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Background Note

May 1998

Electronic Commerce and issues of interest for Less-Advantaged Countries

General outlook


Developing Countries' Approach

Implications for Developing Countries


I. General outlook

1. In the information age global electronic commerce is growing in importance rapidly. It is also affecting the way goods and services are traded across borders. The world trading system is entering an era when goods and services are traded increasingly through electronic means of delivery, lowering costs, increasing productivity as well as consumer choice.

2. The discussion on the need to establish an internationally agreed regime on the legal and commercial environment for the development of electronic commerce has moved at an increasingly fast pace, in line with the swiftness of the "electronic super highway". Studies on various facets of electronic commerce have been launched by several intergovernmental organisations (OECD, UNCTAD, WIPO). Similarly, individual WTO Members have taken initiatives, alone or in tandem, on the subject, for example, the US initiative leading to the "Framework for Global Electronic Commerce", the EU and Japan work towards the creation of an International Charter.

3. Within this atmosphere of varied initiatives with respect to electronic commerce, several WTO Members have issued calls for starting work within the WTO to examine the application of WTO rules to trade-related aspects of electronic commerce and its relation to already established rules in areas such as services, intellectual property, trade facilitation, government procurement and the information technology agreement (ITA).

4. In addition to a thorough examination of how existing WTO rules could be modified to create an enabling environment for electronic commerce, a specific measure, originally proposed by the United States, to preserve the duty free status of electronic transmissions has received the backing of other WTO Members. Indeed, the standstill on customs duties has also been explicitly supported by the European Union, Australia and Canada. That this tariff standstill should be reviewed after 1 January 2000 has been suggested by Canada.

II. Background

5. Discussion of electronic commerce at the WTO is the outcome of several agreements between Members. On the occasion of their summit in Washington, DC, on 5 December 1997, the United States and the European Union issued a joint statement on electronic commerce recognising the following:

  • that a coherent, coordinated approach to it internationally was required and committed themselves to work out solutions within multilateral institutions at a global level and recognised the importance of involving all countries, including developing ones;

  • that governments should provide a clear, consistent and predictable legal framework, and promote a pro-competitive environment for the development of electronic commerce;

  • that within the legal framework provided by governments, industry self-regulation was important to promote public interest objectives via mutually compatible codes of conduct agreed by industry and other private sector actors;

  • that unnecessary existing legal and regulatory barriers should be eliminated and the emergence of new ones should be prevented. Where legislative action is deemed necessary, it should not be to the advantage or disadvantage of electronic commerce compared with other forms of commerce.

  • the important positive role that electronic commerce can play in developing a coherent approach to international work on trade facilitation.

  • the importance of ensuring the effective protection of privacy in processing personal data on global information networks.

6. Furthermore, in this joint statement the United States and the European Union agreed that a global understanding should be worked out as swiftly as possible that:

  • goods ordered electronically and delivered physically should not be charged with additional import duties applied in relation to the use of electronic means.

  • in all other cases relating to electronic commerce, the absence of duties on imports should remain.

7. This joint statement was followed by the United States formal proposal at the WTO General Council session of 19 February 1998 encouraging WTO Members to agree to codify the practice that electronic transmissions be free from customs duties. This proposal was echoed by Australia, the European Union and Canada in April 1998.

8. At their meeting in Versailles on 30 April 1998, the trade ministers of the European Union, the United States, Japan and Canada agreed to work together towards issuing a declaration on the trade-related aspects of electronic commerce in time for the 50th Anniversary of the multilateral trading system, coinciding with the second session of the WTO Ministerial Conference. This would lead to launching a comprehensive programme in the WTO which would include work on the market access treatment of cross border commerce. Similarly, they would work to develop a consensus on the standstill of the current practice of not imposing customs duties on electronic transmissions.

III. Developing Countries' Approach

9. The United States proposal on electronic commerce was greeted by caution by some developing countries. Egypt in particular issued a statement relative to the US proposal recognising that, whilst the importance of electronic commerce was indisputable, the US proposal was quite ambitious and should be studied carefully given its evident complexity. Moreover, that the interest of developing countries should be borne in mind in any discussions of electronic commerce.

10. Although developing countries may not have a common position regarding the issue (or have not expressed themselves explicitly so far) several common attitudes are noticeable:

  • further discussion on this complex issue is warranted before any global agreement on electronic commerce is reached:

  • the consideration of the development dimension of electronic commerce should be a sine qua non in any future work or discussion taking place within the WTO;

  • the playing field should be levelled in this area to allow the benefits of electronic commerce to accrue to all members of the WTO and not just to industrial ones;

IV. Implications for Developing Countries

11. It is clear that developing countries cannot afford not to be part and parcel of the momentous developments that are taking place regarding electronic commerce; to be left behind in this respect would only accelerate their marginalisation. Thus it is of utmost importance that developing countries initiate their own analysis on this complex issue and its related aspects.

12. It is perhaps to be expected that, as was the case with the ITA at the Singapore ministerial, are presented with a fait accompli regarding some pre-agreed proposals from important WTO Members, such as the standstill on duty-free electronic transmissions. If so, it may be in developing countries' interest to support the proposal that this be reviewed after 1 January 2000.

13. Developing countries would benefit from involving themselves in the examination of the issues of interest to them and to establish permanent channels of communication between like-minded countries on this vital issue for future trade relations. Similarly, they could work together to devise mechanisms through which developing countries could find accelerated access to the technology and communications infrastructure that would able them to participate more fully in such important trade-related developments. Perhaps the creation of a consultative process with industrial Members of the WTO on practical means to lessen the technology gap between them would contribute to more balanced international trade relations.


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