine whether the growth in certain countries of the fast-developing
nature of electronic commerce has been inhibited by regulation, due the difficulty of categorizingcertain electronic commercial activities.  Perhaps this problem is more pronounced in countries with
more extensive licensing regimes, and which have greater difficulty applying  relevant regulations.
Are there significant cases of government authorities seeking to encompass electronic
commerce in traditional regulatory categories, which burden electronic commerce andundermine the innovative nature of such services?
In many Member states, the widespread use of the Internet for providing regulatory
information, filing forms and receiving authorizati ons, combined with the broad access to computers
has greatly increased the transparency and efficiency of the regulatory regimes.WT/GC/16, G/C/2,
S/C/7, IP/C/16,
WT/COMTD/17
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What are the advantages of such approach, apart form the obvious issue of infrastructure and
resources?
9. Standards
Although built on a suite of common protocols, the Internet (and the applications it has
spawned) have defied traditional standards-making approaches.  The speed of development of
applications, and developers’ ability to innovate with maximum flexibility, has been the source of
enormous creativity and growth. In addition, the growing empowerment of users in the
standards-making process (as seen in fora such as the Asynchronous Transfer Mode (ATM) Forum
and certain authentication consortia) indicates a shift in the nature of some forms of  technologydevelopment.  In many instances it has become clear that applications would not have emerged
successfully in the market if mandatory standards were imposed, or if a lengthy international
standardization process had to be completed first.  In other cases, international standards have been
successfully developed, only to be shunned by users who demand alternative solutions based on
factors such as cost or flexibility.
Will the success of electronic commerce depend on governments minimizing their
involvement in standards-setting activities, unless there is a clear consensus that the private
sector is unable to address relevant problems?  Will attempts by governments or their proxies
to develop standards to create national or regional advantages by championing certainstandards undermine innovation and market-driven growth?
10. Access to and use of the telecommunications network
The GATS Telecommunications Annex, and the Group on Basic Telecom Reference Paper
which guarantee access to and use of telecommunicat ions networks, provides an important framework
for establishing the rights of electronic service providers.  Given the development of
telecommunications and electronic commerce in the years since that the Annex and Reference Paper
were introduced, Members should examine which elements affecting such access could be expanded.
For example, would it be useful to provide mo re specificity to the concept of “reasonable”
rates for leased lines, which are generally an indispensable element and a major cost
associated with electronic commerce?
In addition to leased lines, electronic commerce suppliers may benefit from additional
commitments involving a greater unbundling of  incumbents’ communications networks?  If
so, Members should discuss key network elements that are relevant to electronic commerce.
With the advent of end-to-end international telecommunications service provided by one
supplier, electronic commerce suppliers may want to own or acquire long-term leases in international
circuits.  In that context, Members might ask whether current regulatory regimes and WTO
disciplines, which are generally designed with basic telecommunications carriers in mind, are
comprehensive enough to support electronic commerce needs.
What in the basic telecommunications Reference Paper would apply to an electronic service
supplier?
One of the most often-heard complaints of companies involved in electronic commerce is
inadequate access to bandwidth traditionally provided by telecommunications carriers.  This sameWT/GC/16, G/C/2,
S/C/7, IP/C/16,
WT/COMTD/17
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issue might also arise with alternative bandwidth providers, e.g. cable TV providers or electricity
providers.
What WTO disciplines best address ways to encourage investment in bandwidth and provide
meaningful access to it?
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