Towards eQuality:

Global E-Commerce Presents Digital Opportunity to Close the Divide

Between Developed and Developing Countries

MITI's Proposal for WTO E-Commerce Initiative

(2nd Draft)

Background and Purpose

This draft proposal reflects our firm belief that the future of the Internet and E-Commerce shall be for the betterment of all people and all nations. E-Commerce is, and will become more, vital not only to business, but also to society itself throughout the world. The "quality of life" of every person in the information society is surely based on reliable and stable system of networks. The confidence of ordinary people as well as business towards activities on the Internet is our common public policy goal. In the Okinawa Charter on Global Information Society, the G8 emphasized that Information and Communications Technology (IT) is one of the most potent forces in shaping the twenty-first century.

The Charter also states that the G8 renews its commitment to the principle of inclusion: everyone, everywhere should be enabled to participate in and no one should be excluded from the benefits of global information society.
E-Commerce presents opportunities for all consumers and small businesses to obtain easy access to the world market via the Internet. In the past, the world market was readily accessible only to large global companies located mainly in developed countries. E-Commerce is a new and powerful medium which can help close the digital divide among countries and achieve global eQuality in the new world economy. This can only be accomplished if member countries take balanced steps between consumers and businesses now and in the future to ensure that an international framework related to E-Commerce benefits both developed countries and developing countries. In undertaking this initiative, member countries should take into consideration the viewpoints of both consumers and the industries. "Digital trade policy" is crucially important from these viewpoints.

This paper is the firstsecond draft proposal for a WTO E-Commerce initiative crafted by the Ministry of International Trade and Industry (MITI) of Japan. The primary purpose of this document is to present a list of issues to facilitate domestic and international discussions at the WTO.

Benefit for Developing Economies

E-Commerce can have positive effects for all economies contributing to the mutually supportive goals of sustainable economic growth, enhancing the public welfare, and fostering social cohesion. It also can be instrumental in helping developing economies participate in the multilateral trading system. Benefits accruing to developing economies from the rapid growth of E-Commerce will help them meet more effectively their vital development goals, such as poverty reduction, health and education.

To achieve global eQuality in the information society by benefit from the tremendous power of E-Commerce, the WTO Members should build a policy environment on a global scale, not only to stimulate and facilitate the transition to the information society, but also to reap its full economic, social and cultural benefits.

At the same time, Members should recognize the need to build up the capacity in developing economies to use effectively the opportunities presented by E-Commerce which can help close the digital divide. In the Okinawa Charter, the G8 reaffirmed its commitment to the efforts underway to formulate and implement a coherent strategy to bridge the digital divide. The WTO Members should contribute to this vital issue taking into account the diverse conditions and needs of developing economies.

　

1. Trade Liberalization of E-Commerce Related Sectors

*Members shall identify and liberalize "E-Commerce Enabling Sectors" which provide the essential infrastructure for E-Commerce.

*Though the existing GATS agreements and commitments apply to the services provided through E-Commerce, "E-Commerce Contents Sectors" further trade liberalization of these services shall be pursued to create a truly global environment that enhances the development of E-Commerce.

*The definition and coverage of sectors need to be discussed in close consultation with industries. International coordination among industries also needs to be promoted. Interests of consumers should be taken fully into account to improve convenience, choice and the range of transactions.

*Some products can be delivered both online and in physical form. Careful consideration should be given to avoid favoring one form of delivery over another.

　

2. Principles for Domestic Regulations

*When Members take domestic regulatory measures to achieve legitimate domestic policy including avoiding fundamental risks to the Internet society, each Member shall agree to the following principles concerning the nature and extent of regulatory measures. These principles which are based upon GATT, GATS (e.g. Article VI) and TRIPS, the principles of domestic regulations discussed at the OECD and other fora, and elaborated by the characteristics of E-Commerce.

*This approach avoids the situation in which a particular Member unilaterally introduces excessive regulatory measures as "disguised trade barriers" to the Internet world, or in which providers are obliged to cope with individual Members' numerous and mutually contradictory regulations.

      (1) Transparency -- Each Member shall promptly publish all measures of general application that are related to or affect E-Commerce at the time the relevant measure enters into force, except in case of emergency.

      (2) Non-Discriminatory Treatment -- The national treatment and most-favoured-nation treatment principles shall be applied.

      (3) Avoidance of Unnecessary Trade Restrictions -- In implementing domestic regulations (e.g. consumer confidence), each Member shall not utilize trade restrictive regulations that are more burdensome than necessary. This is especially important for small and medium seized enterprises in general as well as enterprises in developing economies because they can provide cross border services and enter the "Global Marketplace" more easily through E-Commerce. Therefore, to adapt these measures avoid unnecessary trade restrictions adapting domestic regulations to the characteristics of the Internet without harming necessary consumer protection, Members shall establish focus on "commercial presence" requirements, paper document requirements, face-to-face meeting requirements and person designation requirements for supplying services on the Internet that may not be justified.

      (4) Use of Internationally Harmonized Rules of Regulations and Standards -- Domestic regulations and standards shall be based on market-oriented principles that are internationally harmonized and reflect market realities to the extent adequate and feasible. Members should also pay attention to the role of standards to protect consumers and to facilitate the dissemination of technologies to Members, particularly, developing ones. Adopting of international rules and standards will have the effect of increasing predictability for businesses and consumers.

      (5) Recognition of Equivalence of Foreign Regulatory Measures --When internationally harmonized measures are not possible, necessary, or desirable, the negative trade effects of cross-country disparities can be reduced by recognizing the equivalence of trading parties' regulatory measures or the results of conformity assessment performed in other countries.

　

3. Creating a Pro-Competitive Environment in E-Commerce Related Market

*E-Commerce poses opportunities in which both small businesses and large global corporations can conduct business in a world-wide market if we successfully take balanced steps in the international public policy arena, thereby mitigating the divide between developed and developing Members. On the other hand, the failure to take balanced steps could allow this divide to continue.

*To succeed in mitigating the divide, Members must do more than merely liberalize domestic regulations. To ensure fair chances for entrepreneurs in both developed and developing countries to succeed in the E-Commerce related market, not only the liberalization but also a pro-competitive environment which prevents the anti-competitive practices of market players shall be needed. We should take into consideration network effects that could lead to a dominance or monopoly, the power of which can be abused on a global scale. Fair participation of developed and developing Members and fair reflection of developed and developing Members' views are especially important for the development of global E-Commerce. Pro-competitive environment in E-Commerce related markets enhances the interests of consumers as well.

*In this context, building upon Article VIII and IX of the GATS, further discussions are needed about what kind of impact the network effect has on the development of E-Commerce, taking into account the following issues.

      (1) Access to Essential Facilities -- how to ensure access to and utilization of essential facilities (tangible and intangible) which are essential for the supplier/provider to compete in E-Commerce related market, except where there is justifiable reason for denying access to or utilization of these facilities.

      (2) Patent related issues -- taking account of the current concerns over patents for software-implemented business methods, Members shall be encouraged to discuss international programs which will contribute to achieving harmonized patent protection for inventions in this technology area, including build-up of a solid data base of prior art, as well as to secure a competitive market. In the Okinawa Charter, the G8 welcomes the joint work already underway among intellectual property authorities and further encourage its experts to discuss further direction in this area.

      (3) Exclusive Practices in the Cyberspace -- further discussion on the implications of exclusive business practices on the Internet, and their adverse impact on E-Commerce related market. Any such discussions shall take into account technological innovations.

      (4) International Framework for Cooperation -- Members will promote bilateral, plurilateral or multilateral cooperation programmes to achieve above mentioned objectives.

      　

4. Cooperation with Relevant International Organizations

*With regard to the formation of international rules, including intellectual property rights, contract law, electronic signatures and authentication, consumer protection, jurisdiction and others, E-Commerce issues have been addressed in other international fora such as WIPO (World Intellectual Property Organization), UNCITRAL (United Nations Commission on International Trade Law), the Hague Conference on Private International Laws, ISO (International Standard Organization) (including COPOLCO (Consumer Policy Committee), OECD and others. Each forum should continue to work on these issues as they relate to specific areas of expertise.

*The WTO should pay attention to such work, and consider such work in its own efforts to address various E-Commerce issues.

*When an international agreement has been made in other international fora, the WTO should harmonize its own efforts through provisions such as: "When relevant international rules exist or are to be established in the relevant international organization, Members should reflect the international rules when introducing their own domestic laws and regulations."

　

5. Capacity Building of Developing Countries

Members that fails to keep up with the accelerating pace of growth of the information society will not have the opportunities to participate fully in the information society and enjoy benefits presented by E-Commerce. Members should pursue contributions by the WTO to achieve Global eQuality recognizing the diverse conditions and needs of developing economies. Emphasis should be made in the following areas.

*Technical cooperation -- Developed Members will undertake technical cooperation (e.g. setting up the hard and soft infrastructure, human capital for E-Commerce, trade facilitation) intended to achieve wider use of E-Commerce in developing Members and share the benefits of global E-Commerce with developing Members. We highlight the establishment of a global legal framework for E-Commerce in the WTO.

*Infrastructure requirement -- To enhance the use of E-Commerce, developing economies should focus on enhancing infrastructure. Assistance from the international community should be required in development and improvement of infrastructure for E-Commerce combined with technical cooperation. To pool intellectual and financial resources the WTO should cooperate closely with international and regional organizations such as World Bank, ADB(Asian Development Bank), IDB(Inter-American Development Bank) and UNDP(United Nations Development Programme).

*Demonstration -- Successful experiences of enhancing E-Commerce in developing Members shall be presented at the Committee on Trade and Development for the purpose of sharing information and experiences.

*Policy dialogue -- Members should promote policy dialogue among partners to facilitate the sharing of information and experience between developing countries and other partners, and raise the global awareness of the importance in closing the digital divide.

*International framework for cooperation -- Members should pay attention to recent developments in APEC (Asia Pacific Economic Cooperation) and other fora for capacity building in the field of E-Commerce.

　

6. Promotion of Private Sector Initiatives

*Private sector initiatives such as self-regulation to deal with social issues should be promoted. Self-regulation shall be strengthened through public policy support. (Co-regulation)

*Governments should pursue this initiative with close dialogue with private sector-led fora such as GBDe (Global Business Dialogue on e-commerce), GIIC (Global Information Infrastructure Commission) and consumer groups. The Okinawa Charter states that the G8 welcomes contributions from the private sector to the bridging the international digital divide.

*Members should consider a scheme that effectively reflects the views of industries and consumers in developing economies.

　

7. Other

*Moratorium on Customs Duties -- Members should ensure that the current moratorium on customs duties on E-Commerce is maintained. Discussions on the further extension of the moratorium should take place at the 4th Ministerial Conference.

　

Procedure for discussions

The discussion focusing on Trade Liberalization of E-Commerce Related Sectors should be included in the on-going service negotiations. We welcome reinvigoration of the Work Programme on E-Commerce which reflects to the activities in the four subsidiary bodies. Cross cutting issues which are related to GATT, GATS, TRIPS, and developmental aspects should be discussed at a horizontal task force under the auspices of the General Council.

The task force can build upon, not duplicate, the work already done in the four subsidiary bodies. The outcome of discussions at the task force shall be input into the service negotiations if necessary. The task force will help the WTO more effectively to catch up with rapid technological change, share information and understand broad aspects that traverse all WTO disciplines in a coherent manner. It will also reduce burdens on the delegations, particularly, those delegations from developing economies which now have to attend the four subsidiary bodies. Members should take into account messages from inter-governmental and inter-industrial fora such as APEC and GBDe which call for setting up a horizontal task force as soon as possible.

Comments on this document are welcomed and should be sent to:

Takehiko Ota, International Economic Affairs Division, MITI ohta-takehiko@miti.go.jp

Akihiko Tamura, WTO Affairs Division, MITI tamura-akihiko@miti.go.jp

Satoshi Nohara, Information Economy Office, MITI nohara-satoshi@miti.go.jp

Tetsuya Watanabe, WTO Affairs Division, MITI watanabe-tetsuya@miti.go.jp

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