Marília Maciel   20 Sep 2016   Diplo Blog, Internet Governance

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E-commerce has been part of the World Trade Organization (WTO) agenda since 1998, following the Ministerial Declaration on Global Electronic Commerce. In the same year, the Organisation for Economic Co-operation and Development (OECD) launched its Action Plan for Electronic Commerce, a key framework guiding the activities of member states on this matter. The topic is not an emerging issue at international level, but recent developments have renewed interest in it.

The first is the perceived importance of innovation and the new digital revolution in fostering economic growth in the coming years. This has been recognised, for example, by the G20 Communiqué from the 2016 Hangzhou Summit, which, among other things, welcomed a proposal to create an Electronic World Trade Platform. The second is the key importance of trade – including in its electronic format – for achieving the sustainable development goals (SDGs).

This blog post provides a summary of the evolution of e-commerce in the WTO; the current stage of discussions; and the recent inclusion of a broad range of Internet policy topics, from network neutrality to data localisation, in the documents produced by member states.

Introduction of e-commerce in the WTO

The promotion of commerce and development are inextricably linked in the current multilateral trading system. According to the agreement establishing the WTO, relations in the field of trade should be conducted with a view of 'raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand [...] while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development'. The ongoing Doha Round of negotiations has placed development at its centre. One of its key objectives is to improve the trading prospects of developing countries.

The idea of non-discrimination is the cornerstone of the system. It is based on two principles: the most favoured nation and national treatment. According to the former, countries cannot discriminate between their trading partners. If a special favour – such as a lower customs duty rate – is offered to one country, the same should be done for all other WTO members. This principle has benefited developing countries because they were not left behind, even if they were not necessarily part of the negotiation of preferences among the big trade players. The principle of national treatment establishes that imported and locally produced goods and services should be treated equally after they have entered the market (or have gone through customs) of a given country.

These principles provide a good example of how e-commerce may affect the trading system. The transborder and often de-materialised nature of transactions poses a challenge to customs control and makes it harder to use taxation as an instrument of commercial policy. A moratorium on customs duties – tariffs or tax imposed when a foreign product crosses national borders – was introduced in e-commerce in 1998 and has been renewed ever since, without a definitive conclusion on this matter.

In order to better understand these challenges, the e-commerce ministerial declaration called for a thorough investigation of the trade-related aspects of e-commerce, with special emphasis on the economic, financial, and development needs of developing countries. A Work Programme on Electronic Commerce was adopted in 1998. It established a broad working definition of e-commerce[1] and instructed four councils of the WTO to examine and report on the treatment of this issue: the Council for Trade in Services (GATS), the Council for Trade in Goods (GATT), the Council for Trade-related aspects of Intellectual Property Rights (TRIPS), and the Committee on Trade and Development (CTD).

Current stage of WTO e-commerce discussions

The first preliminary question that lay before member states was the need to define the trade-related aspects that would fall under WTO’s remit. Issues related to e-commerce fall into two policy circles. In the first, there are organisations that directly deal with e-commerce, such as the United Nations Conference on Trade and Development (UNCTAD), which focuses on trade and development, and OECD, which is responsible for carrying out a wide range of e-commerce activities, such as the OECD Ministerial Meeting on the Digital Economy: Innovation, Growth and Social Prosperity, which recently took place in Mexico. In the second circle, there are organisations dedicated to other policy issues that affect e-commerce. To name a few, the World Intellectual Property Organization (WIPO) addresses intellectual property aspects, the International Telecommunication Union (ITU) deals with enabling infrastructure, and the International Organization for Standardization (ISO) is concerned with harmonising standards. The UN Human Rights Council (UNHCR) focuses on privacy, which is relevant for the movement of data, an important aspect of e-commerce.

There is a growing understanding that the WTO could play an important role in e-commerce. Nevertheless, the reports produced by the chairmen of the Work Programme on Electronic Commerce mention that progress across the four areas mentioned has been uneven so far, and has mostly focused on the pillar of services.

Member states seem to be divided between those that express readiness to start delineating outcomes from the discussions on e-commerce and those that believe it is too early to draw any conclusions. Among the latter are many developing countries who see e-commerce as a new issue, not included in the priorities set by Doha. According to them, access to infrastructure and e-literacy skills – which would allow developing countries to make e-commerce flourish –  need to be discussed before the development of multilateral frameworks. Views are also split on how to proceed with the moratorium on customs duties. While some want to see it become permanent, others believe that a mechanism of temporary extension is more adequate. One thing seems to be gaining consensus among member states, however: e-commerce is gaining importance and will probably be among the key topics of the WTO Ministerial Meeting in 2017 (MC11).

E-commerce and Internet policy issues

In preparation for MC11, non-papers were circulated in July 2016 with the aim of enhancing understanding of the different positions espoused by members. The contribution put forth by the European Union and other countries[2] provided a mapping of the trade-related aspects of e-commerce that would fall under the remit of the WTO. Other delegations have opined that the EU document is comprehensive and could be used as a starting point for discussions. Issues were clustered into four groups in the EU proposal: regulatory frameworks, open markets, initiatives facilitating the development of e-commerce, and transparency of the multilateral trading system.

The topics included under the umbrella of regulatory frameworks show an interesting interplay with key issues that are part of the Internet governance agenda. Although discussions on e-commerce have traditionally included other related areas, such as consumer protection, privacy, and authentication – the OECD framework is an example of that – it is interesting to note how member states are making an explicit connection between trade issues and topics of a more technical nature, such as network neutrality, data localisation, interoperability, and access to the source code. A comparison between some of the points included in the proposals put forth by the EU, the United States, and Brazil, three out of the four members of the new QUAD[3], make some interesting revelations:

  • Network neutrality is included among trade facilitation measures in the EU non-paper, which mentions the need for 'rules ensuring the ability of consumers and operators to access and use services and applications of their choice on the Internet; and to connect their choice of end user devices to the Internet'. The non-paper put forth by Brazil explicitly mentions network neutrality among trade facilitation measures, and makes use of a definition that seems to be largely inspired by the Civil Rights Framework for the Internet in Brazil (Marco Civil). Network neutrality is not present in the non-paper presented by the United States.
  • Preventing localisation barriers is an issue included in the EU and US non-papers. The USA mentions that 'companies and digital entrepreneurs relying on cloud computing and delivering Internet-based products and services should not need to build physical infrastructure and expensive data centers in every country they seek to serve.' It is interesting to observe that Brazil does not include data localisation in its contribution. This is a controversial issue in the country, especially after congressmen’s attempt to include a provision on data localisation in the Marco Civil, which ended up being rejected.
  • Protecting the source code is a topic mentioned by the EU and the USA. According to the US non-paper 'innovators should not have to hand over their source code or proprietary algorithms to their competitors or a regulator.' The EU points to the need for 'measures to refrain from requirements on the transfer of or access to, source code of software, as a condition of market access'. Brazil’s non-paper does not include the topic.
  • Technology transfer, one of the key issues in fostering development, is mentioned by Brazil. Unimpeded access to digital technology, free from unwarranted limitations, is a precondition for an inclusive and global e-commerce market. The topic is not present in the non-papers presented by the USA or the EU. The USA expresses concerns with forced technology transfer, imposed as a condition to accessing markets, which could inhibit the development of e-commerce.
  • Technical standards are mentioned by the USA and the EU, especially the need to preserve interoperability.
  • Regulatory frameworks on privacy are key to protecting personal information and enhancing trust in e-commerce, according to the EU and Brazil. The USA does not mention the need for a comprehensive framework on privacy, but stresses the importance of trade norms to prevent anti-competitive regulation that create barriers to free flow and stifle innovation. Cross-border data flows should be enabled 'subject to reasonable safeguards like the protection of consumer data when exported'.  
  • Encryption is mentioned as important by the USA to 'protect security and privacy while allowing law enforcement access to communications consistent with applicable law'. Encryption is not mentioned by the EU or Brazil.

The link between trade and achieving the SDGs is not established by the EU, the USA, or Brazil. Nevertheless, development-related issues are mentioned in a few submissions, such as in Brazil’s reference to the need for technology transfer. The convergence between e-commerce and the SDGs is urgent. UNCTAD’s decision to launch the eTrade for All Initiative is an important step to addressing the nexus between e-commerce and development. Nevertheless, a concerted effort is needed from all relevant organisations.

Member states highlighted that the non-papers  aim to foster discussion and should not be seen as negotiating positions. However, they provide an interesting indication that digital policy or Internet governance issues may be starting to percolate through intergovernmental organisations that were initially seen as loosely associated to the digital policy field. The decision-making characteristic of these organisations – and the existence of mechanisms for the dispute settlement in the case of the WTO – may introduce a new dynamic in the politics of Internet governance in the future.

DiploFoundation and the Geneva Internet Platform will organise a workshop on Inclusive Digital Trade and Sustainable Development: Exploring Creative Solutions and Ways Forward as part of the 2016 World Trade Organization (WTO) Public Forum. The session will take place on 29 September, at the WTO premises, from 13:00 to 14:30 CEST. Diplo will also produce live updates and just-in-time reporting from the WTO Public Forum sessions related to e-commerce. All resources will be posted online for further discussion.

 

[1] The Work Programme on Electronic Commerce states that: 'Exclusively for the purposes of the work programme, and without prejudice to its outcome, the term "electronic commerce" is understood to mean the production, distribution, marketing, sale or delivery of goods and services by electronic means.'

[2] The proposal was presented by the EU on behalf of Canada, Chile, Colombia, Côte d'Ivoire, the European Union, the Republic of Korea, Mexico, Paraguay, and Singapore.

[3] The EU, the United States, Brazil, and India are members of the new QUAD or G4, which are considered a key group of countries in WTO trade negotiations.

Comments

  • Profile picture for user Jovan Kurbalija
    Jovan Kurbalija, 03/29/2020 - 15:04

    Marilia, thank you for comprehensive survey of evolution of e-commerce in WTO and current discussions. There are many links to other policy areas (standards, telecommunications, human rights). It is major challenge for IOs, missions and countries to address e-commerce in as comprehensive as possible way.

  • Profile picture for user Vladimir Radunovic
    Vladimir Radunovic, 03/29/2020 - 15:04

    Great overview, thank you Marilia. I wonder if cyber-espionage - in terms of the industry and IPRs - will also become part of the WTO dialogue in future: namely, the tensions about stealing the industry secrets (especially on the US-China line) are growing; at the same time several bilateral (such as US-China and Germany-China) and multilateral agreements (such as G20 in 2015, or Nordinc-Baltic-US cyberdialogue) are setting as 'default' that countries shouldn't conduct or support cyber-theft of IPR or trade secrets 'with the intent of providing competitive advantages to companies or commercial sectors’ . Worth following further.

  • In reply to by Vladimir Radunovic

    Profile picture for user Marília Maciel
    Marília Maciel, 03/29/2020 - 15:04

    Thank you, Vladimir. At the present moment, my impression is that discussion in the WTO TRIPS council is more focused on other intellectual property areas, such as copyright and trademarks. On these points, the concerns raised in the WTO largely overlap with WIPO's. Trade secrets are emerging in some more recent contributions. For example, the United States mentions the topic in their non-paper, in the context of protecting the source code. Definitely worth following.

  • Berna Akçalı Gür (not verified), 03/29/2020 - 15:04

    This is a very informative summary. I am looking forward to reading about the outcomes of the WTO Public Forum sessions related to e-commerce.

  • William Drake (not verified), 03/29/2020 - 15:04

    This is helpful intro, thanks Marilia. One might add that negotiations on digital trade occurred throughout the Uruguay Round begun in 1986 and resulted in binding commitments in the 1994 treaty. One of the challenges ahead is to read those commitments against measures enacted post hoc like data localization and barriers to data flow. Another is to clarify some of the key issues that have remained unresolved is the lackluster work program since 1998, particularly as they relate to the current Internet trade environment of platforms, IoT and such, e.g. possible revisions to the GATS/GATT/BTA; the classification of digital goods/services; competition; domestic regulation & necessity; market access and nondiscrimination in a networked environment; the problem of 'likeness' (compounded by 3D printing); mutual recognition and regulatory cooperation; customs duties; increasing developing country participation; and especially GATS Article XIV (General Exceptions). Maybe for the next blog? :-)

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