TWN Info Service on WTO and Trade Issues (Nov09/05)
6 November 2009
Third World Network

WTO Members intensify talks on Work Programme on E-Commerce
Published in SUNS #6803 dated 29 October 2009

Geneva, 28 Oct (Riaz K. Tayob) -- Members of the World Trade Organization (WTO) have intensified their discussions in informal and formal meetings during the past week on the Work Programme on Electronic Commerce, and are also considering the future of the moratorium on the practice of not imposing customs duties on electronic transmissions.

The discussions centred on the proposed language on E-commerce for inclusion in the outcome document of the seventh WTO Ministerial Conference, scheduled to take place in Geneva from 30 November to 2 December.

According to the Hong Kong Ministerial Declaration of 2005, the moratorium on customs duties on electronic transmissions applies only until the next Ministerial Conference. Though the WTO agreement mandates a Ministerial Conference at least once in two years, no Ministerial Conference has been held since the one that took place in Hong Kong-China in 2005.

The Work Programme on E-commerce was adopted by the General Council on 25 September 1998 and is referred to in both the Doha and Hong Kong Ministerial Declarations.

The General Council was called upon to establish a comprehensive work programme to examine all trade-related issues relating to global electronic commerce, taking into account the economic, financial, and development needs of developing countries, and to report on the progress of the work programme, with any recommendations for action, to the then Third Session (in Seattle in 1999).

The mandate is that the General Council shall play a central role in the whole process, keep the work programme under continuous review through a standing item on its agenda, and additionally shall take up consideration of any trade-related issue of a cross-cutting nature. All aspects of the work programme concerning the imposition of customs duties on electronic transmission shall be examined in the General Council.

For the purposes of the work programme, "electronic commerce" means "the production, distribution, marketing, sale or delivery of goods and services by electronic means." The work programme will also include consideration of issues relating to the development of the infrastructure for electronic commerce.

At the Doha Ministerial Conference in 2001, Ministers agreed to continue the work programme, as well as to extend the moratorium on customs duties and instructed the General Council, in paragraph 34 of the Doha Declaration, to report on further progress to the Fifth Ministerial in Cancun, in 2003.

(According to a 26 October 2009 Secretariat Briefing Note, there have been five discussions held under the General Council's auspices dedicated to electronic commerce.)

Paragraph 46 of the Hong Kong Ministerial Declaration took note of the reports on the Work Programme on Electronic Commerce, and stated that the examination of issues was not yet complete. Members agreed to reinvigorate that work, including the development-related issues under the Work Programme and discussions on the trade treatment, inter alia, of electronically delivered software. Institutional arrangements were maintained, and the moratorium was also maintained until the next Ministerial Conference session.

[In a United Nations ICT Task Force study (Wunsch-Vincent, S. -2004 "WTO, E-commerce and Information Technologies, From Uruguay Round through the Doha Development Agenda - Report for the UN ICT Task Force" -- www. unicttaskforce. org/perl/documents. pl? id=1536 ), the difficult issue of classification of digital products as goods or services and problems with the scope of the moratorium is discussed.

[On the goods and services classification, it states that "most WTO Members agree that the majority of services that are delivered electronically (e. g., financial or professional services) are services and governed by the GATS. But Members do not agree on whether digital products that have traditionally been traded on a physical carrier medium are goods but are now traded electronically, governed by GATT, services governed by GATS, or some unique category deserving its own set of trade rules.

[The reason, it states, is that neither the GATT classification system (Harmonized System) nor GATS classification system (Services Sectoral Classification List, W/120) offer an unambiguous way to classify digital products. Using the example of computer software, it states that under the GATT system, because software has no physical attributes, there is no classification for it under the Harmonised System.

["Only certain carrier media on which software is recorded (e. g., laser discs or magnetic tapes) are listed. The classification of computer software under the GATS is not any easier as the sub-sector classification for computer services refers only to the "consultancy" services related to "development and implementation" of software - not to the software itself.

[The study further states that the classification of digital products will determine the level of trade liberalization that exporters of these products can expect from WTO Members and whether Members can maintain cultural protections in the face of ubiquitous electronic distribution of movies, music, and literature. Physical carrier media classified as goods can be subject to border measures, but these are limited by an established set of obligations and agreements governing tariff bindings, national treatment, quotas, subsidies, safeguards as well as the Customs Valuation Decision. Under the GATT, the range of discriminatory trade treatment that a WTO Member may engage in is limited.

[The study says that in contrast, under the GATS, digital products are guaranteed national treatment or market access only pursuant to a GATS commitment and these commitments may include significant limitations. A GATS classification would permit Members to extend discriminatory limitations and cultural support measures to audiovisual services that are delivered electronically.

[On the moratorium, the Task-force study states that there is no clear understanding of what "electronic transmission" means. One meaning is that duties cannot be imposed on the electronic transmissions (the transport service) that support E-commerce. Another is that the moratorium prohibits duties on the content of the transmission, namely digital products and electronically delivered services (e. g., legal services). And another is that products that are duty-free in the offline world remain so in the online world.

[Even the WTO's Special Study No. 2 "Electronic Commerce and the Role of the WTO" highlights the difficulties of definitions in the E-commerce work programme, for instance, "whether services transactions over the Internet could be considered trade in goods, trade in services, or a different kind of trade."]

At a 27 October meeting at the WTO as well as informal meetings held earlier, under the auspices of the General Council as mandated in the Work Programme, a number of inputs were provided by various countries regarding the moratorium and the future of the work programme on E-commerce. The meetings were chaired by Mr Harsha Singh of the Secretariat.

According to trade diplomats, during the informal consultations held earlier in the week, Cuba initially proposed that the moratorium be maintained until the General Council meeting set for July 2010. The US sought a permanent moratorium. India proposed that the moratorium be maintained until the eighth Ministerial Conference and its proposal is similar to the section in the Hong Kong Declaration on E-commerce. On 27 October, a proposal from Pakistan was also tabled and discussed.

According to trade diplomats, prior to the 27 October meeting, and during the Chair's consultations, Cuba's proposal was supported by a number of countries in the informal meetings including Bolivia, Venezuela, Ecuador and Nicaragua. India's proposal received support from a number of countries including Malaysia, Singapore, Chile, Uruguay, Australia, Korea, the EC and the US. The US initially sought to have the moratorium made permanent, instead of rolling it over from one Ministerial Conference to the next.

There are similarities and differences between the Indian and Cuban proposals.

The proposals of India and Cuba both include a recognition that the E-commerce Work Programme is not yet complete; agree to reinvigorate work, including development issues, after the seventh Ministerial Conference; that current institutional arrangements be maintained (i. e. the work is conducted under the auspices of the General Council, and mandates work to subsidiary bodies, namely the Council for Trade in Goods, Council for Trade in Services, Council for TRIPS and Committee on Trade and Development); the Work Programme include development issues; and, that the General Council Chairman submit a written report including recommendations that meet the "concerns" (in Cuba's proposal) or issues (India's proposal) raised by Members.

Speaking to SUNS after the meeting, Cuba said that the point of departure in the proposal was that reiterating the language of the Hong Kong Declaration was not tenable.

Cuba's proposal, aside from the different deadline for the moratorium, seeks completion of the E-commerce Work Programme by the July 2010 General Council, which it amended to December 2010 at the 27 October meeting. India proposes that the General Council report on the Work Programme to the Eighth Ministerial Conference.

Cuba proposed that the reference in the Work Programme on "development-related" issues be supplemented with, "trade treatment, inter alia, of electronically delivered software, as well as the implementation of basic principles of non-discrimination and predictability."

Speaking to SUNS after the informal meetings (before 27 October), Cuba said that during the Hong Kong Ministerial Conference, it had expressed reservations on the extension of the moratorium. It said the brackets (indicating text not yet agreed) in the Hong Kong Declaration were removed at the instance of just one member's request. More substantively, discussions remained unfinished on concerns expressed by Members regarding unilateral discrimination, including by countries such as Cuba, Sudan, Syria and Belarus.

Cuba expressed dismay after the informal meetings that in the last four years, not a single meeting was held until the recent flurry of activity in the past two weeks. This was despite the further deterioration of the grounds of its complaints.

Cuba said that it found it untenable that the next declaration repeat the approach adopted in Hong Kong, as this did not even result in meetings in the interim.

Cuba pointed out that the US blocks its E-commerce. Justifying its concerns on the Work Programme, Cuba said that from its 2009 Report to the UN Secretary-General, under the UN General Assembly resolution (63/7) on the US blockade against Cuba, the information and communications technology sector has been heavily affected by application of the embargo, including the restrictions imposed by the US on Cuban Internet access.

This, Cuba said, includes being unable to connect to the Internet at a suitable speed with adequate bandwidth. It also cannot access services offered by a large number of web sites from Cuba. Recently, in May, the American company Microsoft decided to block Windows Live service to Cuba.

The Cuban tourism industry has not escaped the adverse effects of the embargo, it added. One example of the problems it faces, is that its tourism companies cannot advertise on the main web pages of companies like Yahoo! and Google, as the US forbids it. Companies in third countries (non-Cuban) had their adverts stopped and action was even taken against foreign companies with joint-venture arrangements with Cuban companies.

The Cuban delegate told SUNS that the defenders of the moratorium regarded it as beneficial for developing countries and development in particular. Cuba expressed doubts, saying that this may be true, except for some countries. On the quality of the developmental benefits of a zero tariff made by the developed countries, Cuba said that a zero tariff on E-commerce transmissions was good for development but apparently was not good in agriculture.

Cuba said that it cannot be advisable to have the moratorium in place till the eighth Ministerial Conference, as it was uncertain when this would be held, notwithstanding the legal obligations to hold one every two years.

During the 27 October meeting, Pakistan submitted a proposal, also supporting the moratorium until the next Ministerial Conference (eighth). It also sought to instruct the General Council to hold a "midterm review of the Work Programme in December and the outcome of the review would be taken into consideration during our next session for decisions on this item."

According to trade diplomats, at that meeting, Cuba submitted a revised proposal which included, "to hold a midterm review with an interim report of the state of play of the programme and to complete it by the session of the General Council on December 2010, with the submission of a written report by the Chairman of the General Council including recommendations on the concerns raised by members." It also proposed that the extension of the moratorium be until the General Council of December 2010.

According to trade diplomats, Ecuador supported the revised proposal by Cuba and emphasized the development component. Brazil said it was concerned about the link between E-commerce and TRIPS. Mexico did not agree with Cuba's proposal regarding the moratorium and sought its extension to the next Ministerial Conference.

Trade diplomats said that another meeting is expected to be held on Friday for further discussions. +