Universitat de Barcelona Facultat d'Economia i Empresa Máster de Internacionalización: Aspectos Económicos, Empresariales y Jurídico-políticos

The World Trade Organization in times of digital trade Addressing digital protectionism? Master thesis Author: Manuel Metschel NIUB: 17088186 manuel.metschel@gmail.com Supervisor: Dr. Xavier Fernández Pons Date: 23 April 2018

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Index1.Introduction..........................................................................................................................4

2.Theriseofdigitaltrade.........................................................................................................5

2.1Definitionanddimensionsofdigitaltrade......................................................................5

2.2Developmentofdigitaltrade..........................................................................................8

3.Anewdigitalprotectionism................................................................................................14

3.1Existingpre-barrierstodigitaltrade..............................................................................14

3.2Keybarrierstodigitaltradeimplementedbygovernments.........................................16

3.2.1Introduction............................................................................................................16

3.2.2Tariffs......................................................................................................................17

3.2.3Datalocalizationmeasures....................................................................................17

3.2.4Quotas....................................................................................................................19

3.2.5Webblockingandfiltering.....................................................................................19

3.2.6AccesstonetworkinfrastructureandtheInternet................................................21

3.2.7Netneutrality.........................................................................................................22

3.2.8Taxation..................................................................................................................23

3.2.9Intellectualpropertyrights.....................................................................................24

3.2.10Geoblocking..........................................................................................................24

3.2.11Technicalstandardsandforcedtechnologytransfer...........................................25

3.2.12Otherbarriers.......................................................................................................25

3.3Summary.......................................................................................................................25

4.WTOframeworkregardingdigitaltrade.............................................................................26

4.1TheWorkProgrammeonElectronicCommerce...........................................................26

4.2ApplicabilityofWTOprovisionstoelectroniccommerce.............................................28

4.2.1Difficultiesofclassification.....................................................................................28

4.2.2ClassificationofdigitallytransmittedproductsundertheGATT............................30

4.2.3ClassificationofdigitallytransmittedproductsandservicesundertheGATS.......31

4.2.4Neitherproductsnorservices–asuigeneris?.......................................................32

4.2.5Newchallenges......................................................................................................33

5.AnalysisofdigitaltradeundertheGATS.............................................................................34

5.1ThelogicoftheGATS....................................................................................................34

5.2Modesofsupply............................................................................................................35

5.3InclusionofdigitalservicesanddatawithinGATSschedules.......................................37

5.4.BarrierstodigitaltradecoveredbyGATSprovisions...................................................39

5.4.1Generalobservations.............................................................................................39

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5.4.2Tariffs......................................................................................................................39

5.4.3Datalocalizationmeasures....................................................................................39

5.4.4Quotas....................................................................................................................41

5.4.5Webblockingandfiltering.....................................................................................41

5.4.6Accesstotelecommunicationsinfrastructureandnetneutrality..........................42

5.4.7Taxation..................................................................................................................43

5.4.8Technicalstandards................................................................................................43

5.4.9Intellectualpropertyrights,geoblocking,andothers............................................44

5.5GATSexceptions............................................................................................................44

5.6Summary.......................................................................................................................46

6.WTOMinisterialDecisionsandnewways...........................................................................46

6.1MinisterialDecisionssincethelaunchoftheWorkProgramme..................................46

6.2PositionsofkeyWTOMemberStates...........................................................................49

6.3Newways–aplurilateralapproach?............................................................................51

7.Mid-conclusion:analysisoftheresponseoftheWTOtotheriseofdigitaltrade..............53

8.PossiblesolutionstoensureliberalizationofdigitaltradewithintheWTOframework.....56

8.1AviewoutsidetheWTO:TheEuropeanUnionandfreetradeagreements.................56

8.2AddressingopenbasicquestionsfortheWTOregardingdigitaltrade.........................60

8.3Overcomerootcausesofstandstill...............................................................................63

9.Conclusion...........................................................................................................................66

11.Annex................................................................................................................................68

12.Bibliography......................................................................................................................70

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ListofabbreviationsandacronymsB2B BusinesstobusinessB2C BusinesstoconsumerB2G BusinesstogovernmentC2B ConsumertobusinessC2C ConsumertoconsumerCAD Computer-aideddesignCPC CentralProductClassification(productandservicesclassificationsystem

usedbytheUnitedNationsStatisticalCommission)CPTPP ComprehensiveandProgressiveAgreementforTrans-PacificPartnershipDSB DisputeSettlementBodyECIPE EuropeanCentreforInternationalPoliticalEconomyEU EuropeanUnionFTA FreetradeareaG2B GovernmenttobusinessG2C GovernmenttoconsumerGATS GeneralAgreementonTradeinServicesGATT GeneralAgreementonTariffsandTradeGDP GrossdomesticproductGDPR GeneralDataProtectionRegulation(EUregulation)ICT InformationandcomputertechnologyIMF InternationalMonetaryFundIPRs IntellectualPropertyrightsIT InformationTechnologyITA InformationTechnologyAgreementITC InternationalTradeCentreISP InternetservicesproviderLDC LeastdevelopedcountryLTE Long-TermEvolution(high-speedwirelessdatacommunicationstechnology)M2M MachinetomachineMC MinisterialConferenceMC9[e.g.] 9thMinisterialConferenceoftheDohaRound[numberexemplary]MFN Most-favourednationOECD OrganisationforEconomicCo-operationandDevelopmentPPB ProcessoProdutivoBasico(Brazilianregulation)SDGs SustainableDevelopmentGoalsSMEs SmallandmediumenterprisesTiSA TradeinServicesAgreementTPP Trans-PacificPartnershipTRIPS Trade-RelatedAspectsofIntellectualPropertyRightsUN UnitedNationsUNCTAD UnitedNationsConferenceonTradeandDevelopmentUS UnitedStatesUSITC UnitedStatesInternationalTradeCommissionUSTR UnitedStatesTradeRepresentativeVAT Value-addedtaxVPN VirtualPrivateNetworkWTO WorldTradeOrganization

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1.Introduction

Digitaltransformationisaffectingmoreandmoreindustries,changingexistingtradeingoods

and services, and creating a new, digital trade. Baldwin (2016a) calls it the 4th phase of

globalization, the secondunbundling,drivenby the informationand computer technology

(ICT)revolution.1Thespeedofthistransformationisfasterthanotherdisruptivechangesin

thepast2anddigitaltradeisbecominganimportantpartofinternationaltrade.

Atthesametime,theinternationaltradesphereisexperiencingaseverecrisis,withbarriers

toclassicaltradeingoodsrisingandatradewarbetweenChina,theUnitedStates(US)and

theEuropeanUnion(EU)imminent.TheWorldTradeOrganization(WTO)isthemultilateral

organizationthathasdealtwithrulesforinternationaltradefordecades,ensuringtradeflows

tobeasfreeandpredictableaspossible.Now,theorganizationseemstobeparalyzed,not

knowinghowtorespondtothenew,protectionist,realitiesininternationaltrade.

InMarch2018,GermanChancellorAngelaMerkelhighlightedinhergovernmentdeclaration

that“digitalizationandprotectionismaretwoopponentpolesthatinourunderstandingdo

notgowellwitheachother.Thisisactuallywhythe21stcenturyisthecenturyofmultilateral

solutionsandmultilateralinstitutions.Thisisespeciallythecasewithregardtotrade.”3

Foralongtime,theInternethasbeenthespherewheretradeflowshavebeenmostlyfree

andunregulated.In2000,BillClintonclaimed,“tryingtocrackdownontheInternet(…)issort

ofliketryingtonailJell-Otothewall.”4

Today,protectionismisrisinginthedigitalsphereascountriesarestartingtoimplementan

increasingnumberofbarrierstodigitaltrade–thewell-knownChineseGreatFirewallisjust

the tipof the iceberg.Recentdata scandals, suchasFacebook–CambridgeAnalytica,5or

discussionsaboutfakenewshavechangedthepublicopiniontowardstheInternet,freeflows

ofdata,anddigitalproductsandservices.Callsformoreregulation,includingfordigitaltrade,

havebecomelouder.

1See:Baldwin,RichardE.(2016a):Thegreatconvergence:informationtechnologyandthenewglobalization.Cambridge,MA:TheBelknapPressofHarvardUniversityPress.,79-110.2Baldwin2016a,17-110.3TranslatedfromGerman:Merkel,Angela(2018):Regierungserklärungvom21.März2018.Online:https://www.bundesregierung.de/Content/DE/Regierungserklaerung/2018/2018-03-22-regierungserklaerung-merkel.html.4BillClinton,8March2000,speechrecordedbytheFederalNewsServiceandexcerptspublishedintheNewYorkTimes(“Clinton’sWordsonChina:TradeisTheSmartThing.”NewYorkTimes,9March2000.Online:https://www.nytimes.com/2000/03/09/world/clinton-s-words-on-china-trade-is-the-smart-thing.html).5SeeSchulz,Thomas(2018):AußerKontrolle.DerSpiegel,18,24.03.2018,12-24.

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TheWTO,ontheotherhand,hasbeenmuchcriticizedfornottakingactioninregardtothe

riseofdigitaltradeandrespectivebarriers.6Therefore,thispaperaimstoinvestigatetherole

oftheWTOanditsagreementsfortradeliberalizationinthisarea.Itwillbeanalysedifexisting

WTOrulesaddressbarrierstodigitaltradealreadyorifmodifications,orenhancements,need

tobeundertaken.

Inordertodoso,keybarrierstotradeinthedigitalspherewillbeidentifiedfirst.Then,the

applicability of the existing WTO framework in regard to this new kind of trade will be

examined.Lastly,theresponseoftheWTOasanorganizationregardingdigitaltradewillbe

analysedandpossiblefuturesolutionswillbepointedout.

2.Theriseofdigitaltrade

2.1Definitionanddimensionsofdigitaltrade

Asoftoday,manytermsare inusetodescribethedigitallyenabledformoftradesuchas

electronictrade,electroniccommerceordigitaltrade,andthereisnogenerallyagreedupon

definition of what is understood by those terms.7 Often, they are used interchangeably,

withoutdefiningthescopeofeachconcept.8Atthesametime,theWTOhasnotbeenableto

reachconsensusonafinaldefinitiondespiteongoingdiscussionforthepast20years.

For the purpose of itsWork Programmeon Electronic Commerce, theWTOuses a broad

workingdefinitionofelectroniccommerce.Itunderstandsthetermelectroniccommerceto

mean “the production, distribution, marketing, sale or delivery of goods and services by

electronicmeans.”9Thescopeofthisdefinitionreachesfromsellingtangibleproductsover

theInternet,toofferinganonlinemarketingactivitywithnosaleofanykindofproductor

service.Thisverybroadapproachofdefiningelectroniccommerceisconsistentwiththelogic

oftheexplorativenatureoftheWTOWorkProgrammeonElectronicCommerce,aimingto

examineallpossiblerelatedaspectsofdigitaltraderelevantfortheWTO.Itisinterestingto

6See,interalia,Fleuter,Sam(2016):TheRoleofDigitalProductsUndertheWTO:ANewFrameworkforGATTandGATSClassification.ChicagoJournalofInternationalLaw,17(1);GreenbergCenterforGeoeconomicStudies(2017):TheRiseofDigitalProtectionism.CouncilonForeignRelations.https://www.cfr.org/report/rise-digital-protectionism;PrimoBraga,CarlosA.(2005):E-commerce:Newgame,newrules?TheQuarterlyReviewofEconomicsandFinance,45;Weber,RolfH.(2010):DigitalTradeinWTO-Law:TakingStockandLookingAhead.AsianJournalofWTO&InternationalHealthLawandPolicy,5(1).7WorldTradeOrganization(hereinafter:WTO)(2017b):WorldTradeStatisticalReview2017,45;WTO:CommunicationfromCanada,Chile,Colombia,Côted'Ivoire,theEuropeanUnion,theRepublicofKorea,Mexico,Montenegro,Paraguay,SingaporeandTurkeyof13January2017.WTODoc.JOB/GC/116,JOB/CTG/4JOB/SERV/248,JOB/IP/21JOB/DEV/42,2.8WTO2017b,45.9WTO(1998):WorkProgrammeonElectronicCommerceof30September1998.WTODoc.WT/L/274,1.

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point out that nomonetary component would need to be involved for an activity to be

classifiedase-commerceaccordingtotheWTO’sdefinitionasonlytheelectronicdeliveryof

goods and services (e.g. free of charge or paid for with personal data) is enough to be

encompassedbythisdefinition.

IncomparisontotheWTO,otherorganizationsuseanarrowerapproachwhendefiningdigital

trade.AccordingtothemostcurrentofficialdefinitionbytheOrganisationforEconomicCo-

operationandDevelopment(OECD)

“[a]n e-commerce transaction is the sale or purchase of goods or services,conducted over computer networks by methods specifically designed for thepurposeofreceivingorplacingorders.Thegoodsorservicesareorderedbythosemethods,butthepaymentandtheultimatedeliveryofthegoodsorservicesdonothave tobe conductedonline.Ane-commerce transaction canbebetweenenterprises, households, individuals, governments, and other public or privateorganisations.”10

TheOECDdefinitionnarrowsthescopeofe-commercetothesaleorpurchaseofgoodsor

services.Activitiesthatdonotincludeamonetarytransactionwould,therefore,fornow,not

fall under the scope of the OECD’s definition of e-commerce. However, discussions are

ongoing,andtheOECDcallsforincludingdataflowsintheconceptsoftradeingeneralas,in

manycases,thosesupportmonetarytransactions,eventhoughtheymightnotdirectlyresult

inone.11AnexampleofthiscanbeseeninthebusinessmodelofFacebook.

AnotherinterestingperspectiveisthedefinitionofdigitaltradebytheEuropeanUnion,since

itisprobablymoreadvancedinmakingrulesforthedigitaleconomythroughitsDigitalSingle

Market than other international organizations. EU law does not define the term e-

commerce,12butanexistingEUdirectiveone-commercemakesreferencetotheEUdirective

oninformationsocietyservicesdefiningan“InformationSocietyservice(…)[as]anyservice

normallyprovidedforremuneration,atadistance,byelectronicmeansandattheindividual

requestofarecipientofservices.”13AglossaryoftheEuropeanCommissionontheEUDigital

Single Market lays out that the term e-commerce was “used to describe trade over the

10OrganisationforEconomicCo-operationandDevelopment(hereinafterOECD)(2011):OECDGuidetoMeasuringtheInformationSociety2011,72.11OECD(2017b):WorkingPartyonInternationalTradeinGoodsandTradeinServicesStatistics:MeasuringDigitalTrade:TowardsaConceptualFramework.STD/CSSP/WPTGS(2017)3,7,8.12EuropeanCommission(2017c):DigitalSingleMarket:Glossary.Online:https://ec.europa.eu/digital-single-market/en/glossary.13Directive98/34/ECoftheEuropeanParliamentandoftheCouncilonlayingdownaprocedurefortheprovisionofinformationinthefieldoftechnicalstandardsandregulationsandofrulesonInformationSocietyservices[1998],OJL204,art.1.

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internet (…) [including] selling goods online, offering online information or commercial

communications, providing tools allowing for search of products and services, access and

retrievalofdata.”14

Therearetwointerestingobservationstomake:first,EUlawdoesonlyknowdigitalservices,

notgoods.Second,theseservicesdonotnecessarilyhavetoberemuneratedinordertofall

underthescopeofthisdefinition.TheEUGlossaryontheSingleDigitalMarketadditionally

includesactivities, suchassearchtoolsorofferingonline information,withoutmentioning

thatadirecteconomicmonetaryactivityneedstobeinvolved.TheEuropeanUnion,likethe

WTO,therefore,seemstoberelativelyflexiblewiththeuseoftheterme-commerceandits

terminformationsocietyservice,leavingthedefinitionssufficientlyopentoincludenewand

non-traditionally-remuneratedactivities.

Manydifferentconceptsofe-commerceordigitaltradeexist,withagrowingconsensusto

includeall“digitallyenabledtransactions”intradeingoodsandservices.15However,inclusion

of new developments in the concept of digital trade will need to be discussed, such as

transactionspaidforwithdata,transactionsmadewithintheso-called“sharingeconomy”,or

machine to machine (M2M) communications. While some transactions generated within

those new concepts might already be included in trade statistics, it would be useful to

disaggregatethemwithinstatisticstohighlighttheirimpactwithintheeconomy.16

ThisisalsoreflectedbytheG20,callingfora“commonunderstandingofDigitalTradethatis

broadenoughtocoverexistingapproaches,andflexibleenoughtotakeintoaccounton-going

technologicalevolution.”17Onepossiblesolutioncouldbetoseedigitaltradeasaconcept

withdifferentdimensions,orcategories,ratherthantryingtofindonesingledefinition.New

categoriescouldthenbeaddedtothisconceptasnewtechnologyevolves,orolddimensions

couldberemovedastheybecomeobsolete.

Fleuter (2016) disaggregates digital products into four categories: tangible goods ordered

through the Internet,electronicallydeliveredservices,e-products–meaningelectronically

delivered goods – and remote additive manufacturing.18 Another approach could be to

differentiatebetweentangiblegoodsorderedviatheinternet,traditionallydeliveredservices

14EuropeanCommission2017c.15LópezGonzález,Javier&Jouanjean,Marie-Agnes(2017):DigitalTrade:DevelopingaFrameworkforAnalysis.OECDTradePolicyPapers,No.205.Paris:OECDPublishing,12.16UnitedNationsConferenceonTradeandDevelopment(hereinafter:UNCTAD)(2017):InformationEconomyReport:Digitalization,TradeandDevelopment,35.17BundesministeriumfürWirtschaftundEnergie(2017):G20DigitalEconomyMinisterialDeclaration,18.18Fleuter2016,157.

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(e.g.in-person,viatelephone)orderedviatheinternet,andelectronicallydeliveredservices

and goods. The OECD names three different categories of products: goods, services, and

information(inthesenseofdata)andpointsoutthatitisnotasimplequestionofyesorno

ifacross-bordertransactionshouldbeconsidereddigitalornot.19AccordingtotheOECD,all

digitallydeliveredproductsshouldbewithinthescopeoftheconceptofdigitaltrade,aswell

asallgoodsandservicessuppliedinatraditionalway,butdigitallyorderedviaaplatform.

However,digitallyorderedproductsviatraditionalmeans,likeanemailoran(Internetbased)

phonecall,whicharedeliveredinaphysicalortraditionalwayshouldnotbeconsidereddigital

tradeaccordingtotheOECD.

Thisisinterestingas,withfasttechnologicalprogress,itcanbedifficulttodrawalineofwhat

istobeconsideredelectroniccommerceornot.If“platform”isthecriteriausedbytheOECD

to determine if trade is digital or not, what would apply if incoming order-emails were

assessed and processed by an artificial intelligence, instead of a human?Would that be

considereddigital trade?Makingcategoriesbasedondifferentusesof the Internetshould

thereforebe seenwith caution.On theother hand, theOECDalsohighlights theneed to

include information, or data, as new a dimension of international trade, since data is an

essentialpartoftheInterneteconomyandforsupportingmonetarytransactions.

Establishingdifferentcategoriesofdigitaltradeproductsandservicesisimportanttoclearly

define the subject of this paper, and to also differentiate relatively new trade concepts

(electronically transmitted products and services) from traditional, now digitally enabled,

tradeconcepts.

This paperwillmainly focus on cross-border transactions inwhich products and services,

including data, are transmitted electronically, to evaluate the response of theWTO with

regardtotheriseofthisnewkindoftrade.Referencetootherdigitallyenabled,“classical”,

cross-bordertradeingoodsandserviceswillonlybemadebrieflywheredeemednecessary.

Thetermsdigitaltrade,e-commerceandelectroniccommercewillbeusedinterchangeably.

2.2Developmentofdigitaltrade

Unquestionably,digitalizationoftheeconomy,andthusdigitaltrade,hasseenariseonthe

global scale, impacting both industries and nations in a short amount of time. However,

measuringtheexactdevelopmentofdigitaltradeisnotaseasyasmeasuringtradeingoods,

19Hereandfollowing:OECD2017b,5-8.

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wheretangiblegoodsareshippedandcanbecounted.Asoftoday,littleempiricalinformation

existsondigitaltrade.20

Two main challenges can be identified when trying to quantify the impact of electronic

commerce.Giventheabsenceofagloballyaccepteddefinitionofwhatisunderstoodbythe

terms e-commerce ordigital trade, it is hardly possible to collect data and choosewhich

productsandservicestoincludewhenelaboratingstatisticsondigitaltrade.Thisisthefirst

challengearisingwhentryingtomeasuredigitaltrade.

Inadditiontothedifficultyofdefininge-commerce,separatingdigitallytransmittedproducts

andservicesviathe Internetaspartofaneconomictransactionfromdatatransmittedfor

otherreasons,likepersonalexchangesbetweenindividuals,canbeidentifiedasthesecond

mainchallenge.Asalldataistransmittedvia0sand1s,itisstilltechnicallydifficult,oralmost

impossible, for governments or statisticians to count and analyse what kind of data is

transmittedacrossbordersandwhichpartshouldbeconsideredtobetrade.Ontheother

hand, there is the need for expanding the scope of traditional goods and services trade

statisticsasbenefitsfromdataflowsarenotfullycovered.21

Statisticaldatapresentedondigital trade therefore ranges fromelectronically transmitted

productsandservices,toproductsandservicesorderedviatheinternet,cross-borderdata

flows,orindirectindicatorssuchasclassicaltradewithICTproducts.Often,statisticaldatais

simplynotavailable(e.g.forelectronicallydeliveredproductsandservices),orpresenteddata

areonlyestimateswhichcanvarysubstantially.22

Inaddition,indifferencetoclassicaltrade,e-commercetransactionscangoinalldirections:

therecanbeclassicalbusiness-to-consumer(B2C),business-to-business(B2B)andbusiness-

to-government (B2G) transactions, as well as consumer-to-consumer (C2C) (e.g. eBay),

consumer-to-business(C2B)(e.g.inthesharingeconomylikeAirbnb,wherepeopleprovide

their home to Airbnb for the platform to rent it), government-to-consumer (G2C) (e.g.

government e-services for citizens abroad), or government-to-business (G2B) (e.g.

governmente-servicesforbusinessesabroad).Statisticswilloftenonlycoveroneorsomeof

theabove-mentioneddirections.

20OECD2017b,2;WTO2017b,45.21OECD2017b,3,4.22SeeUNCTAD2017,32.

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It is therefore necessary to analyse different dimensions of digital trade when trying to

compilestatisticsaboutitsgrowthorimpact.23Tobeawareofwhatkindofdataisincluded,

and what information can be derived from that, caution is needed when analysing and

interpretingstatisticsconcerningdigitaltrade.

Initsmostrecentreportonthedigitaleconomy,theUnitedNationsConferenceonTradeand

Development(UNCTAD)pointsoutthreerelevantindicatorsformeasuringdigitaltrade:trade

in“classical”ICT-services,tradeinelectronicallydeliveredservices(ICT-enabledservices)and

cross border B2C e-commerce in goods and services.24 It is important to note that those

groupsarenotdisjoint,buthavesubstantialoverlaps,oraresubsetsofeachother.Basedon

datajointlycompiledbytheUNCTAD,theWTO,andtheInternationalTradeCentre(ITC),the

reportstatesthatgrowthofthedigitaleconomyisreflectedbytheexpansionofICTservices

exportsinworldtradeoverthepastdecade,withcomputerandtelecommunicationservices

reaching$467billionin2016,andinformationservicesreaching$26billionin2016,almost

threetimesmorethanin2005.25

Figure1:Globalexportsoftelecommunications,computerandinformationservices,2005-2016

Source:UNCTAD2017,29,basedondatabyUNCTAD,WTOandITC.

Figure1showstheriseinglobalexportsoftelecommunications,computer,andinformation

services during the last decade, growing much faster than commercial services exports,

increasingitsshareinglobalservicesexportsconstantly.

23WTO2017b,45.24UNCTAD2017,28-34.25UNCTAD2017,28,29.

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However,thesenumbersarenotdividedequallyovertheglobe:theEUandtheUSjointly

accountformorethanhalfoftheworld’stelecomsservicesexports,andtheEU,India,and

theUSaccountfor80percentoftheworld’sexportsincomputerservices.26

Trade in electronically transmitted services, including formerly non-tradeable and non-

classicalICT-services,isbelievedtohavegrownmuchoverthelastdecadeaccordingtothe

UNCTAD.27However,duetoalackofofficialdataontheamountoftradeinservicesdelivered

electronically,nostatisticscanbepresented–astrongdisadvantageforpolicymakersinthis

area.28

WhileB2Btransactionsaccount forthebiggestpartofcross-bordere-commerce,statistics

alsopointtoanincreaseinB2CandC2Ccross-bordertrade,giventhatcustomersaremore

andmoreenabledtobuyandsellabroad.29Eventhoughalackofofficialstatistics,andeven

alackofestimatesbycountries,makesitdifficultforpolicymakerstoevaluatetherealimpact

ofdigitalB2CandevenlessC2Ctrade,UNCTADestimatescross-borderB2Ce-commercein

2015tobearound$189billion,with380millionconsumersinvolved.30

Figure2:GlobalB2Ce-commercetransactionvalueandglobalB2Ce-commerceshoppers

Source:Manyikaetal.2016,35,basedondatabyAllResearch.

26UNCTAD2017,28-30.27UNCTAD2017,30.28id.29OECD2017b,7,1230UNCTAD2017,32.

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For thesameyear,Manyikaetal. (2016), ina reportpublishedbyMcKinsey,estimatethe

volume of cross border B2C e-commerce (in this case meaning all products and services

ordered via the Internet) to be around $300 billion with around 400 million consumers

involvedasshowninfigure2.McKinseyalsoestimatesthatin2015approximately12percent

oftheglobaltradeingoodswasconductedviae-commerce(includingB2B).31

Despitethefactthatalldatapresentedprimarilyrepresentsestimates,allreportspointto

rapid growth of cross-border e-commerce in goods and services:McKinsey estimates the

volume of global cross-border e-commerce to be five times higher in 2020 than in 2014,

reaching$1trillionin2020.Inthesameway,cross-borderB2Ce-commercewillbecomemore

importantinrelationtoallB2Ce-commercetransactions,makingupforroughlyathirdofall

e-commercetransactionsworldwidein2020.32

Someregionsandcountriescollectdataonspecificaspectsofcross-borderB2Ce-commerce.

However,dataisnotsufficienttogainacompletepictureofthoseregionsinrelationtoB2C

e-commerce,andevenlesssotohavedataonalle-commercetransactions.33Asanexample,

theEUcollectsdataon theproportionofEUbusinessesbuyingandsellingonlineand the

proportionofonlineshoppersamongInternetusers.In2017,forinstance,68percentofall

EU Internetuserspurchasedgoodsor servicesonline,40percentmore than in2007.3433

percent of purchasers conducted cross-border e-commerce transactionswith sellers from

otherEUcountries,while23percentofe-shoppersboughtproductsandservicesfromsellers

outsidetheEU.35

31Manyikaetal.(2016):DigitalGlobalization:TheneweraofGlobalFlows.McKinseyGlobalInstitute,23.32Manyikaetal.2016,35.33UNCTAD2017,32.34Eurostat(2017):E-commercestatisticsforindividuals.Online:http://ec.europa.eu/eurostat/statistics-explained/index.php/E-commerce_statistics_for_individuals#68.C2.A0.25_of_internet_users_in_the_EU_shopped_online_in_2017.35Id.

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Figure3:Cross-borderbandwidthgrowth

Source:Manyikaetal.2016,31,basedondatabyTeleGeography&GlobalBandwidthForecastService.

Anotherinterestingdimensiontoquantifythedevelopmentofdigitaltradeistolookatthe

increaseof flows indataasshowninfigure3,representedbycross-borderbandwidths. In

2014,cross-borderbandwidthwas45timeshigherthanin2005,whilethegrowthinflowsof

goods(10.5times),services(3.1times),foreigndirectinvestment(2.3times),andpeople(1.6

times) was significantly lower.36 It is important to note that not all of this data can be

considered relevant for digital trade. A great amount of this data supports, or is part of,

transactionsoftradeingoodsandservices,includingintra-companytrade,ispartofaM2M-

transaction,orconstitutesnon-commercialdata,suchaspersonaldatasentbyindividualsor

datatransmittedbygovernments.However,cross-borderdataflowsareagoodindicatorto

quantifythegrowingimportanceofdatainallpartsofglobalization,includingdigitaltrade.

Dataandtheuseofdataanalyticsarebecominganessentialpartofbasicallyanybusiness,

leadingtoanincreaseincross-borderdatatransfers.

Mostofthisdatamovesbetweenadvanceseconomies:93percentofcross-borderdataflows

happenbetweenthetop35economies(withthetop15accountingfor77percent),whilethe

restoftheworldonlyaccountsfor7percentofglobaldataflows.37

Thispointstoadeepdigitaldividebetweenthetopdigitaleconomiesandtherestoftheworld

as large parts of the globe are apparently not participating in the growth of the digital

economyanddigitaltrade.Thisdividecouldnotonlyleadtostrongdisadvantageswhennot

36Manyikaetal.2016,4,20,21.37Manyikaetal.2016,60,61.

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participatinginalargepartoftheeconomy,butalsotodisagreementsbetweenMembersof

theWTOastheirinterestswillbebasedontheroletheytakewithindigitalglobaltrade(e.g.

participatingstronglyornotparticipatingatall).

Thissectionhasshownthat,whilesomedataondimensionsofdigitaltradeexist,thereisstill

a need for improved statistics to better understand the impact of digital trade in the

economy.38As theWTOstates in itsmost recent statistical review:“Thechallenge for the

international statistical community is to find a way of capturing these [digital trade]

transactions in international trade statistics and subsequently in macroeconomic

aggregates.”39Whiletherearealreadyanumberofinitiativesworkingonthisissue,suchas

by the OECD, UNCTAD, or the International Monetary Fund (IMF), these are still mostly

focusedonconceptualizingthedifferentaspectsofdigitaltrade.40

Thedirection,however,isclear,cross-borderdigitaltradeisbecominganimportantpartof

internationaltradeandtheglobaleconomy.Nevertheless,thissectionhasalsoshownthat

transactionsofdigitaltradeareunequallydistributedovertheglobe,leadingtogapsbetween

thenewdigitalplayersandthose,fornow,leftbehind,anissueofpotentialrelevanceforthe

WTO.

3.Anewdigitalprotectionism

3.1Existingpre-barrierstodigitaltrade

Before analysing measures implemented by governments that directly address digitally

transmittedproductsandservices,somefactorsarenoteworthytomentionthathaveadirect

or indirect impactonthedevelopmentondigitaltrade.However,thesewillnotbefurther

analysed in this paper as they do not constitutemeasures implemented by governments

restrictingdigitaltradedirectly.

These includebarriers to classical trade in information technology (IT) equipment such as

tariffs, quotas, or technical barriers, low participation in the Information Technology

Agreement(ITA)andongoingdiscussionsaboutitsscope,aswellasrestrictionstothesupply

38SeeOECD2017b.39WTO2017b,45.40Id.

15

oftelecommunications-services.41Alloftheseissuesarerelatedto,orpotentiallyhindering

thedevelopmentofdigitaltrade.

Apart from these more general factors, research has shown that especially developing

economiesfacesubstantialpre-existingbarrierstodigitaltrade,preventingthemtofullytake

advantageofthegainsofelectroniccommerce,thusleadingtotheabove-mentioneddigital

divideinrelationtoe-commerce.Itisimportanttonotethatthosepre-existingbarriersdo

notfallunderthescopeofWTO-lawaddressingtradebarriers.

Kshetri(2007)identifiesthreekindsoftradebarrierstoe-commerceprevailingindeveloping

economies, ofwhich some are also valid for advanced economies.42 The first category he

identifies is “economic barriers”, including slow or no access to the Internet, bad

telecommunications infrastructure, lack of electric supply, unavailability of credit cards,

economieslargelybasedonagriculture,andlogisticschallenges(e.g.forthedeliveryofonline-

orderedpackages).Thesecondkindaresocio-politicalbarriers,suchasapreferenceforface-

to-facecommunications,validityofelectronicsignatures,importdutiesonICT-products,weak

formalinstitutions,aswellaslegalburdens.ThelastcategoryKshetriidentifiesis“cognitive

barriers”, such as lack of awareness of potential opportunities, lack of trust, computer

illiteracy,orlackoflanguageskills.

Ofallthesefactors,thelackofwidespreadavailabilityoffastbroadbandInternetisoneofthe

mostrestrictingfactorsforthedevelopmentofe-commerceandcross-borderdigitaltradein

developingeconomies.43

This non-exhaustive list illustrates the numerous challenges countries are facing when

participatinginglobaldigitaltrade.Whilesomebarriersmightbeovercomewithinthenext

years,suchaslackofelectricsupplyoraccesstotheInternet,others,suchasweaknessof

formal institutions, might need longer, possibly leading to disadvantages for developing

economies.

While many scholars point to significant potential advantages for developing economies

throughdigitalizationofinternationaltrade,44othersnotethatstructuraldisadvantagesatthe

41SeeAhmed,Usman&Aldonas,Grant(2015):AddressingBarrierstoDigitalTrade.E15Initiative.Geneva:InternationalCentreforTradeandSustainableDevelopment(ICTDS)&WorldEconomicForum,3-6.42Hereandfollowing:Kshetri,Nir(2007):Barrierstoe-commerceandcompetitivebusinessmodelsindevelopingcountries:Acasestudy.ElectronicCommerceResearchandApplications,6,443-452.43Ahmed&Aldonas2015,6.44See,interalia,Ahmed&Aldonas2015,Kshetri2007,Manyikaetal.2016;Suominen,Kati(2017):FuellingTradeintheDigitalEra:PolicyRoadmapforDevelopingCountries.InternationalCentreforTradeandSustainableDevelopment(hereinafterICTSD).Online:https://www.ictsd.org/sites/default/files/research/suominen_fuelling_trade_in_the_digital_era_0.pdf.

16

startcouldbeexacerbatedthroughdigitaltradeandpossibleinternationalregulationinthat

field.45Manydevelopingcountriesthemselvesareoftheopinionthatdigitaltrade,basedon

rulesmainlyelaboratedbyadvancedeconomies,will impede their furtherdevelopment.46

Eventhoughthisissuewillnotbethefocusofthispaper,theimportanceofovercomingthose

pre-existingbarriers fordiscussionsonmultilateral rules fordigital tradebetweenallWTO

Membersasequalscanbehighlightedatthispoint.

3.2Keybarrierstodigitaltradeimplementedbygovernments

3.2.1Introduction

Alongwiththeriseofdigitaltrade,ariseinrestrictivemeasuresinthedigitalspacecanbe

identified,posingpotentialbarrierstodigitaltrade.47EventhoughtheInternetstillseemsto

be a relatively free space regarding trade, compared to the “real world”, with physical

frontiersbetweencountries,governmentsareprogressivelyunderstandingthefunctioningof

theInterneteconomyandstartingtoregulateit.Throughimplementingrestrictivemeasures,

somecountriesareintroducingakindof“digitalprotectionism”48,withsomemeasureshaving

a negative impact on digital trade. Some of these trade-restrictive barriers are similar to

measures that can be identified in classical trade in goods and services, while others are

uniquetoelectroniccommerce.Themotivesforimplementingsuchmeasuresarevariousand

reach from protecting public moral, security, or data privacy of citizens to economic

protectionism.Thelinebetweenthesemotivesisoftenblurredas,likeinclassicaltrade,the

evokingofpublicmoral,orsecurityreasons,insomecasesleadstocompetitiveadvantages

fordomesticcompanies.Thissectionaimstoidentifyandcategorizekeybarrierstotradein

digitally transmitted products and services, as well as motives of governments for their

implementation,withoutprejudiceifthosebarriersaresubjecttoanyoftheagreementsof

theWTOorinviolationofthem.

45James,Deborah(2017):TwelveReasonstoOpposeRulesonDigitalCommerceintheWTO.HuffingtonPost.Online:https://www.huffingtonpost.com/entry/twelve-reasons-to-oppose-rules-on-digital-commerce_us_5915db61e4b0bd90f8e6a48a.46WTO:StatementbytheAfricanGroupof20October2017,WTODoc.JOB/GC/144.47WTO,JOB/GC/116,JOB/CTG/4JOB/SERV/248,JOB/IP/21JOB/DEV/42.48Theterm“digitalprotectionism”includesallmeasurestakenbygovernmentstoputrestrictionsinthedigitalsphere(GreenbergCenterforGeoeconomicStudies2017).

17

3.2.2Tariffs

Classicalmarketaccesslimitationssuchastariffsarenotamajorissueinthefieldofdigital

trade,andtherearenonotedcasesofcountriesimposingcustomdutiesondigitalproducts

and services.49 This is mostly due to three reasons: first, digital trade50 includes mostly

services, where tariffs in a classical sense have never been a big issue. Second, it is still

technicallydifficult,ifnotimpossible,tocontrolallcross-borderflowsofdataandtherefore

impose tariffs on electronically transmitted products and services. And third, the WTO

currentlyholdsamoratoriumoncustomdutiesondigitallytransmittedproductsandservices

which – even though it is legally not binding – could additionally preventMembers from

implementingtariffbarriers.

3.2.3Datalocalizationmeasures

Datalocalizationmeasuresareamongthemostcitedbarrierstointernationaldigitaltrade.

Theyaremeasurestakenbygovernmentswhichprohibitorrestrictthecross-borderflowof

dataorrequirecompaniestostoreandprocessdatalocally.Theythereforelimitaccessto

digital markets in affected economies as they require development and use of local

infrastructure(e.g.computingcentres)asaconditionformarketaccess.51Datalocalization

measuresarenotonlyrelevantfordigitaltrade,butforclassicaltradeinallsectorsasdatais

becomingaresourcerelevantforeveryindustry.Thus,barrierstofreeflowsofdataconstitute

an important barrier not only to trade, but to growth in general, hindering digital trade

directly,hinderingtheenablingofclassicaltrade(e.g.e-payments,e-reporting)andhindering

thevaluecreationoftradedproducts(e.g.byhinderingcross-borderM2M-communications

inthemanufacturing,automotive,oragricultureindustries).52

Forcompanies,complyingwithlocaldatastoragerequirementscancomeatsignificantcosts.

AccordingtoasurveybytheUnitedStates InternationalTradeCommission(USITC)among

US-companies, 82 percent of large companies and 52 percent of small and medium

49SeeUnitedStatesTradeRepresentative(hereinafter:USTR)(2017a):2017NationalTradeEstimateReportonForeignTradeBarriers.Online:https://ustr.gov/sites/default/files/files/reports/2017/NTE/2017%20NTE.pdf;USTR(2017b):KeyBarrierstoDigitalTrade.USTRFactSheets.Online:https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2017/march/key-barriers-digital-trade.50Asoutlinedinchapter2.1:onlydigitallydeliveredproductsandservices.51SeeCrosby,David(2016):AnalysisofDataLocalizationMeasuresUnderWTOServicesTradeRulesandCommitments.E15Initiative.Geneva:ICTSDandWorldEconomicForum,1.52SeeInternationalChamberofCommerce(hereinafter:ICC)(2016):WTOBusinessFocusGroup1:MSMEsandE-Commerce.Online:https://cdn.iccwbo.org/content/uploads/sites/3/2016/10/WTO-Business-focus-Group-1-MSMEs-and-e-commerce.pdf,6;OECD2017b,4.

18

enterprises(SMEs)inthedigitalcommunicationssectorsfounddatalocalizationrequirements

tobeabarriertotheirbusiness.53

Several economies are considering implementing or have already implemented data

localizationrequirements, includingtheEU,Korea,Russia,andTurkey.Cory identifiesdata

localizationmeasuresinatotalof31countriesandtheEU54.Thisnumberillustratesthatmany

countries are considering somekindof “dataprotectionism”55, even though theextentof

existingdatalocalizationmeasuresandtheirimpactondigitaltradeisnotyetfullyclear.56

Themainreasonsevokedforimplementationaretheprotectionofprivacyofcitizens(suchas

the General Data Protection Regulation (GDPR) in the EU)57, as well as national security

interests(suchasinSouthKorea,prohibitingthecross-borderflowofdatarelatedtomaps)58.

However,therearefewexamplesofeconomicprotectionism:59

SouthKoreahasestablisheddatalocalizationrequirementstoprotectlocale-commerceand

onlinepaymentoperators:foreigne-commercecompaniesareonlyallowedtostoreKorean

customercreditcarddataabroadwhenoperatinginfiveormorecountries.60

Another example of economic protectionism could be Kazakhstan, requiring all websites

registeredwitha.kz-domaintooperateonserverslocatedwithinthecountry.61

In Turkey, Internet-based payment providers, like PayPal, must store all data within the

countryfortenyears,which,interalia,madePayPalexitthecountry.62

The impact of data localization requirements on the economy is notmarginal: the USITC

estimates that removing data localizationmeasures posed by foreign governmentswould

increasetherealGDPoftheUSby0.1to0.3percent.63Thisnumberwillgrowasanincreasing

numberofbarrierstothefreeflowofdataare implementedandmoreandmoreclassical

sectorsortradedisciplineswilldependondataflows,suchasmanufacturing,automotiveor

53UnitedStatesInternationalTradeCommission(hereinafter:USITC)(2014):DigitalTradeintheU.S.andGlobalEconomies,Part2.Online:https://www.usitc.gov/publications/332/pub4485.pdf,81.54Cory,Nigel(2017):Cross-BorderDataFlows:WhereAretheBarriers,andWhatDoTheyCost?InformationTechnology&InnovationFoundation.Online:http://www2.itif.org/2017-cross-border-data-flows.pdf?_ga=2.13714868.2007752918.1518863940-1236132695.1518863940,20-31.55Cory2017,2.56SeeUSTR2017a,USTR2017b.57USITC2014,90.58Cory2017,28.59Crosby2016,2.60Cory2017,28.61Deibert,Ronald;Palfrey,John;Rohozinski&Zittrain,Jonathan(eds.)(2008):AccessDenied:ThePracticeandPolicyofGlobalInternetFiltering.Cambridge,MA;London:TheMITPress,315.62Cory2017,29.63USITC2014,78.

19

agriculture. A study publishedby the EuropeanCentre for International Political Economy

(ECIPE)comestotheresultthatinascenariowitheconomy-widedatalocalizationmeasures

applying to all sectors, GDP-losses would be substantial in countries analysed, with -1.1

percent in the EU and South Kora, -0.8 percent in Brazil and India, and -0.7 percent in

Indonesia.64

3.2.4Quotas

There are no cited cases quotas in the classical sense regarding the supply of digitally

transmitted products and services.65 There are however some cases in which countries

implementatotalprohibitionofthesupplyofadigitalproductorservicewithintheirterritory

whichcanbeinterpretedasazeroquotaasthecaseUS–Gamblinghasshown.66Giventhat

azeroquotaisaspecialcaseinWTO-law,thisshouldbeseenmoregenerallyinrelationto

blocking and filteringwebsites and applications (apps).Aquota canbe interpreted as the

prohibitionofwebsitesandappsofferingacertainkindofservice(webblockingandfiltering),

andvice-versa.

3.2.5Webblockingandfiltering

Blockingandfilteringofwebsitesandappsisoneofthemostcommonbarrierstodigitaltrade,

ofwhichtwodimensionscanbeidentified:websitesorappscaneitherbeblockedasawhole,

orsomeoftheircontentcanbefiltered.Filteredcontentandservicesmay includecertain

news,information,movies,e-books,music,orpaymentservices.Webblockingandfiltering

couldbeinterpretedassomekindofaquota,butgivenitsimportance,itsowncategoryseems

tobemoreuseful.

Numerousexamplescanbenamed:Chinaisoneofthemostcitedandwell-knownexamples

forwebblockingandfiltering:currentlytherearemorethan3,000websitesblocked,including

11ofthetop25globalwebsitesandservices likeFacebook, Instagram,andTwitter.These

measures–knownastheGreatFirewall67–constituteoneofthebiggest,ifnotthebiggest,

tradebarriersfordigitaltradeglobally.68Besidesblockedwebsitesandapps,lotsofcontent

64Bauer,Matthias;Lee-Makiyama,Hosuk;Marel,Erikvander&Verschelde,Bert(2014):Thecostsofdatalocalisation:friendlyfireoneconomicrecovery.EuropeanCentreforInternationalPoliticalEconomy(ECIPE).Online:http://www.ecipe.org/app/uploads/2014/12/OCC32014__1.pdf,6.65USTR2017a;USTR2017b.66WTOAppellateBodyReportadopted7April2005:UnitedStates–MeasuresAffectingtheCross-BorderSupplyofGamblingandBettingServices(US–Gambling),WT/DS285/AB/R,hereinafter:ABreportUS–Gambling.67USTR2017a,90.68“China’sprotectionismcomeshometoroost”.FinancialTimes,03January2018.Online:https://www.ft.com/content/14196546-f098-11e7-ac08-07c3086a2625.

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isfilteredbycompaniesthemselvesinordertocomplywithChineselawtobeabletoenter

theChinesemarket.

Notalwaysarewebsitesandappsblockedentirely:sometimesonlypartsareblocked,making

thewebsiteorapplessuseful.Thiswas,forexample,thecasewithWhatsAppinChina:the

government, prior to blocking the app completely, interrupted the possibility of sending

photos,videos,andvoicemessages,aswellasfilteredsometextmessagessothatuserscould

notbesureiftheirmessagehadbeenreceived,hencemakingtheappbasicallyuseless.69Even

thoughnationalsecuritymightbeoneofthemotivesforblockingmanywebsites,itcannot

bedeniedthatthishasledtoanincreaseinnational,verysimilar,services,suchasWeChat

(similar to Facebook and WhatsApp) or Baidu (similar to Google), giving China and its

companiesanadvantageintheglobaleconomy.70Withitssuccessfulimplementationofweb

filtering and blocking, Chinese blocking behaviour also serves as an example for other

countrieswhichareimplementingsimilarmeasures.71

OtherexamplesincludePakistan,regularlyblockingwebsitesthatitsgovernmentconsiders

tobeblasphemousorimmoral.72InTurkey,over111,000websiteswerebannedasofMay

2016,basedoncomplaintsregardingTurkey’scivilcodeandviolationsofIntellectualProperty

rights(IPRs),accordingtotheOfficeoftheUnitedStatesTradeRepresentative(USTR).73

Motivesforblockingwebsitesandfilteringcontentincludecultural,moral,political,orsafety

reasons. Economic protectionism, the reason for classically imposing quotas, cannot be

consideredanevidentmotiveforwebsiteandappblocking,74eventhoughsupportforlocal

similarservicesmightbearesult.

Itisimportanttonotethatnotallwebblockingandfilteringcanbeconsideredabarrierto

lawful international trade as some websites might be non-commercial, such as personal

websites or blogs, while others might include clear violations of IPRs (like illegal music

downloads)orbasichumanrights(e.g.childpornography).

69Bradsher,Keith(2017):ChinaBlocksWhatsApp,BroadeningOnlineCensorship.TheNewYorkTimes.Online:https://www.nytimes.com/2017/09/25/business/china-whatsapp-blocked.html.70GreenbergCenterforGeoeconomicStudies2017.71Coca,Nithin(2017):ThemissingtradewaragainstChina’sdigitalprotectionism.Engadget.Online:https://www.engadget.com/2017/09/15/china-digital-protectionism-firewall-trade/.72USTR2017a,340.73Haas,Benjamin(2017):ChinamovestoblockinternetVPNsfrom2018.TheGuardian.Online:https://www.theguardian.com/world/2017/jul/11/china-moves-to-block-internet-vpns-from-2018;USTR2017a,441.74SeeUSTR2017a.

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Questionsarisearoundtheevaluationofblockingandfilteringwebsitesandappsthatdonot

have a direct commercial activity involvedwith the final consumer, such as Facebook, or

WhatsApp,butwhereconsumers“pay”withtheirdata(inthecaseofFacebook,monetary

transactionsare,however,involvedbetweentheplatformandcompaniesadvertisingonthe

platform). Given that data is often cited to be an essential resource in the 21st century,

blocking and filtering of websites and apps which generate “data revenue” (rather than

“monetaryrevenue”)monetizedatalaterstageinthevaluechainshouldalsobeconsidered

tobeabarriertodigitaltrade.

The numbers presented show that web blocking and filtering constitutes amajor barrier

internationaldigitaltrade.

3.2.6AccesstonetworkinfrastructureandtheInternet

Thetransportofdatatoitsdestinationisessentialfordigitaltradetobepossiblewhichiswhy

itshouldbeanalysedwithfurtherdetail.Countriesarestartingtoputbarrierstoaccessto

networkinfrastructure,theInternet,orothernetworks.Accesstotelecommunications-and

Internet-serviceshastobeseenasamediumforfacilitatingdigitaltrade,comparabletoroads

orharboursinclassicaltrade.Withoutliberalizedaccess,digitaltradecanfacerestrictions.

AfamousexampleforrestrictingaccesstoinfrastructureistheWTOdisputesettlementcase

Mexico–TelecomsinwhichthePanelfoundthatMexicohadfailedtoofferreasonableand

non-discriminatory access to basic telecommunications-services forUS companies at cost-

orientatedprices.75Eventhoughthedisputewasonpricesforinternationalphonecallsand

notondata,itillustrateshoweasilyaccesstotelecommunications-infrastructureand-services

canberestricted.

AveryrecentcaseofrestrictingaccesstotheInternetisChinawhichin2017announcedthe

totalprohibitionofVirtualPrivateNetworks(VPNs),exceptforVPN-softwarelicensedbythe

Chinese government, taking affect 31 March 2018.76 In China, VPNs are largely used by

individuals,researches,andbusinessestocircumventtheGreatFirewall.VPNsarealsoused

bybusinessestocommunicateandexchangedatawithintheir intra-companynetworks.As

75SeeWTOPanelReportadopted2April2004:Mexico–MeasuresAffectingTelecommunicationsServices(Mexico−Telecoms),WTODoc.WT/DS204/R,hereinafterPanelreportMexico–Telecoms.76“ChinaTellsCarrierstoBlockAccesstoPersonalVPNsbyFebruary”.BloombergNews,10July2017.Online:https://www.bloomberg.com/news/articles/2017-07-10/china-is-said-to-order-carriers-to-bar-personal-vpns-by-february;“ChinaschränktZugangzufreiemInternetweiterein”.SpiegelOnline,31March2018.Online:http://www.spiegel.de/netzwelt/web/china-regierung-erlaubt-nur-noch-staatlich-lizenzierte-vpn-software-a-1200731.html;“USflagsfearsoverChina’snewVPNruleswiththeWorldTradeOrganisation”.SouthChinaMorningPost,23February2018.Online:http://www.scmp.com/news/china/diplomacy-defence/article/2134550/us-flags-fears-over-chinas-new-vpn-rules-world-trade.

22

themeasure isonly ineffectsinceveryrecently, it isyetunclearhow itwillaffect foreign

businesses using VPNs.77 However, concerns of the US show that restrictions to network

accessviaVPNsmightposeasignificantbarriertotradeforforeigncompanies.78Restrictions

toVPN-usewillalsohaveaneffectonChinesecustomers,usingVPNstopurchasegoodsand

servicesabroadviaVPNs,hence,posingabarriertoe-commerce.

AnotherexampleforimplementingarbitraryaccessrestrictionstotheInternetisVietnam,not

allowingaccesstotheInternetthroughforeignInternetServicesProviders(ISPs),againposing

abarriertodigitaltrade.79

Web filteringandblockingalsoposes restrictions to theaccess to the Internet.Due to its

importance, different nature, and frequent use by countries, it was treated above in a

separatesection.

3.2.7Netneutrality

NetneutralityensuresthatalldataontheInternetistreatedequally,nomattertheoriginor

destination.Theconceptis,thus,similartotheprincipleofnon-discriminationinWTO-law.80

Wheneliminatingnetneutrality,ISPsareabletochargecompaniesfortransportingdatawith

higherpriority.Thiscanleadtodefactodiscriminationofcompaniesbasedontheircountry

oforigin,forexample,ifamonopolistISPtransportsdatafromlocalcompaniesfasterthan

datafromforeigncompanies.Eveninliberalizedmarkets,ISPscouldchargeforeignbusinesses

more to transport theirdata thandomestic companies.Netneutrality is still an important

principleinallmajordigitaleconomymarkets,exceptfortheUSThere,ithasbeenrecently

eliminated,81hence,enablingISPstodiscriminatedataofcompaniesbasedonfeespaidor

potentiallythecountryoforigin.AsthesupplyofInternetisamonopolymarketinlargeparts

oftheUS,82thiswillleadtosubstantialbarrierstodigitaltrade:companieswillhavenochoice

77“MIIT:ChinaonlyprohibitsVPNsofunauthorisedcompaniesorindividuals”.GBTimes,25July2017.Online:https://gbtimes.com/miit-china-only-prohibits-vpns-unauthorised-companies-or-individuals;SpiegelOnline,31March2018;SouthChinaMorningPost,23February2018.78GBTimes,25July2017;SouthChinaMorningPost,23February2018.79UnitedStatesDepartmentofState(2016):Vietnam2015HumanRightsReport.Online:https://www.state.gov/documents/organization/253025.pdf,28.80SeeShroff,Tvisha&Kuhlmann(2016):ALegalPerspectiveonDigitalTrade:KeepingtheInternetNeutral.Trade,LawandDevelopment,8(2),13.81Rushe,Dominic&Gambino,Lauren(2017):USregulatorscrapsnetneutralityrulesthatprotectopeninternet.TheGuardian.Online:https://www.theguardian.com/technology/2017/dec/14/net-neutrality-fcc-rules-open-internet.8231percentofZIPcodeareashavenochoiceregardingtheirInternetproviderasonlyoneISPoffersservicesintheirarea.70percentofUSZIPcodeareashavenoneoronlyoneproviderofferinghighspeedbroadbandInternet>25Mbpsintheirarea.99percentofUSZIPcodeareashavenoneoronlyoneproviderofferinghighspeedbroadbandInternet>100Mbpsintheirarea(Segan,Sascha(2017):CheckOuttheTerribleStateofUSISP

23

buttopayanadditionalfeeoracceptthattheirdataisdeliveredwithlessprioritywithinthe

respectiveareas.83

Given that elimination of net neutrality in the US has been very recent and developing

economies,wherenetneutralityissometimesdefactonon-existent,areoftennoimportant

digitalmarkets, effectsofnon-existingnetneutrality asapotentialbarrier todigital trade

cannotbefullyevaluatedyet.

3.2.8Taxation

Differencesintaxationcanpreventliberalizationofdigitaltradewhengovernmentsgiveless

favourabletaxregimestoforeigndigitalserviceprovidersthandomesticones.Lowtaxesfor

domesticdigitalcompaniescanconstituteasubsidyforcompetinginthedomesticmarketas

wellasforexporting.

Brazil,forexample,providessignificanttaxreductionsonmanydomestically-producedICT-

products, and digital products and services, like software or technical services under the

Processo Produtivo Basico (PPB) regulation,84 putting foreign suppliers at a significant

disadvantage.85GiventhattherelatedBrazilianSupportProgramfortheDevelopmentofthe

InformationTechnologySectorhastheobjectivetostrengthenresearchanddevelopmentin

theBrazilianinformationtechnologysector,tofosternationaldevelopment,andsupportand

projectsofnationalinterest,86itcanbearguedthatthemotivefordifferentiationintaxispure

economicprotectionism.

Anotherexample tobenamedwith regard toeconomicprotectionism is India,where the

governmentintroducedan“equalizationlevy”,posinganadditional6percentwithholdingtax

on foreignonline advertisingplatforms, aiming to “equaliz[e] theplaying field”87 between

Indianandforeignserviceproviders.88

Competition.PCMag.Online:https://www.pcmag.com/news/357972/exclusive-data-shows-the-terrible-state-of-us-isp-competitio).83Datadeliverywithalowerprioritycanhaveseriousimplicationsfordigitalbusinesses.Ifforexampledataofavideoportalisdeliveredtooslowly,consumersmightnotbeabletowatchvideosonacertainwebsitewithouthavingtowaitforthevideotoload,whilevideosoncompetitor’swebsiteshavingpaidextrafeesforquickerdatadeliverywillloadwithoutanyproblems.84WTOPanelReportadopted30August2017:Brazil–CertainMeasuresConcerningTaxationandCharges(Brazil–Taxation),WTODoc.WT/DS472/R,WT/DS497/R,para.2.46,hereinafter:PanelReportBrazil–Taxation.85“Brazil-InformationTechnology-ComputerSoftwareandHardware”.Export.gov,2017.Online:https://www.export.gov/article?id=Brazil-Information-Technology-Computer-Software-and-Hardware;USTR2017a,51.86DecretoNº5.906de26Septembrode2006,DiárioOficialdaUnião-Seção1-27/9/2006[Brazil],art.10§1.87USTR2017a,217.88Id.

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3.2.9Intellectualpropertyrights

Tooweak,aswellastoostrict,IPRscanalsoconstitutebarrierstodigitaltrade.Itisagreed

thatstrongIPRsarecriticalforinnovation,whileweakIPRscanhinderinnovationaswellas

digitaltrade,forexample,duetoillegaldownloads.89Ontheotherhand,innovationinthe

Interneteconomy,and thereforealsodigital trade,depends, toacertaindegree,onopen

innovation and open source codes. IPRs that are too strict can, therefore, equally pose a

barrier to thedevelopmentof thedigitaleconomyand, thus,digital trade, for instance, in

regardtodevelopingandtradingnewsoftware,orthedistributionofmoviesormusic(see

geoblockingbelow).

3.2.10Geoblocking

Many companies use geoblocking to restrict access to content in a certain territory.

Geoblocking can also be induced by governments, such as when countries do not allow

websites,likeYouTubeorNetflix,toshowcertaincontentintheircountry.Thesemeasures

shouldthenbecategorizedaswebblockingorfiltering,asdescribedabove.Companiesusually

usegeoblockingtoincreaserevenuesviaIPRs,ortotailorcontenttoaspecificmarket.They

can,thus,reducecostsforIPRsorareabletousedifferentpricingindifferentmarkets.Even

thoughfromaconsumerperspectivethiscanbeseenasabarriertotrade,thesecompany-

inducedmeasuresshouldratherbeconsideredaregularbusinessmeasurethanabarrierto

digitaltradeasitiscomparablewithcompaniestailoringtheiroffertoaspecificmarketinthe

traditionalindustry.

While eliminating company-induced geoblocking barriers can be seen as positive from a

consumerperspective,companiescanseethisasanadditionalbarriertotrade:tostrengthen

theSingleDigitalMarket,theEUrecentlyeliminatedwhatitcalls“unjustifiedgeoblocking”90,

hence, forcing companies toprovideequal access to content for all consumerswithin the

EuropeanUnion,strengtheningtherightsofconsumers.UScompanies,ontheotherhand,

haveexpressedconcernsthat thiswouldaffect theirability tomarketofferingstailoredto

differentmarketsorengageinlicensingofaudio-visualworkbasedonterritoriallimitations,

increasingcostsrelatedtoIPRs.91Thisillustratesthecomplexnatureofbarrierstodigitaltrade

89PrimoBraga,CarlosA.2005,546.90EuropeanCouncil&CounciloftheEuropeanUnion(2018):Geo-blocking:Unlockinge-commerceintheEU.Online:http://www.consilium.europa.eu/en/policies/geo-blocking/.91USTR2017a,183

25

andrespectiveregulation:whileitmightreducebarriersononeside,regulationcanposenew

barriersontheothersideoftheequation.

3.2.11Technicalstandardsandforcedtechnologytransfer

Theforceduseofdifferentorunusualtechnicalstandards,theneedforcertaincertifications,

ortherequirementtouselocaltechnologyposeadditionalbarrierstodigitaltrade.China,for

example,requirestheuseofChineseencryptionalgorithms(e.g.forWiFiorLTE-products).92

InthecaseofChina,thisisprobablyrelatedtogovernmentinducedwebblockingandfiltering

astheuseofChinesetechnologymakescensorshiptechnicallyeasier.

Forcedtechnologytransferis,asintraditionaltrade,alsoanissueindigitaltrade,especially

incountrieswhereestablishingasubsidyisonlypossibleintheformofajointventure,such

asinChina.

3.2.12Otherbarriers

There isanumberofother internalregulationsaffectinge-commerce lessrelevantforthis

paper,includingregulationofthetelecommunicationsmarket,competitionpolicy,orfurther

internetgovernanceissues,suchasallocationofIPaddresses.93Eventhoughtheseissuescan

alsoposebarriersindigitaltrade,duetolimitationsinspace,theywillnotbefurtheranalysed

inthispaper.

3.3Summary

Thissectionhasshownthatgovernmentsareimplementingawiderangeofbarrierstodigital

trade, thus, leading to a new, digital, protectionism. The line between thedifferent trade

barriersissometimesblurred,suchasbetweenwebblockingandquotas,ordatalocalization

measuresandaccesstonetworkinfrastructureaswellasnetneutrality.Aggregatingthose

barriersfurtherontheotherhandwouldcomeatthedisadvantageofclear,existingbarriers

notbeingnamedassuch.This iswhy inthispaperthemost importantbarriershavebeen

includedinowncategories,respectively.

Naturally,notallcountriesareimplementingbarrierstotradewiththesameintensity.The

USITChasidentifiedcountriesposingmostbarriersforUScompanies,ledbyNigeria,Algeria,

China,Bangladesh,Russia,andPakistan.94Also,barriersmightvarysubstantiallydepending

onthetypeofcompanyorindustry.Whilesocialnetworkingcompanies,suchasFacebook,

92USTR2017a,91.93PrimoBraga2005,545.94USITC2014,79.

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mightfacesubstantialbarrierstooffertheirproductsinsomemarkets,thismightnotbethe

caseforcompaniesofferingbusinesssoftwareasaservice,suchasAdobe.

Interestingly,Baldwin(2016a),whileacknowledgingthefactthatgovernmentpoliciescould

counteract falls in communication costs, points out in relation to free flows of data and

communicationthatatleastintheG7countries,“theinstinctforanopensocietyisstronger

than any protectionist instinct that is likely to arise.”95 This statement, however, seems

questionable when having in mind the broad spectrum of barriers to digital trade

governmentsare starting to implement, including theG7, aswell as the recently changed

international trade environment, with rising protectionism not only in digital, but also in

classicaltradeasnotedinthispaper’sintroduction.

4.WTOframeworkregardingdigitaltrade

4.1TheWorkProgrammeonElectronicCommerce

InMay1998,ministersofMemberStatesattheSecondMinisterialConferenceoftheDoha

Roundcalledfortheadoptionofacomprehensiveworkprogrammeonelectroniccommerce,

recognizing the growing importanceof digital trade creating newopportunities. TheWTO

Work Programme on Electronic Commerce was subsequently established by the General

CouncilinSeptemberthatyear.

Itshouldbe“acomprehensiveworkprogrammetoexaminealltrade-relatedissuesrelating

toglobalelectroniccommerce,takingintoaccounttheeconomic,financial,anddevelopment

needsofdevelopingcountries.”96TheWorkProgrammeshouldbeasbroadaspossibleand

ofexploratorynature.Inadditiontoprovidingaworkingdefinitionofwhatisunderstoodto

beelectroniccommerceforthemeansoftheWorkProgramme(asdescribedinchapter2.1),

thedocumentalsoprovidesalistoftasksfortheCouncilforTradeinServices,theCouncilfor

TradeinGoods,theCouncilforTRIPS,andtheCommitteeforTradeandDevelopment.The

GeneralCouncil,ontheotherhand,shouldplayacentralroleintheprocessandreviewthe

Work Programme on a continuous basis. Since May 2001, the General Council has held

95Baldwin2016a,287.96WTO:MinisterialDeclarationof25May1998.WTODoc.WT/MIN(98)/DEC/2.

27

dedicated biannual discussions on cross-cutting issues. However, deliverables of those

debateshavebeenlimitedasdifferencesbetweenMemberStatesaresubstantial.97

Work carried out in the different bodies has been of varying intensity. Progress reports

submittedtotheGeneralCouncilshowthatwhiletherehavebeen17reportssubmittedby

theCouncilforTradeinServices,onlyfourhavebeensubmittedbytheCouncilforTRIPs.98

WorkintherespectivebodieshasbeenveryactiveintheyearsafterlaunchingoftheWork

Programme.However,almostnoreportshavebeenissuedinthe2000sandearly2010sas

interestofMembersinthetopichadwaned.99Morerecently,thebodieshavebecomemore

activeagainthankstorenewedinterestofMemberStatestoengageinthisissue.100Rising

barrierstodigitaltradeasoutlinedinchapter3cancertainlybeseenasonetriggerforthis

development.

Todate,theWorkProgrammehasnotbeenabletopresentsubstantialresults:thisispartially

due to Member States having diverging opinions on key issues of electronic commerce

includingonhowdiscussionsshouldtakeplace.101Somehavestatedneedingmoretimeto

internallyevaluate the impactofdigital trade,whileothershavenot taken interest in the

matter, and thus have not participated in the discussions at the relevantmeetings of the

differentCouncils.102WhilemostMemberspointouttheneedtofurtherinvestigatetheissue

ofelectroniccommerceandtocontinueexaminingandexploring itstraderelatedaspects,

othersviewthate-commercewasbeinggivenahigherprioritycomparedtotheDohaissues

ofinteresttothem.103SomeMemberStatesbelievethatsomeofthesubmissionsmadeother

Memberswentbeyond theexploratorynatureof theWorkProgrammeandwere looking

towards rule-making, something thatwas not part of the 1998mandate.104OneMember

refusedtoengagewithintheDedicatedDiscussionconvenedbytheGeneralCouncil,since

fromitsviewpointtheGeneralCouncilhadnomandatetoconvenesuchadiscussion.Still

97SeeWTO:DocumentsOnline:GeneralCouncil:DedicatedDiscussionsonElectronicCommerce;Farrokhnia,Farrokh&Richards,Cameron(2016):E-CommerceProductsUndertheWorldTradeOrganizationAgreements:Goods,Services,BothorNeither?JournalofWorldTrade,50(5).98WTO:DocumentsOnline:GeneralCouncil.99SeenumberofpublisheddocumentsinWTODocumentsOnline;Foster,Christopher&Azmeh,Shamel(2018):TheDigitalTradeAgendaandAfrica.InternationalCentreforTradeandSustainableDevelopment.Online:https://www.ictsd.org/bridges-news/bridges-africa/news/the-digital-trade-agenda-and-africa.100Id.101SeeWTO:ReporttotheGeneralCouncilof8December2016,WTODoc.WT/GC/W/728,para.1.6.102SeeWTO:ReporttotheGeneralCouncilof8December2014,WTODoc.WT/GC/W/692,para.1.5.103WTO,WT/GC/W/728,para.1.8.104Id.

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others would accuse some delegations of using procedural issues to block discussions

entirely.105

Asaconsequence,consensusonsubstantial issuescanhardlybeexpectedwithoutatleast

agreeingonhowdiscussionsonelectroniccommerceshouldbecarriedout.Theissueslaid

outabovehighlighttheneedforamorepractice-orientated,hands-on,approachinorderto

deliverresultswithinareasonableamountoftime.

4.2ApplicabilityofWTOprovisionstoelectroniccommerce

4.2.1Difficultiesofclassification

ClassificationofdigitalproductsandserviceswithintheframeworkoftheWTOisoneofthe

main controversies between Member States as well as among scholars. With regard to

classificationofcrossborderdigitaltrade,twoofthemainWTOagreementsarepotentially

ofrelevance:theGeneralAgreementonTariffsandTrade(GATT)andtheGeneralAgreement

on Trade in Services (GATS). While trade related IPRs are also an important issue when

analysingdigitaltradewithintheWTOframework,thispaperwillnotfocusontheseaspects

due to the different nature of the Agreement on Trade-Related Aspects of Intellectual

PropertyRights(TRIPS).ThisprovidesminimumstandardsregardingIPRs,therebysupporting

tradeliberalizationinaffectedgoodsandservicesratherthanprovidingrulesforliberalization

oftradeperse.106

Discussionshavebeenongoingformorethantwentyyearsnowwithoutanyfinaldecision

made.Thisisnotonlyatechnicalquestionintermsofstatisticalclassification107butahighly

politicalone:108 classificationofe-commerceproductsandservicesunder theGATTor the

GATScanhaveseriousimplicationsfordigitaltrade,giventhattheregimeprovidedbythe

GATTismoreliberalisedthantheGATS.109

105WTO,WT/GC/W/728,para.1.9.,1.10.106ForfurtherresearchtraderelatedIPRsinrelationtodigitaltradesee,interalia,Taubmann,Antony(2012):TRIPSencounterstheInternet:Ananaloguetreatyinadigitalage,orthefirsttrade2.0agreement?Burri,Mira&Cottier,Thomas(Eds.):TradeGovernanceintheDigitalAge.Cambridge:CambridgeUniversityPress;Wunsch-Vincent,Sascha&Hold,Arnold(2012):Towardscoherentrulesfordigitaltrade:Buildingoneffortsinmultilateralversuspreferentialtradeagreements.Burri,Mira&Cottier,Thomas(Eds.):TradeGovernanceintheDigitalAge.Cambridge:CambridgeUniversityPress.107WTO2017b,45.108SeeBurri,Mira(2013):ShouldThereBeNewMultilateralRulesforDigitalTrade?E15Initiative.Geneva:InternationalCentreforTradeandSustainableDevelopment&WorldEconomicForum,3.109GATS:GeneralAgreementonTradeinServices,Apr.15,1994,MarrakeshAgreementEstablishingtheWorldTradeOrganization,Annex1B,1869U.N.T.S.183,33I.L.M.1167(1994),hereinafterGATS;GATT1994:GeneralAgreementonTariffsandTrade1994,Apr.15,1994,MarrakeshAgreementEstablishingtheWorldTradeOrganization,Annex1A,1867U.N.T.S.187,33I.L.M.1153(1994),hereinafterGATT.

29

Thereisnotonlycontroversyabouttheclassificationperse,butalsoifclassificationisneeded

atthispointornot.110Thisquestionisinteresting,asneithertheGATTnortheGATSclarify

whatisunderstoodtobeaproductoraservice.However,thedifferentnatureofe-commerce

products and services, and especially of electronically transmitted products and services,

seems to bring the need for definition, as discussed in chapter 2, and clarification in

classification.At thispoint, it isunclearwhatWTOregimeshouldbeapplied,especially in

regardtodigitallydeliveredproductsandservices.111

WhiletheWTOisstrugglingtoclarifytheissueofclassification,fasttechnologicalchangehas

evenoutdatedparts of thediscussion.Oneexampleof this is if softwaredeliveredon an

optical disc and software delivered via download should be considered like-products as

softwareismostlynotsoldonopticaldiscsanymore.112Thisexampleillustratesthechallenges

fortheWTOthatlayahead.AsnegotiationswithintheWTOareverytimeconsuming,it is

importanttoestablishasolidandexhaustivesystem,encompassingarisingtechnologiesfor

comingdecades.Asoftoday,manyquestionsstillremainunanswered.

Thebasicquestionguidingthosediscussionsiswhethere-commerceproductsandservices

fallunderthescopeofoneoftheexistingWTOagreements,andifso,whichone,orwhether

modifications,orevenanentirelynewagreementregardinge-commerceproducts,isneeded.

Giventhattheterme-commerceisnotevenclearlydefined,itwillbeadvantageoustomake

useofthecategories,outlinedinchapter2,toanalysetheapplicabilityandclassificationofe-

commerceproductsandserviceswithintheWTOframework:tangiblegoodsorderedviathe

internet,servicesdeliveredinatraditionalway,electronicallydeliveredproducts,aswellas

theissueofinformationordata,andremoteadditivemanufacturing.

Scholars widely agree that goods ordered or payed for via the internet but delivered in

tangibleformstillremaingoodsforthepurposesoftheGATTwhencrossingtheborder,while

traditionally delivered services (including remotedelivery) ordered via the internet clearly

remainsubjecttotheGATS.113

As a side note, it is interesting to mention that growth of B2C and C2C cross-border e-

commerce,aswellastheriseofjust-in-timedeliveryintheB2Bsegment,areleadingtoan

110Farrokhnia&Richards2016,799,800.111WTO2017b,45.112SeeLópezGonzales&Jouanjean2017,21.113Fleuter,Sam(2016):TheRoleofDigitalProductsUndertheWTO:ANewFrameworkforGATTandGATSClassification.ChicagoJournalofInternationalLaw,17(1),158.

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increaseinsmallpackagesandsmallvalueproductscrossingborders.114Thismeansitwillbe

importantforgovernmentstoevaluateand,ifnecessary,adjusttheircurrentdeminimisto

respondtothisdevelopment.115TheWTOcouldassistMembersevaluatingtheoptimalde

minimisinorderforregulationnottohamperthedevelopmentofthiskindoftrade.Atthe

sametime,theWTOcouldensurethatMembersdonotlosetoomuchtariffincome,whichin

somedevelopingcountriesisstillanimportantsourceofincome.

Remotely supplied digital services are encompassed by the GATS, given its technological

neutrality within the respective modes,116 as clarified by the Panel US – Gambling and

confirmedinChina–PublicationsandAudiovisualProducts.117Questionsariseconcerningthe

remainingproducts,likethosewhichpossessaphysicalequivalent,suchase-books,movies,

music,orsoftware.

4.2.2ClassificationofdigitallytransmittedproductsundertheGATT

SomeargumentscanbemadetoclassifydigitallytransmittedproductsundertheGATT,such

asthatcontentismoreimportantthantheneedtobeaphysicalgood(giventhattheGATT

doesnotstatethatitonlyappliestophysicalgoods).ClassificationundertheGATTwouldalso

eliminatetheuncertaintiesaroundlikeness inrelationtotheirphysicalcounterpart.118The

existingmoratorium on applying custom duties on electronic transmission can further be

valuedinthelightofapplyingGATTrulestodigitallytransmittedproductsascustomduties

arenotanissuewithintheGATSframework.

Additionally, theWTO Panelmight havemade a case for classifying digital products that

possessaphysicalcounterpartasproductsundertheGATTinarecentruling:thebeforecited

BraziliantaxmeasureshavebeenchallengedattheWTOundertheGATT,asthePPBmostly

includesphysicalICT-goods,andonlysomerelatedservicesandpossiblydigitalproducts.119

ThePanelfoundBrazil’smeasures,interalia,tobeinconsistentwithparagraphs2and4of

114LópezGonzales&Jouanjean2017,8;OECD2017b,11,12.115SeeAhmed&Aldonas2015,5;LópezGonzales&Jouanjean2017.116Inthisregard,itisimportanttonotethatMemberscandiscriminatebasedonthefourmodesofsupply.ItisequallyimportanttonotethatthespecificschedulesofMembersarepartoftheGATS.117PanelReportUS–Gambling,interaliapara.6.285,6.355,7.2(b);WTOAppellateBodyreportadopted21December2009:China–MeasuresAffectingTradingRightsandDistributionServicesforCertainPublicationsandAudiovisualEntertainmentProducts(China–PublicationsandAudiovisualProducts),WTODoc.WT/DS363/AB/R,hereinafterABreportChina–PublicationsandAudiovisualProducts;WTOPanelreportadopted12August2009:China–MeasuresAffectingTradingRightsandDistributionServicesforCertainPublicationsandAudiovisualEntertainmentProducts(China–PublicationsandAudiovisualProducts),WTODoc.WT/DS363/R,hereinafter:PanelreportChina–PublicationsandAudiovisualProducts.118SeeFarrokhina&Richards2016,801,802.119PanelReportBrazil–Taxation,para.2.2.1.3,2.2.2.3,2.2.3.3,2.2.4.3,2.2.5.3,2.2.6.3,2.2.7.3.

31

articleIII(NationalTreatmentonInternalTaxationandRegulation)oftheGATT,includingfor

software.120Thisisinteresting,asthiswouldincludesoftwarethatissuppliedelectronically

(given that software today is often supplied electronically and no restrictions on how the

softwarehastobesupplied(e.g.inphysicalform)havebeenmadeinthePanelreport).Ifthis

isthecase,thePanelwouldhavetreateddigitalproductsliketheirphysicalcounterpartsby

applying GATT rules to them. The still outstanding Appellate Body Report might bring

clarification to this issue. If theAppellate Body reaffirms the findings of the Panel, digital

productsdeliveredelectronicallywouldpossiblyhavetobeanalysedundertheprovisionsof

theGATT–atthefirstsightagoodsigninthelightof liberalization.Physicalproductsand

theirdigitalcounterpartscouldthenbetreatedaslike-productsundertheGATT.Noliterature

analysingthisspecificissueofthisdisputesettlementcasecanbefoundatthismoment,but

furtherdiscussionsonthisissuewillbenecessary.Questionsaroundcustomdutiesondigitally

transmittedproductsandthelinebetweendigitalproductspossessingaphysicalcounterpart,

andthosethatdonot,wouldthenhavetobeevaluated.

4.2.3ClassificationofdigitallytransmittedproductsandservicesundertheGATS

Todate,discussionsamongscholarspointtowardsclassifyingdigitallytransmittedproducts

and services as services under theGATS.121 Arguments include that a productwas rather

definedby its content than its formor the importanceofdomestic regulation fordigitally

deliveredproducts.122OthersemphasizethattheGATThasbeendesignedonlyforphysical

goods,withanumberofevidencespointingtowardsthis,suchasthelistingofphysicalgoods

accordingtotheirphysicalappearance.123TheWTOSecretariatpointedoutthatanykindof

electronictransmissionshouldbeseenasaservice,astherelevantissueistheactofcross-

border transmission,notwhat canbedonewith the transmitteddataafterwards, suchas

downloadingorprintingitout.124Furthermore,itwashighlightedthat“[a]nysuggestionthat

"electronictransmissions"assuchshouldberegardedasoutsidethescopeoftheGATSwould

120PanelReportBrazil–Taxation,para.7.1-8.22.121Chen,John-ren&Smekal,Christian(2009):ShouldtheWTOdealwithe-tradetaxationissues?ProgressinDevelopmentStudies,9(4);Farrokhina&Richards2016;Fleuter2016;Singh,HarshaV.,Abdel-Latif,Ahmed&Tuthill,L.Lee(2016):GovernanceofInternationalTradeandtheInternet:ExistingandEvolvingRegulatorySystems.CIGI&ChathamHouse(Publishers):MappingtheDigitalFrontiersofTradeandIntellectualProperty.Ontario,London:CIGI,ChathamHouse,108.122Farrokhina&Richards2016,801,802.123WTO:SubmissionfromtheEuropeanCommunitiesof09May2003,WTODoc.WT/GC/W/497.124WTO:NotebytheSecretariatof16November1998,WTODoc.S/C/W/68,para.37,38.

32

of course fundamentally damage the entire Agreement and undermine a wide range of

existingcommitments(…).”125

ClassifyingalldigitallydeliveredproductsandservicesundertheGATSleadstothequestion

ofdifferencesinmarketaccesscommitmentsfortangiblegoodsandtheirdigitalcounterparts

aswell as discrimination between both, based on national regulation. There has been an

ongoingdiscussioniftangiblegoodsandtheirphysicalcounterpartsshouldbetreatedaslike-

products.126Incasealldigitallydeliveredproductsaretobeclassifiedasservicesunderthe

GATS,fromaWTO-lawstandpoint,thisisarathertheoreticalquestion.WhiletheGATTonly

makesreferencesto like-products(ruledbytheGATT),theGATSonlymakesreferencesto

like-services (ruled by the GATS). A service therefore can legally not be a like-product in

referencetoagoodorviceversa.

Eventhoughthisquestioncouldbesolvedfroma legal-perspective ifalldigitallydelivered

productswere tobe services, it still poses challenges inpractice as this leads todifferent

treatment,e.g.formusicdeliveredonaCDandmusicdownloaded,intermsofmarketaccess

andnational treatment– aquestion, theWTOwill possiblyhave todealwith in thenear

future.

4.2.4Neitherproductsnorservices–asuigeneris?

Classifying all digitally delivered products and services as services under the GATS is not

unchallenged.Farrokhina&Richards(2016),forexample,criticizethediscussionfocusingonly

onachoicebetweenGATTandGATS,beingasourceofinconsistencies.127Somescholarsas

wellasWTOMemberStatespointoutthate-commerceproductsandservices(sometimes

evenincludingtangiblegoodsorderedviatheinternet)wereneitherproductsnorservices,

butathirdcategory,sometimesleadingtotheconclusionthatanewtreatyforthem,asui

generissolution,wouldbenecessary.128Thisisaninterestingproposal,giventhat,withouta

doubt,e-commerceblurs the linebetweenwhat traditionallywasconsideredtobesimply

goodsandservices.

However, when aiming to solve the issue of classification of e-commerce, and especially

digitally transmitted, products, those suggestions seem not be useful for delivering quick

125WTO:NotebytheSecretariatof16November1998,WTODoc.S/C/W/68,para.37.126LópezGonzales&Jouanjean2017.127Farrokhina&Richards2016,816.128Seei.a.Burri2013;Farrokhina&Richards2016;Fleuter2016;Lee-Makiyama(2011):Future-proofingworldtradeintechnology:TurningtheWTOITAgreement(ITA)intotheInternationalDigitalEconomyAgreement(IDEA).EuropeanCentreforInternationalPoliticalEconomy(ECIPE).Online:http://ecipe.org//app/uploads/2014/12/WP201104.pdf.

33

resultsandclaritytotheissueofclassification.Thisisespeciallytruegiventhealreadyexisting

tradeagreementswithintheWTOframeworkandthetime-consumingnatureofmultilateral

negotiations.Anewagreementwouldriskunderminingthevalueofexistingagreements.129

Inaddition,itwouldemphasizetheneedforclarifyingthequestionofwhatkindsofproducts

shouldbeunderitsscopebeforehand.This,again,leadstothequestionofclassificationwhich

that potentially new agreement was originally meant to avoid. Also, negotiating a new

agreementsolelyfordigitaltradewouldposetheriskbeingmorerestrictivethanexistingrules

as Member States currently seem to be imposing greater rather than fewer barriers,

somethingwhichcouldbereflectedinapossiblenewagreement.

4.2.5Newchallenges

Evenifallelectronicallydeliveredproductsandserviceswereunderstoodtobeservices,and

thereforesubjecttotheGATS,newchallengeswouldarise.

Thebundlingofproducts,mixingtraditionalgoodsandelectronicallydeliveredservices(e.g.

afarmequipmentmanufacturerprovidingdataonweather,thesoil,healthofanimalsetc.),

ortheas-a-service-culturewouldagaincomplicateidentifyingtheapplicableWTOregime.130

Emerging technologies will challenge the existing WTO framework additionally, such as

additivemanufacturing.In1998,theWTOSecretariat, inanotetotheCouncilforTradein

Services, stressed that “of course it would be impossible to deliver a tangible product

electronically.”131Thisstatementisnotquiteobviousanymore.Baldwin(2016a)notesthat

when 3D-printing becomes normal, “the transmission of data would substitute for the

transportationofgoods.”132ThisleadstothequestionthatifaComputer-AidedDesign(CAD)-

filefor3D-printingissentfromonecountrytoanothertobeprintedatamanufacturingsite

orathome,isthistobeconsideredaservice(providingthefile)oragood(asatitspointof

consumption,itwillbeagood)?Whileitcouldbearguedthatthecross-bordersendingofthe

fileisclearlyaservice,133questionsarisearoundthefinalstateoftheproduct:willtariffsapply

toprintedproductsoronly to itsmaterials, if imported? If the cross-border transaction is

solelyaservice,customdutiesontheproductarenot likely tobeapplied,challengingthe

conceptofcountriesprotectingcertainpartsoftheireconomythroughhightariffs.Thiswill

129Fleuter2016,174.130Gonzales&Jouanjean2017,5-9;OECD(2017a):OECDDigitalEconomyOutlook2017.Paris:OECDPublishing.Online:http://dx.doi.org/10.1787/9789264276284-en,232.131WTO,S/C/W/68,para.37.132Baldwin2016a,291.133SeeLópezGonzales&Jouanjean2017,16.

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alsoraisethequestionifthosegoodsarelike-productsinrelationtoproductsthathavebeen

deliveredinatraditionalway.

Atthispoint,noclearanswercanbeidentifiedforthosequestionsgiventhelimitedscopeof

this paper. In addition, further development in the additivemanufacturing sector will be

necessarytodeterminenewkindofquestionsthatwillariseinthefieldofinternationaltrade

inpracticeandhowtheWTOcouldbestaddressthem.Itisnecessary,however,tohavethese

issuesinmindwhendiscussingrulesfordigitaltrade,soastonotmissessentialpointsthat

arealreadyontherise.Hence,moreresearchontheseissueswillbenecessarytogainabetter

understandingoftheimpactof3D-printingininternationaltrade.

Given the uncertainties highlighted above, it is critical for theWTO to clarify the issue of

classificationofdigitalgoodsandservicesalongsidethedescribedimplications,especiallyin

relationtodata.

5.AnalysisofdigitaltradeundertheGATS

5.1ThelogicoftheGATS

Asthemajorityofscholarspointstotradeindigitallytransmittedproductsandservicestobe

ruledbytheGATS,asoutlinedinchapter4.2.3,thissectionaimstoanalysesuchdigitaltrade

undertheprovisionsofthatagreementtoevaluate ifexistingrulesalreadyaddressarising

issues.AsimilaranalysisinregardtotheGATTisnotundertakenatthispoint,giventhelimited

scopeofthispaper,withoutprejudicetothestilloutstandingAppellateBodyrulinginthecase

Brazil – Taxation and its possible subsequent implications. Further research on the

applicabilityofGATTrulestodigitaltradewillbenecessary.

The GATS provides a framework for international trade rules for services in all sectors134

supplied inoneofthefourmodesoutlined intheagreement(mode1:cross-bordertrade,

mode2:consumptionabroad,mode3:commercialpresenceofaforeigncompany,mode4:

presenceofnaturalforeignpersons).

It includes two sets of basic obligations forMembers: first, GeneralObligations, including

most-favoured nation (MFN)-treatment (article II), prohibiting to discriminate between

Members, as well as transparency (article III), automatically applying to all Members in

relation toall servicescoveredby theGATS.Andsecond,SpecificCommitments regarding

market access (article XVI) and national treatment (article XVII), applying to services

134Exceptservicessuppliedintheexerciseofgovernmentalauthorityaswellasairtrafficrightsservices.

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designated by Member States in their individual schedules of commitments. Potentially,

provisions on domestic regulation (art. VI) disciplines also apply to all services for which

Members have undertaken commitments.135 However, GATS disciplines on domestic

regulationingeneral,orwithregardtoe-commerce,havenotyetbeenconcluded.136

Thus,theGATSprovidesamoreflexible,lessliberalized,regimethantheGATTasMembers

candecideforwhichservicestheywanttoundertakeliberalizationcommitmentsunderwhich

modesofsupply.

5.2Modesofsupply

AccordingtotheschedulingguidelinesoftheGATS,modesareessentiallydefinedonthebasis

oftheoriginoftheservicesupplierandconsumeraswellasthedegreeandtypeofterritorial

presenceatthemomenttheserviceisdelivered.137

Itmightbeapparentthatcross-bordertradeofdigitallytransmittedproductsandservicesis

akindofremotesupplyandthereforeundermode1.138However,someauthorsarguethat

certainpartsofthistradecouldalsobeseenasconsumptionabroad(mode2),alwayswhen

aconsumer“visits”aforeignwebsitewhichishostedintheterritoryofaforeigncountry.139

Othersarguethatthelinebetweenmode1,2,and3isblurredastheintangiblenatureof

products and services delivered via the Internet has created incentives for providers to

establish their service where it is best advantageous, for instance, in terms of cost or

legislation.140

Even thoughmode 1 seems to be themost obviousway of supply for digitally delivered

productsandservices,anexamplecanillustratetheemergingdifficulties:Uberisacompany

135Inthatcase,itisimportanttonotethatmeasurescoveredbyarticleVIcannotbecoveredbyarticleXVIatthesametime,astheyaremutuallyexclusive(PanelReportUS–Gambling;Wunsch-Vincent,Sascha(2006):TheInternet,cross-bordertradeinservices,andtheGATS:lessonsfromUS-Gambling.WorldTradeReview,5(3),339).136WTO(2018b):WTOnegotiationsondomesticregulationdisciplines.Online:https://www.wto.org/english/tratop_e/serv_e/dom_reg_negs_e.htm;Seealso:Wunsch-Vincent,Sascha(2008):Traderulesforthedigitalage.Panizzon,Marion,Pohl,Nicole&SauvéPierre(eds.)(2008):GATSandtheRegulationofInternationalTradeinServices,Cambridge:CambridgeUniversityPress,7-9.137Crosby2016,3.138ThiswasalsoconfirmedbythePanelandtheAppellateBodyinUS–Gambling.139SeeFarrokhnia&Richards2016,796;Tinawi,Emad&Berkey,JudsonO.(2000):E-ServicesandtheWTO:TheadequacyoftheGATSclassificationframework.InstituteforAgriculture&TradePolicy.Online:https://www.iatp.org/sites/default/files/E-Services_and_the_WTO_The_Adequacy_of_the_GAT.pdf;Wunsch-Vincent2006,325.140OECD2017b,4.

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thatactsasabrokerfortransportationservices.141Uberitselfdoesnotownanycars,might

not even employ the driver, but operates an app where clients can order an “Uber”, a

transportationservice.IfaclientordersanUberviathisapp,thetransportationservicewill

takeplaceinonecountry.Otherservices,likethematchingserviceviatheapp,thepayment

for the driver by Uber, or the insurance are potentially provided from another country.

Depending on the classification of the service Uber provides, it operates under different

modes of supply of the GATS. If classified as a transportation service, it is, according the

argumentationusedbytheOECD,operatingunderGATSmode3,whilewhenclassifiedasa

businessservice,itisoperatingremotely(mode1).142The2008SystemofNationalAccounts

specifies this service as a transportation service (and therefore according to the OECD

operatingundermode3).ItcouldalsobearguedthatUber,asacompany,doesonlyprovide

businessservicestothedriver(findingclients)andclients(findingadriver,providinginsurance

fortheride).143AnotherpointviewwouldbethatUberprovidesitstransportationservices

remotely(mode1),orthateachserviceprovidedinthebundlewouldbesubjecttodifferent

rules.Thus,thebundlingofservicesposesadditionalchallengesforansweringthequestionof

modesofsupply.144

Mostmembershavemadebroadliberalizationcommitmentsundermode2,whiletheyhave

beenmorerestrictivewithcommitmentsundermode1.145Again,thismakesthequestionof

classificationapoliticalone.Classifyingcross-bordere-commerceundermode1mightput

significant barriers to further development of e-commerce due to lower market access

commitments.Ontheotherhand,classificationasmode2wouldputMembersintheposition

tofindthemselveswithservicesmoreliberalizedthantheyhadintendedto.146

Thesearisingquestionsposechallengesforpolicymakersandhighlighttheneedforfurther

clarificationontheissueofmodesofsupplyindigitaltradetogiveMembersthepossibilityto

updatetheirschedulesifdeemednecessary.

141Hereandfollowing:OECD2017b,6-7.142OECD2017b,7.143Id.144SeeLópezGonzales&Jouanjean2017,10,15,16.145Tinawi&Berkey2000,5-7;Wunsch-Vincent2006,324.146Id.

37

5.3InclusionofdigitalservicesanddatawithinGATSschedules

Liberalizationcommitmentsinservicesinrelationtomarketaccessandnationaltreatment

dependonthespecificschedulesofeachmember.Throughapositivelistapproach,Members

havetoundertakeliberalizationcommitmentsforeachspecificservice(orsector)andmode

of supply in regard to market access and national treatment. Doing so, they are free to

schedule(ornottoschedule)specificcommitmentsforcompletesectorsoranysingleservice,

ifdesired.147

Asdigitalizationprogressivelyaffectsallindustries,moreandmoreservicesareaffectedby

digital trade, even those that were formerly non-tradeable, or at least non-tradeable

remotely.On the other hand, there is a number of new services, such as search engines,

mobile applications, or cloud computing, for which clarification is needed where those

servicesfitwithintheexistingUNCentralProductClassification(CPC)148,onwhichtheWTO

ServicesSectoralClassificationlistisbased.

However, there has been no significant progress in improving the coverage of GATS

commitmentsatthemultilaterallevelsince1997.149EventhoughtheUNhasupdateditsCPC-

list,thisprogresshasnotyetbeenincorporatedinGATSschedules.150Hardlyanyonecould

haveimaginedthetremendousimpacttheInternetwouldhaveonallareasof lifeandthe

implicationsfor internationaltradeinserviceswhenGATScommitmentswereundertaken.

Thisisespeciallythecaseforsectorswheredigitalizationhasbeenfasterthaninothers,such

as telecommunications, media, financial services, retail, education, healthcare, business

services,aswellasdataservices.

This can have serious implications for Members when scheduling was undertaken at a

momentwhentheservicescheduledwasessentiallydifferentfromtoday.

This can be illustrated by the WTO dispute settlement case China – Publications and

AudiovisualProducts:151theUSaccusedChinaofposinglimitationstomarketaccessaswell

as national treatment in regard to distribution services for publications and audiovisual

products,includingsoundrecordings.Chinaarguedthatbythetimewhenithadundertaken

147SeetherulingofthePanelin:WTOPanelReportadopted31August2012:China–CertainMeasuresAffectingElectronicPaymentServices(China–ElectronicPaymentServices),WTODoc.WT/DS413/R,hereinafter:PanelreportChina–ElectronicPaymentServices.148WTO:CommunicationbytheRussianFederationof13July2017,WTODoc.JOB/GC/131,para.3.2.149Crosby2016,1.150Weber2010,9.151ABReportChina–PublicationsandAudiovisualProducts;PanelReportChina–PublicationsandAudiovisualProducts.

38

commitmentsin“soundrecordingdistributionservices”,theyhadbeenexclusivelyintended

for distribution of sound recordings in their traditional hardcopy format and that those

commitmentsdidnotincludenetworkmusicservices.In2007,whenthecasewasdiscussed,

themajorityofsounddistributionwasalreadyconductedviatheInternet.152So,thenotionof

whatwasunderstoodby“soundrecordingdistributionservices”wasdifferenttowhenChina

hadundertakencommitmentsforthisservice.153

Inthatcase,theAppellateBodynotedthatinterpretationofcommitmentsscheduledhasto

bebasedonthecommonintentionsofallMembersandnotontheunilateralinterpretation

ofitscommitmentsbyasingleMember.154Itdid,thus,notfollowtheargumentationofthe

PanelwhichassumedthatChinawasawareofthetechnologicpossibilityofnetworkmusic

servicesbythetime itundertook itscommitments.However, theAppellateBodyassumed

thatusinggenerictermsintheGATSschedulesevidencestheconvincementofMembersfor

technologytochangeovertime.155

In this regard, again, the case US – Gambling can be cited in which the intra-modal

technologicalneutralityoftheGATSwaspointedout156,thus,confirmingitsapplicabilityin

regard to new technologies. In the case China – Publications and Audiovisual Products

applicabilityinregardtonewtechnologieswasconfirmedagain,eventhoughtheAppellate

Bodyusedadifferentargumentation.157

With the intra-modal technologicalneutralityof theGATSand theuseofgeneric terms in

Members’schedules,theGATSseemstobeequippedtorespondtotechnologicalchanges.

Thismeans,ontheotherhand,Memberswouldhavetore-evaluateand,ifneeded,modify

their specific schedules if due to technological change original market access or national

treatment commitments are not reflected anymore, e.g. when wanting to differentiate

betweendifferentmeansofsupply.

Anotherissuearisesaroundthequestionofdata: itcanbeconfirmedthatGATSschedules

alsoincluderelevantsectorsandsubsectorsfordigitallytransmittedservices,including“Data

andProcessingServices” (CPCSection843)and“DataBaseServices” (CPCSection844),158

152Peng,Shin-yi(2012):RenegotiatetheWTO“SchedulesofCommitments”?:TechnologicalDevelopmentandTreatyInterpretation.Cornellinternationallawjournal,45(2),416-418.153Id.154Peng2012,419-426;ABreportChina–PublicationsandAudiovisualProducts.155Peng2012,427.156PanelReportUS–Gambling,interaliapara.6.285,6.355,7.2(b).157Peng2012,429.158Crosby2016,5.

39

both subsectors within “Computer and Related Services” which falls under “Business

Services”.However,notallcross-borderdataflowscanbeclearlydefinedasaserviceinvolving

a monetary transaction. Many data flows rather support an economic activity, such as

personaldatacollectedbycompanies.Furtherclarificationonhowthisdataistobeclassified

isneeded.

5.4.BarrierstodigitaltradecoveredbyGATSprovisions

5.4.1Generalobservations

Inthelightofscholarsemphasizingtheneedforclearrulesfordigitaltrade,orevennewrules,

itisimportanttoseeifexistingruleswouldalreadyprovideacomprehensiveframeworkto

addressarisingchallenges.Consequently,thequestionwaspointedout,ifnewrulesfordigital

tradecouldberedundantastheywerepotentiallyalreadycoveredbyexistingdisciplines.159

AgainstthebackdropoftheGATSseemingtobemostusefulforclassifyingalltradeindigitally

delivered products and services as shown above, this section aims to analyse if theGATS

alreadyprovides a comprehensive framework to address rising barriers to digital trade as

describedinchapter3,orifotheroptionsormodificationsoftheagreementwouldhaveto

beevaluated.

5.4.2Tariffs

Tariffsaretraditionallynotanissueintheservicessector.Apartfromtheearlier-citedarticles

IIandIII,potentialtariffsonelectronicallysubmittedproductsandserviceswouldespecially

effectsupplyinmode1andcouldbechallengedagainstarticleXVI:1(marketaccess)ofthe

GATS. While there is currently a customs moratorium on digital transmissions, GATS

provisionscouldbecomerelevantifthiswasnolongerupheld.However,incontrasttothe

GATT,theGATSdoesnotincludeanyprovisionsspecificallyontariffs.

5.4.3Datalocalizationmeasures

DatalocalizationmeasuresareaparticularlysensitivetopicasMembersprobablydidnothave

inmindtheflowofcross-borderdataatalargescalewhenmakingGATScommitments,given

thattheInternetwasessentiallylessdevelopedatthattime.

Itcanbearguedthatthecross-borderremotesupplyofadigitallydeliveredservice(mode1)

necessarilyrequires“data-transfer”.Eventhoughnotlistedexplicitlyasasubsector,transfer

159Wunsch-Vincent&Hold2012,30.

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ofdataisnecessarytosupplyaserviceelectronically.160Additionally,physicalpresenceofa

companycannotberequiredwhenamemberhasfullyscheduledmarketaccesscommitments

inmode1,includingfordigitalservices.161

Data localization measures requiring the establishment of local infrastructure directly or

indirectly (prohibition of cross border data flows), and consequently local presence of a

company, can, therefore, be seen as a restriction on market access in a sector with no

limitationsonmode1,violatingarticleXVI:2(c)oftheGATSasitlimitsthenumberofservice

operationsdefactotozero.162However,forinterpretationofthoseparagraphsitisimportant

toexaminethecommonintentionofMemberswithregardtocross-borderdatatransferat

thetimewhenschedulingcommitmentswereundertaken.163

An indication for Members’ intention can be found in paragraph 5(c) of the Annex on

Telecommunications,statingthat“eachMembershallensure(…)movementofinformation

within and across borders, including for intra-corporate communications of such service

suppliers,andforaccesstoinformationcontainedindatabases[sic!]orotherwisestoredin

machine-readableformintheterritoryofanyMember.”164Thiscanbeseenasanindicator

that Members knew cross-border data transfer would be necessary for the supply of

services.165Members,therefore,wouldhavetoensurefreecross-borderdatatransmissions

ofsuppliersofallscheduledservices,includingdatathatissupportingaservicestransaction.

However,thisparagraphhasnotyetbeenchallengedinthelightofrisingdatalocalization

measuresandaccessrestrictionstotheInternetimplementedbygovernments.

ItcanalsobearguedthatdatalocalizationmeasuresareinviolationofarticleXVIIoftheGATS

insectorswithnolimitationsonmode1,asrequiringcompaniesfromotherMemberStates

to establish infrastructure in its own territory will come at additional costs for those

companies. This, thus, modifies the conditions of competition through giving them less

favourabletreatmentthannationalcompanies,asoutlinedinparagraph3ofarticleXVII.

160Crosby2016,6.161SeeCrosby2016,3;LópezGonzáles&Jouanjean2017,13.162FollowingtheargumentationprovidedbythePanelandtheAppellateBodyinUS–GamblinginrelationtoarticleXVI:2(a)andapplyingitto2(c).163SeeinthisregardthefindingsoftheAppellateBodyinUS–Gambling(ABreportUS–Gambling,para.159)andChina–PublicationsandAudiovisualProducts(ABreportChina–PublicationsandAudiovisualproductspara.405)remindingoftheimportancethecommonintentionofpartiesasoutlinedintheViennaConvention.164GATSAnnexonTelecommunications,para.5(c).165Crosby2016,8.

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Followingthisargumentation,datalocalizationrequirementscouldonlybeincompliancewith

theGATS for “unbound” services,or serviceswhereaccording toGATS schedulesphysical

presenceisrequiredforamode1supply.

5.4.4Quotas

ArticleXVI:2oftheGATSprohibitslimitationsonthenumberofservicesuppliers(XVI:2(a)),

thetotalvalueofservicetransactionsorassets(b),thetotalnumberofoperations(c),the

totalnumberofnaturalpersons(d),thetypeoflegalentity(e),andtheparticipationofforeign

capital(f),wherespecificcommitmentshavebeenundertaken.Alloftheseparagraphsareof

relevancefortradeindigitallydeliveredproductsandservices.US–Gamblinghasshownthat

thetotalprohibitionofa(digital)serviceisconsideredanumericalquotaandthusinviolation

ofarticleXVI:2(a).InChina–electronicpayments,thePanelhasreaffirmedthisargumentation

inrelationtomaintainingamonopolysupplierwheremarketaccesscommitmentshavebeen

undertaken.166

5.4.5Webblockingandfiltering

Blockingandfilteringofcommercial167websitesandappscanbeinterpretedinthelightof

various provisions of the GATS. In the first place, prohibiting the supply of a service, by

blockingorfilteringthesupplier’swebsite,couldbeinterpretedinthelightofarticleXVI:2(a)

and(b)insectorswherecommitmentshavebeenundertaken.Thiswouldalsobethecaseif

a service, such as access to a social network, is supplied on a non-monetary basis to the

consumers, but rather on the basis of “paid with data” as GATS does not specify that a

monetary transaction needs to be involved. However, as those “free to use” services are

usuallymonetized throughadvertising, thequestionariseshowacase likeblockingof the

Facebook website should be analysed: in the light of commitments undertaken in the

“ComputerandRelatedServices”section,suchas“DataProcessingServices”(CPC843),orthe

“CommunicationServices”section(e.g.CPC7523)asthisishowFacebookgetsitsdata?Or,

ratherasadvertisingservices(CPC871)inthe“OtherBusinessServices”section168asthishow

Facebook realises sales?This isequally thecase forallwebsitesandappswithabusiness

modelbasedonconnectinguser-dataandadvertising.

166PanelReportChina–ElectronicPayments.167Filteringandblockingofprivate,non-commercialwebsitescannotbeconsideredabarriertotradeasstatedinchapter3.168See:WTO:ServicesSectoralClassificationListfrom10July1991,WTODoc.MTN.GNS/W/120.

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Itcanalsobearguedthatfilteringandblockingforeignwebsitesandappsinscheduledsectors

is inviolationofarticleXVIIoftheGATSwhennational“like-websitesandapps”(as inthe

conceptoflike-servicesandlike-servicessuppliersasoutlinedinarticleXVII:1)areallowedto

operate. This could be the case for China when blocking Facebook and WhatsApp or

underminingitsuse(byfilteringmessagessent)169,butatthesametimeallowingWeChat,a

ChineseplatformwhichoffersverysimilarserviceslikeFacebookandWhatsApp.Especially

thecaseofblockingWhatsApp,butalsoFacebookMessenger,couldbechallengedagainst

China’s commitments undertaken in Telecommunications and Value-added Services,

includingelectronicmail, voicemail, andelectronicdata interchange in regard tonational

treatment,wherenolimitationsareincludedintheChineseschedule.170

Webblocking and filtering could also violateMFN-obligations (art. II), ifmeasures applied

accordlessfavourabletreatmenttoservicesorservicesuppliersfromoneMemberStatein

relation to anotherMember State. This is the case ifmainly American newswebsites are

blocked,whilee.g.Russiannewswebsitesareavailable.

5.4.6Accesstotelecommunicationsinfrastructureandnetneutrality

Regardingbarrierstoaccesstotelecommunicationsinfrastructureandservicesaswellasnet

neutrality, three additional agreements to the GATS should bementioned: the Annex on

Telecommunications,the4thprotocoltotheGATS,andtheReferencePaper.171

TheAnnexonTelecommunications recognizes theessential natureof telecommunications

services for trade in services and ensures access to telecom networks and basic telecom

servicesforthesupplyofscheduledservices,regardlessifbasictelecommunicationsservices

have been scheduled.172 Hence, the Annex on Telecommunications provides essential

protectionagainstrestrictionsforaccesstotelecommunications-infrastructureandservices

inthesectorswherecommitmentshavebeenundertaken.

The 4th protocol to the GATS includes provisions on commitments by Member States to

liberalize a significant number of basic telecommunication services, including data

transmission, however, only for scheduled services.173 The Reference Paper, on the other

hand, includes some key principles for net neutrality, including transparency and non-

discrimination. It also contains positive language on competition and interconnection

169Bradsher2017.170GATS,ScheduleCLII–ThePeople'sRepublicofChinaof01October2001.WT/ACC/CHN/49/Add.2.171SeeShroff&Kuhlmann2016.172GATSAnnexonTelecommunications,para.5(a)-(e);Seealso:Shroff&Kuhlmann2016,21.173Shroff&Kuhlmann2016,21

43

betweentelecommunicationscompanies.However,thislanguagehasneverbeenappliedin

theInternetcontext.174

EventhoughthescopeofthesethreeagreementsislimitedbyparticipationofMembersand

commitments made, they provide a starting point for ensuring liberalized access to the

InternetandInternetservices,theprohibitionofdata localizationmeasures,aswellasthe

principleofnetneutrality.

5.4.7Taxation

Asinclassicaltradeinservices,theGATSprovidesaframeworkforaddressingdiscriminatory

taxationwithintheconceptofMFN(art.II),nationaltreatment(art.XVII),whenscheduled

accordingly,andpotentiallydomesticregulation(articleVI).

Asoutlinedinchapter4.2.2,thebefore-citedcaseofBrazilhasnotbeenchallengedatthe

WTOunderGATS,butundertheGATT,asthePPBmostlyincludesphysicalgoodsandonly

somerelatedservicesanddigitalproducts.175Nevertheless, taxationmeasures focusingon

servicescouldbechallengedat theWTOunder theGATS insectorswhereMembershave

undertakenspecificcommitmentsinthelightofarticleVI:1andarticleXVII:1,aswellasarticle

IIiftaxregimesdiscriminatebetweenMembers.

5.4.8Technicalstandards

Theforceduseofspecifictechnologyortechnicalstandardscouldpotentiallybeseenasin

violationofarticleVI:5(a)i.Thisisthecaseiftheuseofacertaintechnologyorstandardisnot

basedonobjectiveandtransparentcriteria,suchasthemereabilitytosupplycertainservices,

or more burdensome than necessary to ensure the service’s quality as outlined in the

paragraphs4(a)and(b)ofarticleVIoftheGATS.However,relevantdisciplines,asoutlinedin

articleVIoftheGATS,havenotbeendevelopedyet,thus,beingonlyapotentialcoverage.

Theneedtousespecifictechnologyortechnicalstandardscould,however,beanalysedinthe

light of national treatment commitments for scheduled services (art. XVII:3): forcing

companies to use a different, potentially unusual, standard or technology will come at

additionalcostsforforeigncompaniescomparedtonationalcompaniesthatoperatefromthe

beginningbasedonthesedifferentstandardsortechnologies.Incaseofadispute,itwould

174WhilethecaseMexico–TelecomsthePanelclarifiedtheapplicabilityoftheReferencePapertocross-borderdatainterconnection,itsapplicabilityontheInternethasnotbeenchallengedyetandremainsthereforeunclear.See:Ahmed&Aldonas2015,8;PanelReportMexico–Telecoms;Shroff&Kuhlmann2016,22.175PanelReportBrazil–Taxation.

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thenbeuponthePanelorAppellateBodytodetermineifatechnologyorstandardwould

havetobeconsideredunusual,sothatitmodifiestheconditionsofcompetition.

5.4.9Intellectualpropertyrights,geoblocking,andothers

As IPRs are essentially addressed by the TRIPS agreement, geoblocking undertaken by

governmentscanbeinterpretedinthesameregardaswebblockingandfiltering,andInternet

governancerelatedtopicsdonotfallunderthemainscopeoftheWTO,thoseissueswillnot

be further analysed at this point, given the limitations in space. However, clarifying their

relationtoWTO-lawisimportantandshouldbeaddressedbyfutureresearch.

5.5GATSexceptions

BarriersviolatingoneorseveralarticlesoftheGATSmaybecoveredbyarelevantexception

asstatedinarticleXIV“GeneralExceptions”oftheagreement.Inordertodoso,themeasure

inquestionmust,first,fallwithinthescopeofoneoftheexceptionslaidoutinarticleXIVand,

second, complywith the chapeauof article XIV. Twoof themost cited exceptionswill be

analysedinthefollowing.

Theprotectionofpublicmoralandmaintainingthepublicorder(asoutlined inart.XIV(a):

necessary to protect public morals or tomaintain public order) is one of the often-cited

argumentsforimplementingquotasaswellasmeasuresforblockingandfilteringofwebsites.

Thus, ithasbeenreferredto in twoWTOdisputesettlementcasesrelatedtodigital trade

already.IntheWTOdisputesettlementcasesUS–GamblingaswellasChina–Publications

andAudiovisualProducts,theAppellateBodyupheldtheargumentationofprohibitingcertain

digital services to protect public morals. However, in the case China – Publications and

AudiovisualProducts,itwasmadeclearthatthisexceptioncouldnotbeevokedforbanning

services (in that case, inter alia, digital distributionof books andmovies) in awidespread

generalmanner,buthadtobeappliedbasedonindividualcircumstances.176 Itcanalsobe

notedthatcompliancewiththechapeauofarticleXIVisquestionable,especiallyininregard

to web blocking and filtering in an arbitrary manner, leading to possible de facto

discriminationbetweenMembers.

Inthecaseofdatalocalizationrequirements,thedataprivacyofcitizens(art.XIV(c)ii)isone

of the most mentioned reasons for implementation of such requirements. However, its

applicability has not yet been challenged in the ambit of digital trade. It is questionable,

176ABreportChina–PublicationsandAudiovisualProducts,para.234-311.

45

however,ifthesemeasureswouldsustainthenecessitytest,asitcanbearguedthatsecurity

ofdatadoesnotdependontheterritorystored,butratheronsecuritymeasurestakenby

companiestoprotectdata.177Ontheotherhand,itcanbearguedthatforeigngovernments

couldaccessdataor forcecompaniesby legislation to sharedata ifdata is stored in their

territory.Butevenifdataisstoredwithinnationalterritory,foreigngovernmentscanforce

theirdomesticbasedcompaniestogivethemaccesstodatastoredabroadasthecaseofthe

US government, forcing Google to share data stored on servers in Ireland, shows.178 The

passingofthenecessitytestfordatalocalizationmeasureswould,again,beinquestion.

SouthKorea’sPersonalInformationProtectionAct,forexample,requirescompaniestoobtain

userconsentpriortoexportingdata,includingdetailsonwhoreceivesthedata,thepersonal

information provided, the period the data will be stored, as well as the purpose of

exporting.179Itcanbearguedthatsuchcomprehensiveprovisions,especiallytherequirement

toprovideadditionalinformation,donothaveanyeffectontheprivacyofdata,leadingto

theconclusionthatthismeasureisnotnecessaryfortheprotectionofdataprivacyofcitizens

and, consequently, does not comply with the GATS in sectors in which South Korea has

scheduledmarketaccesscommitments.

RestrictivemeasuresmightalsobecoveredbyArticleXIVbis“SecurityExceptions”,especially

byparagraph1(b).ThisparagraphcoversallmeasuresthatMembers“considernecessary”for

theprotectionofessentialsecurityinterests.Thesesecurityrelatedexceptionsare,therefore,

difficulttochallengeattheWTO.Hence,a“fairuse”ofthisarticlebyMembersisnecessary

toensureoperabilityoftheGATS,alsointhedigitalsphere.

Withincreasingregulationlimitingcross-borderdataflowsjustifiedwithprivacyorsecurity

questions,itwillbeimportantforgovernmentstofindtherightbalancebetweenprotection

of interestsandopennessof the internet.WhiletheGATSmightgrantWTOMembersthe

opportunitytorestrictcertainactivitiesintheirterritory,thismightalsolimitthepossibilities

of their citizensandcompanies toparticipate in the internationaldigitaleconomy.On the

otherhand,astherecentscandalregardingFacebookandCambridgeAnalyticahasshown,

governments will also have the duty to ensure that private companies, including foreign

177SeeCorry2017,3-5.178Kerr,Orin(2017):Googlemustturnoverforeign-storedemailspursuanttoawarrant,courtrules.TheWashingtonPost.Online:https://www.washingtonpost.com/news/volokh-conspiracy/wp/2017/02/03/google-must-turn-over-foreign-stored-e-mails-pursuant-to-a-warrant-court-rules/?utm_term=.f041e246e251.179Cory2017,5.

46

companies, will not abuse data of their citizens in their interest.180 However, when

implementingrestrictionstodigitaltradetoachieverelevantpolicygoals,Membersshould

alwaysonlyimplementmeasuresthataretheleasttrade-restrictivetoattaintherespective

objective.

5.6Summary

When applied to existing barriers, it was shown that GATS rules already address most

identified barriers to international trade in digitally delivered products and serviceswhen

WTOMembersundertakerelevantcommitments.

Howevermuchofitsprovisionsremainyetunchallengedinrelationtodigitaltrade,apartfrom

someclarificationsmadebythePanelandtheAppellateBodyinthecasesMexico–Telecoms,

US–Gambling,China – PublicationsAudiovisual Services, andChina – Electronic Payment

Services.Furtherclarification,eitherthroughWTOdisputesettlementcases,orthroughactive

rule-making,isthereforenecessarytoconfirmtheapplicabilityofGATS.

6.WTOMinisterialDecisionsandnewways

6.1MinisterialDecisionssincethelaunchoftheWorkProgramme

BesidesthelaunchoftheWorkProgramme,theresponseoftheWTOasanorganizationwith

regardtothetheriseofe-commercecanbeanalysedthroughMinisterialDecisionsissuedas

no other results have been conveyed, yet. Since the launch of theWork Programme on

ElectronicCommerce,MinistersofMemberStateshaveincludedlanguageone-commercein

mostoftheirMinisterialDecisionsmadeatMinisterialConferences(MCs).However,content

of thoseDecisions, so far, has been limited as they contain only theminimum consensus

reachedbyMembersinregardtoelectroniccommerce.

The GenevaMinisterial Declaration on global electronic commerce of 1998 called for the

establishment of a comprehensive work programme by the General Council as outlined

earlier. The Declaration also established a moratorium on custom duties on electronic

transmissions,statingthat“[w]ithoutprejudicetotheoutcomeoftheworkprogrammeor

the rights and obligations ofMembers under theWTOAgreements,we also declare that

180Schulz2018,12-24.

47

Memberswillcontinuetheircurrentpracticeofnot imposingcustomsdutiesonelectronic

transmissions.”181

Inthe2001DohaDeclaration,besidestakingnoteoftheworkaccomplishedintherespective

bodies, Ministers acknowledged that “electronic commerce creates new challenges and

opportunities for trade forMembersatall stagesofdevelopment”182and recognized“the

importanceof creatingandmaintaininganenvironmentwhich is favourable to the future

developmentofelectroniccommerce.”183Ministersalsoupheldtheexistingmoratoriumon

customdutiesforelectronictransmissions.

The2005HongKongDeclarationand2009GenevaDecision,interalia,takenoteofthereports

submitted,statethattheWorkProgrammeisnotyetcomplete,andagreetomaintainthe

institutionalarrangements for theWorkProgrammeaswellas themoratoriumoncustom

dutiesonelectronictransmissionsuntilthenextsession.184

The2011GenevaMinisterialDecisionisbroaderinitsscopeas,forthefirsttime,languageis

includedspecificallymakingreferencetodevelopingandleast-developedcountriesaswellas

SMEs.ItalsoincludestaskingoftheGeneralCouncilontheseissues,includingexamination

andmonitoringofdevelopment-relatedissues,suchastechnicalassistance,capacitybuilding,

andthefacilitationofaccesstoelectroniccommerce.185Before,Declarationsonlyincluded

more generic language on “development-related issues”. Ministers also instructed the

General Council to consider recommendations on possiblemeasures related to electronic

commercewhich can be seen as a first step towardswidening themandate of theWork

Programmetowardsexploringpossibilitiesforrulemaking.

The2013BaliMinisterialDecisionhasbeenthebroadestinitsscopesofar.Whilemaintaining

some languageof the2011MinisterialDecision,Ministersadded languageon technology-

related issues, stating that “theWork Programme should continue to examine the trade

relatedaspectsof,interalia,enhancinginternetconnectivityandaccesstoinformationand

telecommunicationstechnologiesandpublicinternetsites,thegrowthofmobiletelephony,

electronically delivered software, cloud computing, the protection of confidential data,

privacy and consumer protection.”186 Thus, for the first time, besides naming relevant

181WTO:MinisterialDeclarationof25May1998,WTODoc.WT/MIN(98)/DEC/2.182WTO:MinisterialDeclarationof20November2001,WTODoc.WT/MIN(01)/DEC/1,para34.183Id.184WTO:MinisterialDeclarationof22December2005,WTODoc.WT/MIN(05)/DEC,para.46;WTO:MinisterialDecisionof11December2009,WTODoc.WT/L/782.185WTO:MinisterialDecisionof19December2011,WTODoc.WT/L/843.186WTO:MinisterialDecisionof11December2013,WTODoc.WT/MIN(13)/32,WT/L/907.

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developmentrelatedissues,Ministersmadereferencetorelevanttrade-relatedtechnological

issueswhichcanbeinterpretedasasignofadvancingtheWorkProgrammeasmoreconcrete

languagewasadded. The2013Decisionequallymaintains tasking for theGeneralCouncil

relatedtoconsideringrecommendationsonpossiblemeasuresregardinge-commerce,and

upholds the moratorium on custom duties, thus underscoring the will of Ministers to

substantiallyadvanceonthisissue.Thisinterpretationissupportedbythe2013reportofthe

General Council submitted to Ministers prior to MC9, stressing that “delegations

demonstrated a high level of willingness to work towards a consensus text (…) showed

flexibilityandprovidedconstructivecommentsanddraftingsuggestions.”187

In2015however,momentumwas lost: the2015NairobiMinisterialDecisiondoesneither

includetaskingrelatedtodevelopmentissuesortechnologicalquestionsnortaskingofthe

GeneralCouncilinrelationtoconsideringrecommendationsonpossiblemeasures.188Instead,

Ministers instructed the Council to “hold reviews” and “report” to the next Ministerial

Conference.Eventhoughthedecisionmakesreferencesto“theexistingmandate”189,thelack

ofclearlanguagecomparedtopriorDecisionspointstoalackofconsensusbetweenMembers

ontheseissues.Thisisunderscoredbyseveraldraftproposalssubmittedbydifferentgroups

ofMemberStates190aswellasdisagreementbetweenMembersontheexactscopeofthe

mandate of the Work Programme.191 Only two key points from earlier decisions can be

identified:thecontinuationoftheworkoftheWorkProgrammeaswellasmaintainingthe

moratoriumoncustomduties.

Thelatest2017BuenosAiresDecisionhasbeentheshortestMinisterialDecisionontheissue

ofelectroniccommercesofar.Whileitbringsclaritytothescopeofthemandate,byagreeing

tocontinuetheworkoftheWorkProgrammebasedonthemandategivenintheoriginal1998

documentontheWorkProgrammeonElectronicCommerce,192itnullifiesprogressachieved

inpriorMinisterialDecisions,suchasin2011and2013.AsearlierDecisions,itmaintainsthe

practiceofnotimposingcustomdutiesonelectronictransmissions.

187WTO:GeneralCouncilReportof11November2013,WTODoc.WT/GC/W/676.188WTO:MinisterialDecisionof21December2015,WTODoc.WT/MIN(15)/42,WT/L/977.189Id.190WTO:DocumentsOnline.191WTO:GeneralCouncilReportof24July2015,WTODoc.WT/GC/W/701,para.1.5.192WTO:MinisterialDecisionof18December2017,WTODoc.WT/MIN(17)/65,WT/L/1032.

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6.2PositionsofkeyWTOMemberStates

As outlined atmultiple points in this paper, opinions ofMembers regarding the different

aspects of electronic commerce are very diverse, consequently having led to hardly any

progressachievedwithintheWorkProgramme,despiteongoingdiscussionsfor20years.The

very limited scope of themost recentMinisterial Decisions points to a lack of consensus

betweenMembersonbasicallyallrelevanttopics.

ThiscanbeseenwhenlookingatdraftMinisterialDecisionssubmittedtotheGeneralCouncil

bydelegationsintheforerunofMC11.DraftMinisterialDecisionssubmittedwerebyeight

differentdelegationsandco-sponsors totheGeneralCouncil,whichwereallconsequently

forwarded toMinisters.193 Draft Decisions have been submitted by the African Group194,

Bangladesh,China,theEUandco-sponsors,India,Japanandco-sponsors,Russia,aswellas

Singaporeandco-sponsors.Interestingly,noproposalhasbeensubmittedbytheUSunderits

new administration. Efforts of the Chairman of the General Council to bridge differences

betweenproposalshavenotbeensuccessfulasproposalsincludedawiderangeofdifferent

standpoints thatcouldnotbebrought together.195With lackofconsensusat theworking-

level,resultsattheMC11high-leveldiscussionscouldhardlyhavebeenachieved.

Inordertoillustratethedifficultiesoffindingconsensusonimportantissues,keypointsof

Members’draftdecisionsshallbenoted:

Four delegations and their co-sponsors called for the establishment of a new forum for

discussionstoadvancethedigitaltradeagendaoftheWTO.TheEuropeanUnionanditsco-

sponsors called for establishing a Working Party on electronic commerce to “conduct

preparationsforandcarryoutnegotiationsontrade-relatedaspectsofelectroniccommerce

onthebasisofproposalsbyMembers.”196Inasimilarvein,Russiacalledfortheestablishment

ofanewWorkingGrouponelectroniccommerce“toprovideMemberswiththeappropriate

forumfordiscussionsone-commerceissuesanditsdevelopment,includingthepossibilityof

developinginternationalrules.”197MembersshouldbeabletosubmittopicstotheWorking

Group,includingoneliminationoftradebarriersandtradefacilitation.TheproposalofJapan

193WTO:GeneralCouncil:ReportbytheChairmanof1December2017.WT/GC/W/739.194WithoutprejudicetoparticipationofNigeriaintheJointMinisterialStatementattheendofMC11regardinge-commerce.195WTO,WT/GC/W/739.196WTO:CommunicationfromAustralia,Canada,Chile,Colombia,TheEuropeanUnion,Israel,TheRepublicofKorea,Mexico,Montenegro,NewZealand,Norway,Paraguay,PeruandUkraineof30November2017,WTODoc.JOB/GC/140/Rev.5.197WTO:CommunicationfromtheRussianFederationof06October2017,WTODoc.JOB/GC/137.

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andco-sponsorsequallycalledforestablishingaWorkingGrouptasked,interalia,withthe

assessment of whether clarification and strengthening of current WTO rules regarding

electronic commerce was necessary, as well as the identification of priority needs for

developingcountries.198China,inadditiontomaintainingthecurrentdiscussionsunderthe

General Council, proposed to establish a forum for horizontal “DedicatedDiscussions” on

issues such as facilitation of cross border digital trade.199 The four other draftMinisterial

Decisions,however,onlyreiteratedmaintainingthecurrentoverallworkingstructureofthe

WorkProgramme.

Three draft Ministerial Decisions raised concerns in relation to maintaining the customs

moratorium on electronic submissions, despite the moratorium being one of the few

deliverables of the currentWork Programme. The African proposal pointed out that “the

renewalofthemoratoriumshouldnotbeseenasautomatic[asthe](…)AfricanGroupisstill

discussingitinviewoftherevenueimplications.”200Inthesameregard,Bangladeshproposed

tograntthepossibilitytoleastdevelopedcountries(LDCs)toimposecustomsandquotason

digitallytransmittedproducts,whileadvancedeconomies,aswellasdevelopingeconomies

onavoluntarybasis,shouldberestrainedfromimplementingcustomdutiesandquotasfor

alldigitallytransmittedgoodsandservicesoriginatingfromLDCs.201India,ontheotherhand,

conditioneditsacceptanceofthemoratoriumtoMembers’decisiononTRIPSNon-Violation

andSituationComplaints.202

Furtherissuesbroughtupwerethedefinitionandclassificationofe-commerceproducts,as

wellasthecallforfurtherworkondevelopment-relatedissuesandtechnologicalquestions

includedinproposalsoftheAfricanGroup,Bangladesh,China,Japanandco-sponsors,and

Russia.

However, India opposed any discussions on issues thatwent beyond themandate of the

existingWorkProgramme,andespeciallyonbindingrulesregardingelectroniccommerce.203

Subsequently,followingthelogicoftheruleofconsensus,itsdraftDecisionsubmitted,being

theshortestofall,isalmostidenticalwiththefinalMinisterialDecisionadopted.

198WTO:CommunicationfromCostaRica;HongKong,China;Japan;SwitzerlandandtheseparatecustomsterritoryofTaiwan,Penghu,KinmenandMatsuof27November2017,WTODoc.JOB/GC/156/Rev.1.199WTO:CommunicationfromChinaof10November2017,WTODoc.JOB/GC/150.200WTO:CommunicationfromtheAfricanGroupof21November2017,WTODoc.JOB/GC/155.201WTO:CommunicationfromBangladeshof20November2017,WTODoc.JOB/GC/152/Rev.1.202WTO:CommunicationfromIndiaof20November2017,WTODoc.JOB/GC/153.203Suneja,Kirtika(2017):Indiaopposese-commercetalksatWTO;submitsdocument.EconomicTimesofIndia.Online:https://economictimes.indiatimes.com/news/economy/policy/india-opens-e-commerce-talks-at-wto-submits-document/articleshow/61907459.cms.

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6.3Newways–aplurilateralapproach?

GiventhesubstantialdifferencesbetweenMembersandthedifficultiesofreachingconsensus

onsubstantialmattersatMC11,agroupof71MemberStates,accountingfor77percentof

global trade,204 issued a Joint Statement, stating toworkmore closely together on trade-

relatedaspectsofelectroniccommerceby initiatingexploratoryworktowardsfutureWTO

negotiations.205

The initiative was mostly supported by advanced economies. Only some emerging and

developingeconomieshavejoinedandofallLDCs,onlyLaoPeople’sDemocraticRepublicand

Cambodiahavesignedthestatement.206Lowparticipationamongdevelopingcountriesinthis

declaration is interesting to note, given the beforementioned discussions: some scholars

pointoutthatespeciallySMEsfromdevelopingeconomiesandLDCswillbenefitmostfrom

digitalization of the trade.207 On the other hand,many developing economies themselves

statethattheyarecurrentlystill intheprocessofevaluatingtheimplicationsofthedigital

economy and do not want to be part of any agreement that later might come as a

disadvantage.208 African countries additionally pointed out that the narrative of SMEs

benefitingmostfrommultilateralrulesondigitaltradewas“false”209.

Nineproposalsbydelegations,includingtheUS,onhowtomoveforwardinrelevantaspects

havebeenputforwardinApril2018210inpreparationforameetingofthegrouptobeheldin

May2018.211ParticipationtonegotiationsisopentoallMembers.

204WTO(2017a):Newinitiativesonelectroniccommerce,investmentfacilitationandMSMEs.Online:https://www.wto.org/english/news_e/news17_e/minis_13dec17_e.htm.205WTO:CommunicationfromAlbania;Argentina;Australia;Bahrain;Brazil;BruneiDarussalam;Cambodia;Canada;Chile;Colombia;CostaRica;EuropeanUnion;Guatemala;HongKong,China;Iceland;Israel;Japan;Kazakhstan;Korea,Republicof;Kuwait;LaoPDR;Liechtenstein;theformerYugoslavRepublicofMacedonia;Malaysia;Mexico;Moldova,Republicof;Montenegro;Myanmar;NewZealand;Nigeria;Norway;Panama;Paraguay;Peru;Qatar;RussianFederation;Singapore;Switzerland;SeparateCustomsTerritoryofTaiwan,Penghu,KinmenandMatsu;Turkey;Ukraine;UnitedStates;andUruguayof13December2017,WTODoc.WT/MIN(17)/60.206LDCsasspecifiedbytheUN:UNCTAD(2018):UNlistofLeastDevelopedCountries.Online:http://unctad.org/en/Pages/ALDC/Least%20Developed%20Countries/UN-list-of-Least-Developed-Countries.aspx.207Seei.a.Ahmed&Aldonas2015;UNCTAD2017.208WTO,WT/GC/W/728,para.1.11.;WTO,JOB/GC/144.209WTO,JOB/GC/144,para.3.3,3.4.210Proposalssubmittedbetween6Apriland16April2018.Numberofsubmissionsasof21April2018(WTODocumentsOnline).211ICTSD(2018):WTOMembersSubmitProposalsAimedatAdvancingExploratoryE-CommerceWork.Bridges,22,13.Online:http://www.ictsd.org/bridges-news/bridges/news/wto-members-submit-proposals-aimed-at-advancing-exploratory-e-commerce.

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Thisnewinitiativeof71MemberStatescouldultimatelyleadtoanew,plurilateralagreement

undertheauspicesoftheWTOwhichwouldgiveotherMemberstheoptiontojoinifthey

desired.Theadvantageofthiswayforwardmightbetoreachanagreementsoonerrather

thanlater.However,forcountriesnotinitiallyparticipating,joiningatalaterstagemightcome

as a disadvantage. Nevertheless, this opt-in, opt-out version could be a good way for

advancingtheWTOagendaonelectroniccommerce.Itwouldhelptheorganizationtoaddress

thechallengesthatlayaheadinadigitizedtradeworldrathersoonerthanlater,tonotlose

itscredibilityorbecomesimplyoutdated.212

Critics of this Joint Statement, on the other hand, emphasize the need to clarify open

questionswithrelevanceforallMembers,suchasthetechnologicalneutralityoftheGATS,

applicationofGATSmodes1or2,aswellasclassificationofdigitallydeliveredproducts,ona

multilateral basis first.213 In addition, a plurilateral approach would come at the risk of

fragmentationofWTO-lawinrelationtobasicissues.

AnotherwayforwardcouldbetowidenthescopeoftheTradeinServicesAgreement(TiSA)

whichiscurrentlynegotiatedasaplurilateralagreementbetween23MembersoftheWTO

toprovidefurtherliberalizationintheservicessector.TiSAnegotiationsaddressanumberof

issues related todigital trade, includingdata localizationmeasures, transparency, and the

needforregulationinthisarea.214

However, there has been no breakthrough that would suggest that a final agreement is

imminent. In addition, again, the plurilateral approach would come at the cost of

fragmentationofruleswithintheWTOandthequestionofinteroperabilitywiththeGATS.215

However,theTiSAmightproviderelevantinputtobuildonwhennegotiatingrulesfordigital

tradeonamultilateralbasis.

212SeeRodríguezMendoza,Miguel(2016):ANewArchitecturefortheWTO?PrimoBraga,CarlosA.&Hoekman,Bernard(eds.):FutureoftheGlobalTradeOrder.SanDomenicodiFiesole,Lausanne:EuropeanUniversityInstitute,15-30.213WTO,JOB/GC/144,para.2.5.214Ahmed&Aldonas2015,8.215Burri2013,8.

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7.Mid-conclusion:analysisoftheresponseoftheWTOtotheriseof

digitaltrade

TheWTO established itsWork Programme on Electronic Commerce in 1998, at the very

beginningoftheriseofthedigitaleconomy.Thus,itcannotbestatedthattheorganization

hasoversleptthebeginningofdigitalizationoftrade.

Despite recognizing the, at that time, new phenomena from an early stage on, the

organization has remained paralyzed ever since: 20 years have passed, with hardly any

deliverablesachieved.Apartfromestablishingamoratoriumoncustomdutiesonelectronic

transmission,MinisterialDecisionshavenotadvancedtheWTOagendaondigitaltrade.Small

progressmadeintheyears2011and2013hasbeenreversedbyrecentdecisions,especially

themostrecentone.

Thispaperhas identifiedanumberofopenbasicquestionstheWTOhasnotbeenableto

answer yet.216 In the first place, a clear definition of what is understood by the term e-

commerce as well as a clear statement regarding classification of digitally transmitted

products and services is pending. If GATS ruleswere to be applied, further clarification is

neededonthecorrectmodeofsupplyandtheapplicabilityofGATSprovisionstodigitaltrade

aswellasanupdateofGATSschedules.

Especiallyinthelightofexistingandrisingbarrierstodigitaltrade,acommitmentforapplying

GATS rules could be useful to address these barriers. This paper has shown that GATS

provisionsalreadyaddressmostbarrierstodigitaltrade.Thisis,interalia,relevantinregard

tomarketaccess,nationaltreatment,possibledomesticregulationprovisions,andtheGATS

general exceptions. Also, the applicability of the Annex on Telecommunications, the 4th

ProtocoltotheGATS,andtheReferencepapertothedigitaleconomyhasnotbeenclearly

confirmedyetandshouldthereforebeclarified.

Against this backdrop, different variables can be identified that may have impeded

progress.217Thosevariablesshouldonlyserveasindicatorsatthispoint,furtherresearchon

causalitywouldbenecessary toanalyse theeffectsof thedifferentvariableson theWork

Programme.

One part of the problem certainly is theway theWTO operates, relying on consensus of

Membersforrule-making.Hence,theaboveidentifiedgreatdiversityofinterestsofMembers

216Foratabularizedoverview,seetable1intheannexofthispaper.217Foratabularizedoverview,seetable2intheannexofthispaper.

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StatesinrelationtotheWorkProgrammecanbenamedasamajorreason.ThestalledDoha-

round is anotherbarrierwhichnotonly impedesprogress in related tradeareas, but also

questionstheWTOasaninstitution,duetoalackofdeliverablesandputsfurtherburdenson

negotiationswithintheWTOingeneral.218

Another issuetobehighlighted ishowtheWorkProgrammeoperates.Work isconducted

withintherespectivebodiesonanexplorativebasis.ThebodiesreporttotheGeneralCouncil

which then reports toMinisters, currentlyevery twoyears.No real forum forpermanent,

more frequent, or more flexible discussions has been established. In the current, fast-

developing,environmentoftheInterneteconomy,twoyearscanbeasubstantialamountof

time. Russia, for example, is of the opinion that the lack of a proper forum for orderly

discussionsisoneofthemainreasonswhytheWorkProgrammehasnotbeenabletodeliver

resultsasoftoday,withworkonelectroniccommercehavingbecome,inthewordsofthe

Russiandelegation,“morechaoticthanever”219.

Anotherissuethatcanbeidentifiedisthemandategiven.AccordingtosomeMembers,the

Work Programme does not have a mandate to work towards rule-making but is only of

exploratory nature.220 When the Work Programme was established however, a clearer

mandatecouldhavebeengiven,forexampleclearlystatingthatonedeliverableshouldbeto

identifybarriersandwaystheWTOcanaddressthem.Aclearmandatefromthebeginningon

might have led to more focused work within the Work Programme. Without that clear

mandate, and induced by the dot-com crisis,221Member States lost interest very quickly,

activityintherespectivebodieswaned,andmomentumwaslost.Eventhoughmomentum

could be regained, the above outlined difficulties, such as need of consensus, become of

importanceagain.

Anotherbarrierforprogressistheexistingdigitaldivide,relatedtosignificantknowledgegaps

aswellasinfrastructuregaps:First,thereisaknowledgegap,betweenMembersoftheWTO

asmanycountriesarenotyetawareaboutalltheimplicationsdigitaltradewillhaveontheir

economyandcitizensasstatedintheirdifferentcommunications.Second,manydeveloping

218Baldwin,RichardE.(2016b):TheWorldTradeOrganizationandtheFutureofMultilateralism.JournalofEconomicPerspectives,30(1),113;PrimoBraga,CarlosA.&Hoekman,Bernard(2016):FutureoftheGlobalTradeOrder.PrimoBraga,CarlosA.&Hoekman,Bernard(eds.):FutureoftheGlobalTradeOrder.SanDomenicodiFiesole,Lausanne:EuropeanUniversityInstitute,IMD,2.219WTO,JOB/GC/131,para.4.1.220WTO,WT/GC/W/728,para.1.8.221Weber2010,13.

55

countries face substantial lack of infrastructure for conducting digital trade as outlined in

chapter3.1.

Additionally,aknowledgegapcanbeidentifiedbetweenthetradegovernancecommunity

andthe Internetgovernancecommunityastherehasbeennosignificantoverlapbetween

both until very recently.222 Trade policy makers have simply not been aware of Internet

specificrules,implications,andneeds.

Until very recently,Members also adopted a “wait-and-see” approach instead of actively

engaginginthesubject.Fewdisputesettlementcasesinrelationtodigitaltradehavebeen

broughttothetablesofar,buteachhasbroughtsignificantlymoreclaritytoopenquestions

than 20 years of work in the Work Programme. Given the stalled negotiations, further

clarificationonopenissuesinrelationtoe-commerceislikelytohappeninthenearfuture

onlyifaMemberfilesacomplaintagainstanotherMember.TheWTOSecretariatitselfdoes

nothave the right todoso itself,opposed to, forexample, theEUCommission.However,

Membersstillhesitatetoengageactivelyindisputesrelatedtodigitaltrade.Itcouldbeargued

thatthisisalsopartiallyduetouncertaintyorlackofknowledgeonthisissue.

The paralysation of the WTO has created a vacuum and legal uncertainty in which

governmentsarestartingtoimposebarrierstodigitaltrade.Businessescannotbesuretobe

backed by international WTO trade rules, leading to hampered GDP growth globally, as

outlinedinchapter3.

With fast technological progress, more uncertainties lay ahead, such as implications of

additive manufacturing, just in time delivery, the classification of data within the WTO

framework, thequestionofdataownershipandpotential abuse,or taxationof thedigital

economy.Specialattentionshouldbegiventonewlyevolvingtechnologieswiththepotential

todisrupttradeinitstraditionalway.Additivemanufacturingmightonlybethebeginning.

As countries are increasingly implementingmeasures restricting digital trade, and a great

numberofbarrierstodigitaltradealreadyexists,thereisaneedfortheWTOtoact,givenits

corepurposeoftradeliberalizationwhichiscurrentlyatriskinthedigitalspace.

Ultimately,adeeperdilemmaof theWTO-conceptandarchitecturecanbe identified.The

WTOwascreatedfortheliberalizationoftradeinananalogueworld,formedbynationstates.

AhmedandAldonas(2015)pointoutthatthecurrentagendaoftheWTOfocusesonremoving

barrierstotradethatwereintroducedinthefirsthalfofthe20thcentury.223Withtheriseof

222Singh,Abdel-Latif&Tuthill2016,104,105;UNCTAD2017,72-77.223Ahmed&Aldonas2015,11.

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theInternet,aborderless,digital,economyhasrisen,theworldeconomyhaschanged.Thus,

itcanbequestionedifcurrentWTOconceptsfocusingongeographicalnotionswillbeableto

leadtoacomprehensivesolutionfordigitaltrade,raisingquestionsthatgobeyondclassical

liberalization.

8.Possiblesolutionstoensureliberalizationofdigitaltradewithinthe

WTOframework

8.1AviewoutsidetheWTO:TheEuropeanUnionandfreetradeagreements

WhenlookingatpossiblesolutionsonhowtoevolvetheWTOagendaondigitaltrade,aview

outsidetheorganizationcanbehelpfulasplurilateralrulesfordigitaltradealreadyexistin

differentcontexts,suchaswithinotherinternationalorregionalorganizationsorfreetrade

agreements(FTAs).

Ofall internationalandregionalorganizations,theEUcertainlyseemstopossessthemost

developed regulation in the area of digital trade. In difference to theWTO, which as an

internationalorganizationofcooperationdependsondecisionsmadebyitsdiverseMember

Statesinconsensus,theEUismoreflexiblewithregardtoimposingnewrules.Reasonsfor

this include a solid legislating-system aswell as less diversity betweenMember States in

comparison to theWTO.With the European Commission, the EU also possesses its own

administration with the power to propose legislation, implement decisions, and monitor

compliance of Members. TheWTO, on the other hand, only possesses a relatively small

secretariattosupporttheintergovernmentalworkofMemberStates.

However,takingacloserlookatEUregulationandtheEUDigitalSingleMarketcanhelpto

betterunderstandpossibilities inthefieldofdigitaltradeandidentify important issuesfor

regulation.

TheEUDigitalSingleMarkethasthegoaltoeliminatebarrierstodigitaltradeforbusinesses

andconsumerswithintheEUterritory,basedonthreeprinciplepolicystreams.Incomparison

totheWTO,theEUstrategyhasastrongerfocusonconsumerrightsandprotection.224

224Seealso:Pitschas,Christian&Gerstetter,Christiane(2017):ConsumerRightsinInternationalTradeAgreements.VerbraucherzentraleBundesverband.Online:https://www.vzbv.de/sites/default/files/downloads/2017/03/20/17-03-18_study_vzbv_consumer_rights_in_trade_agreements.pdf.

57

Oneofthethreemainpolicystreamsaimsforbetteraccessforconsumersandbusinessto

onlinegoodsandservices,includingthroughending“unjustified”geo-blockingandreducing

value-addedtax(VAT)burdensforcrossborderdigitalbusinesses.225Thepillaralsoincludes

plansonimplementingamoderncopyrightframework,facilitatingwideronlineavailabilityof

content across the EU, and ensuring that nation-based copyright rules do not impede

innovationandresearch.

The second pillar aims to create a better environment for digital networks and services,

includingbetteraccesstotelecoms-servicesforallEUcitizensandbusinesses.Italsofocuses

on adapting existing rules for audio-visual media to new business models for content

distribution,analysingtheroleofonlineplatforms,particularlywithregardtotransparency,

information use, illegal content, and the relationship between the supplier and the

platform.226Italsotacklestheissuesofstrengtheningdata-andcyber-security.

Thethirdpillar,named“economy&society”,addressesbarrierstodigitaltrade.Thisincludes

ensuringfreeflowsofnon-personaldata,workingonstandardsandinteroperabilitytoensure

compatibilitybetweensystems,andenablingEUcitizenstohavetherightskillstofullybenefit

fromthedigitaleconomy.227TheEuropeanCommissionestimatestheDigitalSingleMarketto

contribute€415billiontotheeconomyoftheEU.228

InregardtoWTO-law,thewilltomodernizeexistingrulesandframeworkstomakethemfit

forthedigitalagecancertainlybeidentifiedasoneofthekeytakeawaysofanalysingtheEU

DigitalSingleMarket.Ittriestocreateabalancebetweentherightsofconsumers,businesses,

andIPR-holders.TheWTO,ontheotherhand,hastraditionallyfocusedmoreonliberalization

of trade, thus focusing on mainly on businesses and only to a lesser degree IPRs and

consumers.However,inthedigitaleconomy,andwithdatabecominganimportanttradeable

resource,therightsofconsumersasimportantsuppliersoftheresource“data”willbecome

important.Multilateraltraderegulationwillhardlybeabletoignorethisissuewhenaiming

toinitiateasincereintentfordigitaltraderegulationandliberalization.Asshowninchapter

2.2,theconsumerisbecominganimportant,activeplayerininternationaltrade,andthusthe

225Hereandfollowing:EuropeanCommission(2017a):Betteraccessforconsumersandbusinesstoonlinegoods.Online:https://ec.europa.eu/digital-single-market/en/better-access-consumers-and-business-online-goods.226EuropeanCommission(2017e):Rightenvironmentfordigitalnetworksandservices.Online:https://ec.europa.eu/digital-single-market/en/right-environment-digital-networks-and-services.227EuropeanCommission(2017d):Economy&Society.Online:https://ec.europa.eu/digital-single-market/en/economy-society.228EuropeanCommission(2017b):Digitalsinglemarket:Bringingdownbarrierstounlockonlineopportunities.Online:https://ec.europa.eu/commission/priorities/digital-single-market_en.

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WTOwillalsohavetoensureconsumers’interestsaremet.TheEUDigitalSingleMarketgives

some examples on this matter. In addition, EU regulation directly addresses questions

essentialtodigitaltrade,suchasfreeflowsofnon-personaldata,theroleofplatforms,access

totelecoms-servicesordatasecurity.Allthoseissuescouldpotentiallybeaddressedatthe

WTOlevelaswell,wideningthescopeoftheorganization.

AnothersourceforpossiblesolutionstohowtotackletheissueofdigitaltradeattheWTO

areFTAsassomehavebettermanagedtoaddressdigital tradethantheWTO,bydirectly

includingprovisionsondigitaltradeandrelatedtopics,suchasprivacyorsecurity.229Examples

includetheEUagreementswithCanada(CETA)andKorea(KOREU)230,ortheComprehensive

and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the new version of the

formerlynegotiatedTrans-PacificPartnership(TPP).EspeciallytheTPP,whoseprovisionson

digital tradearenow fullypartof theCPTPP,hasbeen citedby scholars to illustratehow

provisionsone-commercecanbeincludedinaninternationaltradeagreement.231Thisiswhy

itseemsusefultohaveacloserlookatsomeprovisionsintheCPTPPregardinge-commerce.

Chapter14oftheCPTPP232addressesabroadrangeofissuesrelatedtoelectroniccommerce,

includingspecificprovisionsthatclarifytheobligationsofcountriesnottorestrictdigitaltrade,

hence creating greater legal certainty.233 The agreement does, for instance, not allow to

imposecustomdutiesonelectronictransmission(article14.3),ortoimplementmeasuresthat

prohibitcross-borderflowofdata, includingpersonaldata(article14.11.2),orthatrequire

businessestoestablishlocalcomputingfacilities(article14.13.2).TheCPTPPis,thus,thefirst

majortradeagreementincludinglanguageonbindingcommitmentstoprotectfreeflowof

information across borders.234 However, like the GATS, the CPTPP allows Parties to take

measures to achieve legitimatepublic policy objectives (articles 14.11.3 and14.13.3). The

agreementalsoaddressesawiderangeofotherimportantissues,suchasquestionsofsource

code, consumer protection and protection of personal information, or cooperation on

229Mavroidis,PetrosC.(2017):TradeRegulation,andDigitalTrade.ColumbiaSchoolofInternationalandPublicAffairs.Online:https://sipa.columbia.edu/sites/default/files/Mavroidis_Trade_Regulation_and_Digital_Trade_0502.pdf,1-4.230Id.231Seei.a.Cory2017,14;Singh&Tuthill2016,113.232CPTPP:ComprehensiveandProgressiveAgreementforTrans-PacificPartnership.Chapter14.(Signed8March2018).233Crosby2016,1.234Sillman,Ari&Peterson,ErikR.(2017):DigitalWallsontheRise.A.T.Kearney.Online:https://www.atkearney.com/web/the-purchasing-chessboard/article/-/asset_publisher/9AutfSQfJm6Y/content/digital-walls-on-the-rise/236833.

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cybersecuritymatters.Due to limitations in space,andhaving inmind thepurposeof this

paper,adeeperanalysisofprovisionsintheTPPwillnotbemadeatthispoint.

Theimportantpointtomakehereistwofold:first,thereareinternationaltradeagreements

addressingdirectlyopenquestions in relation todigital trade, its implications,and related

issuesinastraightforwardway.Withintheseagreements,thereisnoneedforinterpreting

andbending rules fromanalogue-ages tomake themapt to21st century trade. Important

topicsarerathernameddirectly.TheCPTPPdoesnotonlyincludeprovisionssolelyfocusing

on the liberalization of digital trade, but also important related issues, such as electronic

authentication,handlingofsourcecodesorthequestionofhowtohandledataandconsumer

privacy.Hence,CPTPPreflectsthemorecomplexnatureofdigitaltrade,whichincludesmore

technical,securityandethicalquestionsthanclassicaltradeingoodsandservices.Second,

whentheWTOistryingtoincludelanguageondigitaltradeinitsframework,theorganization

canrelyonworkone-commercethathasalreadybeendonewithinthescopeofmanyFTAs,

thusnotneedingtocomeupwithacompletelynewframeworkfromscratch.

Inamoregeneralmanner,Wunsch-Vincent(2008)highlightsthatmanyFTAsaddresstheissue

ofdigitaltradeinadirectway,byincludingarelevantdefinitionoftheterm,clearrecognition

oftheapplicabilityofWTOrulesandprovisionsoftheFTAinquestiontotheelectronicsupply

of a service.235 In addition, FTAs often established a clear and applicable customs duty

moratoriumonelectronic transmission,non-discriminationandMFNtreatment,aswellas

clearrulesfordomesticregulationbasedonGATSarticleVI.Byusinganegativelistapproach,

FTAshavealsoensured the inclusionofnewservicesaswellasmore flexibility.Mavroidis

(2017)additionallyhighlightstheinclusionofprovisionsagainstdatalocalizationmeasuresin

manyFTAs.236

AsystematicassessmentofFTAs in relationtodigital tradecould leadto findingthemost

useful provisions forpotentially including them inWTOagreements.237 Even thoughFTAs,

wherePartiesoftensharesimilarinterests,arenotdirectlycomparablewiththemultilateral

forumoftheWTO,whereinterestsofMemberscanbeverydiverse,theystillhighlighthow

theWTOcouldworktowardsbetteraddressingtheissueofdigitalizationoftrade.

235Hereandfollowing:Wunsch-Vincent2008,12-17.236Mavroidis2017.237Wunsch-Vincent&Hold2012,32.

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8.2AddressingopenbasicquestionsfortheWTOregardingdigitaltrade

Asshowninthispaper,theWTOasanorganizationisatadifficultpoint:whiledigitaltradeis

becominganincreasinglyimportantdisciplineininternationaltrade,resultswithintheWork

ProgrammeonElectronicCommercehavenotbeenachievedsofar,andopinionsondigital

tradeanditsliberalizationvarysubstantiallybetweenMembers.However,theWTOpossesses

a strong framework as a basis to address barriers to of digital trade, including rules on

transparencyandMFN,andisconsequentlystillthemostappropriateorganizationtocreate

bindingrulesformultilateraldigitaltrade.238

Beforedealingwithmoresophisticatedissues,theWTOwillhavetoaddressanumberofbasic

questionsthathavebeenoutlinedinthispaper.Indifferencetotradeingoodsandservices,

the development of an analytical framework including a defined terminology of what is

understoodbyelectroniccommerceordigitaltradeandindicatorsformeasurementisakey

preconditionforanyfurtherregulatoryworktobecarriedoutbytheWTO.Whilecommon

sensehasbeenenoughforunderstandingwhatisentailedbytheconceptsoftradeingoods

andservices,thisisnotthecasefordigitaltrade.

Thisdoesnotmeanthatanewdefinitionfordigitaltradehastobefound.Rather,thequestion

of defining the concept of digital trade for the purposes of the WTO could be seen in

connectionwiththequestionofapplicabilityofWTOagreementstodigitaltrade.

Fromthestandpointoftradeliberalization,atthefirstview,itwouldbemostbeneficialto

categorize all digitally supplied products as products ruled by theGATT,while all services

should remain subject to the GATS. Even though some indicators imply the potential

applicabilityoftheGATT,discussionsmostlypointtoclassifyingalldigitallydeliveredproducts

andservicesasservicesundertheGATSasindicatedearlier.

Ifdoneso,fromthestandpointofWTO-law,aformaldefinitionofwhatisincludedwithinthe

conceptofdigitaltradewouldthennotbenecessaryanymoreasallgoodswouldbesubject

totheGATT(leadingtotheneedtoadjustdeminimisasoutlinedinchapter4.2.1)whileall

services (including all digitally delivered products and services) would be subject to the

GATS.239Thebroadworkingdefinitionofelectroniccommercecouldbemaintainedsolelyfor

thepurposeoftheWorkProgrammeornewinitiatives.

238Burri2013,5.239Ofcourse,forthepurposesofstatistics,adefinitionfordigitaltrade,ordifferentdimensionsofdigitaltrade,willstillbenecessary.ThiswillequallybeimportantfordeterminingthevalueofcountermeasuresMemberscanimposeagainstotherMembersifthoseimplementbarrierstodigitaltrade.Researchanddiscussionson

61

TheframeworkprovidedbytheGATSseemstobewellequippedtoaddresscurrentandfuture

issuesinregardtodigitaltrade,legalcertaintyabouttheapplicabilityofGATSrulestodigitally

deliveredproductsandserviceswould,however,benecessary.EventhoughtheWTOdispute

settlementsystemhasledtosomeclarification,judicialdecisionscannotsubstitutepolitical

consensusonthesematters.240

ClassifyingallelectronicallydeliveredproductsandservicesasservicessubjecttotheGATS

wouldleadtoacoupleofimplicationsthatwouldneedtoberesolved.

Clarificationon the issueofhow to includeand classifynewarising services, forexample,

throughusingthemostcurrentCPC-listorthroughanautomatedinclusionprocess,isneeded.

Inthisregard,clarificationonthedifferentmodesofsupplyisnecessary.Aclearcommitment

formode1fordigitallysuppliedproductsandservicesbyMemberswouldbringclarity,not

only from a legal, but also from a political perspective. If consensus on this issue is not

achieved, thePanelandAppellateBodycould furtherexamine this issue in futuredispute

settlement cases related to digitally delivered products and services, based on decisions

alreadymade.Eventhoughthisdoesnotseemtobeanelegantsolution,sofar,ithasonly

beenthedisputesettlementsystembringingclarificationtoopenquestionsregardingdigital

trade.

Asaminimumsolution,MemberStatesshouldupdatetheirindividualGATSscheduleswith

regardtoservicesincludedandmodesofsupply.Thiswouldensurethattheircommitments

takefullyintoaccounttheeffectsoftheInternetontrade,giventhatmanyservicesnotexist

orexistedinadifferentmannerwhenscheduleswherenegotiated.TheWTO,inthisregard,

could support and guide Members, wanting to update their scheduled commitments, to

preventbroadde-liberalization.Inthisregard,theschedulingofentireservicesectorscould

beapossiblesolutiontoalsoincludenew,arisingserviceswithinanindustry.However,inthe

lightofMembersposingmoreandmorebarrierstodigitaltrade,successofthisapproachis

questionable,andde-liberalizationcouldbeapossibleresult.

theissueofstatisticalmeasurementiscurrentlycarriedoutbytheOECD,theWTO,UNCTAD,andotherorganizations,aswellasacademicscholars.Thosediscussionswillhavetobecontinued.240SeeBurri,Mira(2015):DesigningFuture-OrientatedMultilateralRulesforDigitalTrade.Sauvé,Pierre&Roy,Martin(eds.):ResearchHandbookonTradeinServices.Cheltenham,Northhampton:EdwardElgarPublishin;availablethrough:ResearchGate:https://www.researchgate.net/profile/Mira_Burri/publication/271803010_Designing_Future-Oriented_Multilateral_Rules_for_Digital_Trade/links/54d1d9ba0cf25ba0f041eb96/Designing-Future-Oriented-Multilateral-Rules-for-Digital-Trade.pdf,6.

62

Amoreusefulsolutionfromaliberalization-standpointwouldbetheintroductionofnegative

listsasdone inmanyFTAs: thisapproachwould lead toawidespread liberalization in the

services sector as, in the first place, all services would be fully scheduled, including new

servicesastheyarise.Governmentscouldthenmakerestrictionsspecificallytotheservices

they deem necessary. This would ensure new arising digital services to be automatically

included intheschedulesofallMembers, thus, leadingto further liberalization inthe first

place.However,whileMembersseemtobeopentothe inclusionofsuchnegative lists in

FTAs,implementationonamultilaterallevelseemsratherdifficult.

IfGATSrulesapply,practicalimplicationsofthequestiononhowtotreatdigitalproductsand

theirphysicalcounterpartswillhavetobeconsidered,eveniflikenessisnotgivenfromalegal

perspective.

Anotherimportantpointwillbetoaddressbarrierstodigitaltrademoredirectlyasdoneby

manyFTAs.GATSprovisionscovermostrelevantmeasuresrelatedtodigitaltradeasindicated

in chapter 5.4. However, this should be highlighted in a more straightforward way, for

example,byanexplanatorynoteoftheWTOSecretariat,summarizingkeyclarificationsofthe

PanelandAppellateBodywithregardtodigitaltrade.Memberscouldthendecideiftheywish

toincludeclearerlanguageintheGATSaddressingrelevantbarriers.However, it isequally

importantthatanykindofsolutiondoesnotharmthelevelofliberalizationalreadyexisting.

IfupdatingtheWTOagreementsisdesiredbyMemberstobetteraddressbarriers,language

couldbeusedfromexistingFTAs,suchastheCPTPP,includingoncross-borderdataflowsor

makingthecustomsmoratoriumondigitaltransmissionspermanent.

Another possible solution would be the negotiation of a new multilateral agreement on

electroniccommerceasmentionedearlier.However,besidesotherreservations,itcanhardly

be believed that a new multilateral agreement on electronic commerce could easily be

negotiatedwithintheWTOagainstthebackdropofthestalledDohaRound.

AplurilateralapproachasnowinitiatedatMC11ontheotherhandcannotbethesolutionfor

solvingopenbasicquestionsone-commerce,itcanonlybeaforumforfurtherdiscussions.If

onlyagroupofMembersadvancesontheissueofdigitaltrade,thiswillultimatelyleadtoa

fragmentation ofWTO-law regarding e-commerce as even basic questions have not been

answeredyetinthemultilateralforum.241Advancingonthesebasicquestionsonaplurilateral

basiscanhardlybeimaginedasimplicationsofclassification,GATSmodes,orapplicabilityof

241Comapreinthisregard:Baldwin2016b,114.

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WTOagreementsarerelevantforallMembers.Asdigitaltransformationisaffectingmoreand

moresectorsoftheeconomy,questionsregardingdigitaltradeandcross-borderdataflows

mightbecomerelevantfortradeingoodsandservicesinallsectors.Asaconsequence,these

issues will need multilateral participation in order to be addressed and resolved, if the

multilateralnatureoftheWTOistobemaintained.Creatingaplurilateralagreement,besides

theriskoffragmentationofWTO-lawalsobearstheriskoffragmentationbetweenMembers:

countriesnotparticipatinginthefirstplacecouldfeelleftoutandtheirinterestswouldnot

berepresented,leadingtodisadvantagesfortheminthedigitaleconomy.Thiscouldpossibly

leadtoagreaterdigitaldividethanalreadyexisting.

8.3Overcomerootcausesofstandstill

Whileexistingliteraturemainlyfocusesdeliverablestobeachieved,242thoseapproachesdo

notgofarenough.Giventhestallednegotiationsone-commercefor20yearsnow,notonly

possibleoutcomeshavetobediscussed,butalsohowtoovercometherootcausesforthe

existingstandstilloutlinedinchapter7.

WhilechangingthewaytheWTOoperates(byconsensus)mightbetooambitioustodiscuss

atthispointinregardtodigitaltrade,otherissuescanbeaddressedinasimplermanner.

Theestablishmentofapermanent,moreflexibleforumformultilateraldiscussionregarding

digitaltradewouldbeimportantinthelightofspeedingupnegotiationsandimprovingthe

operationalworkone-commerce.Thosediscussionsshouldadditionallybemandatedtogo

beyondthescopeofthecurrentWorkProgramme,includingtoexplorepossibilitiesforrule-

makingaswellasexploringtheapplicabilityofGATSrulestodigitaltrade.TheJointStatement

by 71 Member States at MC11 and subsequent work can be a significant step into this

directionbutcannotbetheultimatesolutionasoutlinedinchapter8.2.

ManyMember States have reiterated the need for further work and discussions to fully

understand the implications of digital trade on their economy. Hence, building common

knowledgeamongstWTOMembersondigitaltradeanditsimplicationscouldbeoneofthe

keydeliverablesoftheWTOintheshort-term,possiblydrivenbytheWTOSecretariatand

backedbyotherMembers.ItwillbeessentialfortheWTOtoprovideaframeworkinwhich

noMemberStatefeels leftbehindordiscriminatedagainstothers.Giventhestrongdigital

242i.a.Burri2013;Burri2015;Farrokhnia&Richards2016;Fleuter2016;Lee-Makiyama2011;LópezGonzález&Jouanjean2011;Wunsch-Vincent2008.

64

dividebetweenadvancedanddevelopingeconomies243,itwillbecrucialtobuildbridgesand

includeallvoiceswithintheorganizationtomaketruetheWTOpromiseofamoreinclusive

internationaltrade,alsointhedigitalsphere.Inthisregard,capabilityandcapacitybuilding

programmesfordevelopingcountrieswouldbeawaytosupportMemberStatestobetter

benefitfromtheemergingdigitaleconomy.

In order to address the knowledge gap between trade policymakers and Internet policy

makers,theWTOandotherorganizationsfromthetradeambit,suchastheOECDorUNCTAD,

should enter into a regular, more coordinated dialogue with internet governance

organizations,forbothsidestolearnfromeachotherandtocoordinateInternetandtrade

regulationmoreclosely.244

IftheWTOistobetteraddresselectroniccommerce,itwillbeuponitsMemberstotakethe

necessarystepsandtomoveforward.Aslongascountriescontinuetoimplementbarriersto

digital tradeandmanyquestions remainunanswered, it is upon theMembers tobecome

moreactive infilingclaimsrelatedtodigital trade inordertoeliminatethosebarriersand

achievefurtherclarityontheapplicabilityofWTOrulestodigitaltrade.Whilemanyclaims

havebeenfiledrelatedtoclassicaltradeingoods,casesrelatedtodigitaltradehavebeen

rare.

Ultimately,inthelong-term,theissueofthescopeoftheWTOwillhavetobeaddressedas

theapproachofmainlyaddressingtradebarriersoftheanalogueworldmightnotbesufficient

tosucceedinthefuture.

ItwillbeimportantfortheWTOtodefinealltrade-relatedaspectsofthedigitaleconomythat

willberelevantforitsworkbesidesliberalization.TheEUandco-sponsorshaveproposeda

tentative frameworkmapping issues in four categories and numerous sub-categories that

couldserveasabasisforthewayforward.Categoriesincluderegulatoryframeworks,open

markets(liberalization),initiativesfacilitatingthedevelopmentofe-commerceandenhanced

transparencyofthemultilateraltradingframework.245Thisbroadspectrumshowsthemany

aspectsrelatedtodigitaltradepossiblyrelevantformultilateralregulationundertheauspices

oftheWTO.

243Seechapter2.2;inthesameregard:WTO(2017c):WTO-eWTP-WEFEnablingE-commerceLaunchEvent:RemarksbyDGAzevêdo.Online:https://www.wto.org/english/news_e/spra_e/spra206_e.htm.244SeeSingh,Abdel-Latif&Tuthill2016,115.245WorldTradeOrganization:CommunicationfromCanada,Chile,Colombia,Côted'Ivoire,theEuropeanUnion,theRepublicofKorea,Mexico,ParaguayandSingaporeof22July2016.WTODoc.JOB/GC/97/Rev.1.

65

Whilethispaperhasfocusedontheaspectofliberalizationofdigitaltrade,inlinewiththe

current agenda of theWTO, further research and work within theWTO will have to be

undertaken on other trade related aspects of digital trade with relevance for the WTO,

possiblybasedontheotherthreecategoriesproposedbytheEU.

Lessonscanbelearned,interalia,fromclassicaltradeingoods,whererulesonmanytrade

relatedissueshavebeenaddressedbytheWTObesidespureliberalizationoftrade,suchas

sanitaryandphytosanitarymeasures,trade-relatedenvironmentalmeasuresornon-product

relatedprocessandproductionmeasures.

Possiblesolutionscouldbetoworktowardsaninternationalframeworkthatissimilartothe

EU Digital Single Market, including rules on competition and stronger rules on non-

discriminationwithintheWTOframework,connectingdigitaltradewiththeUNSustainable

Development Goals (SDGs), as well as focusing on rights of consumers. The most recent

Facebook–CambridgeAnalyticascandalhasshownthatpure liberalizationofdigitaltrade

canleadtoimbalancesbetweenbusinesses,governmentsandcitizens,especiallyregarding

data. Thus, providing a balanced framework not solely focusing on liberalization will be

essential.

Otherissuestobeincludedcouldbethedevelopmentofinfrastructureorthefacilitationof

adopting new technologies, consequently leading to a more comprehensive approach.

Addressingtheissueofcorporatetaxationandspecificallytaxavoidancebybigdigitalplayers

willalsobeoneofthemajorchallengesrelatedtothedigitaleconomyinthenearfuture.In

thisregard,theWTOcouldserveasaforumfornegotiationsfortaxationindigitaltrade.246A

fair framework for taxationofe-commerceactivitieswith taxes fairlydividedby countries

wherevalueisadded247couldalsohelpdevelopingcountriesthatmightloseincomethrough

fewercustomdutiesasmoreandmore tradebecomesdigitized.A reformedWTO,witha

widerscope,couldalsoaddresstheseissuethatoriginallywerenotunderitsauspices.

However,thiswouldmeanforMemberstohandoversomeoftheirregulationsovereigntyin

theseareastotheWTO.AfactthatmostMemberswillhardlybewillingtodo.

246SeeChen&Smekal2009.247Valuecreationcould,forexample,possiblyalsoincludetheprovidingofdatabycustomers,notonlymonetaryvalue.

66

9.Conclusion

Thispaperhaspointedoutagreatnumberoftraderestrictivemeasuresthatgovernments

areimplementinginthedigitaleconomy,constitutinganewkindofdigitalprotectionism.It

wasshownthat theWTOframework isalreadywellequippedtoaddress thesebarriers, if

openkeyquestionsareclarified.TheWTOasanestablishedmultilateralforumisstilltheideal

placeforaddressingnewquestionsarisingaroundtrade,includingdigitaltrade.Itpossesses

widely accepted core principles, such as transparency and non-discrimination between

Members,aswellasa–still–soliddisputesettlementsystem.248Ashighlighted,aplurilateral

approachcannotbethesolutionforansweringbasicquestionsregardingdigitaltrade.Even

thoughtherecurrently isa lackofprogressatthemultilateral levelregardingdigitaltrade,

FTAscannotbethesolutionfordeterminingbindingrulesfordigitaltradeduetotheriskof

increasedfragmentationultimatelyharmingthemultilateralsystem.

Thispaperhas identifiedopenkeyopen issues for theWTOthatneed tobeaddressed in

relation to digital trade andhas indicated proposals for possible solutions. To do so, root

causesforthecurrentstandstill,outlinedinthispaper,needbeaddressed,inordertoachieve

progressmorequickly.TheGATS,ifapplied,providesasolidframeworkforaddressingrising

barriers in thedigital sphere as this paper has shown, even thoughmany issues could be

addressed in amore directmanner, ifMemberswished to do so.While theGATTwould

provide amore liberalized regime than theGATS, its application in regard todigital trade

seemsnottobeverylikelyasMemberswouldprobablynotbewillingtoliberalizedigitaltrade

tothatextent.FurtherresearchonapplicationofGATTrulestoe-commerceisnecessary.

For addressing digital trade in a comprehensive manner, widening of the scope of the

organizationwillbenecessaryandfurtherdiscussionsonthisissuewillhavetobeheld,going

beyondthescopeofthispaper.TheWTOisacreationofnationstatesandthereforegranting

the possibility to itsMembers to relatively freely regulate trade issues according to their

interests.The Internet,on theotherhand,hascreatedaborderlessdigitalworld,aglobal

248ThefunctioningoftheWTOdisputesettlementsystemiscurrentlyatriskduetotheUSblockingtheappointmentofAppellateBodyMembers.BySeptember2018,thenumberofmembersoftheAppellateBodywillbedowntothree,theminimumnumberofjudgesforthebodytocarryoutitswork(O’Grady,Sean(2018):TheWorldTradeOrganisationisterrifiedofDonaldTrumpandwillnotstoptheglobaltradewar.TheIndependent.Online:https://www.independent.co.uk/voices/world-trade-organisation-donald-trump-global-trade-war-tariffs-china-eu-a8285286.html;WTO(2018a):AppellateBodyMembers.Online:https://www.wto.org/english/tratop_e/dispu_e/ab_members_descrp_e.htm).

67

community, even though countries are starting to nationalise the Internet within their

borders.Somedosowithgreatsuccess,suchasChina.

Closenegotiationsandcooperationwith Internetgovernance relatedorganizationswillbe

necessarytoincludeallrelevantissueswithregardtotheInternetinanadequatemanner.

WithoutaddressingissuesrelatedtotheInterneteconomyanddigitaltradeatamultilateral

level,furthernationalizationoftheInternetmightbetheresult.

ItwillbeessentialnowfortheWTOtobringtogetheradvancedeconomies,wantingtomove

forwardontraderelated issuesofthedigitaleconomy,anddevelopingeconomies, feeling

thattheirinterestsarenotsufficientlyheard.Themultilateralforumwillhavetolistentothe

needsofallMembers,withaspecialfocusondevelopingeconomiesandLDCs.

Ultimately,bynotrespondingtonewemergingtradetopicsincludingdigitaltrade,theWTO

weakensitsposition.ThemultilateraltradesystemundertheauspicesoftheWTOiscurrently

atrisk.GiventhestalledDohaRound,manydiscussionshavebeenongoingonwhetherornot

theWTOisstilltheadequateforumforaddressing21stcenturychallengesoftrade,alsoin

relationtodigitaltrade.Criticshavecomefrommanysides,includingscholarsandMember

States.IntheUS,theTrumpadministrationhasleftnodoubtthatitseeslittlevalueinthe

organization.ByblockingnominationofjudgesfortheAppellateBody,itfurtherundermines

theworkoftheorganizationandmightultimatelyleaveitdysfunctional.

Beinganeasytargetiscertainlypartiallyduetohardlyhavingdeliveredanyresultssincethe

launchof theDohaRound,putting theorganization inaweakposition.Hardworkwillbe

necessarytomaketheWTOaptfor21stcenturychallenges,includingdigitaltrade,andforthe

organizationtoleavethecurrentcrisisstrongerthanithasbeenbefore.Deliveringresultson

openissuesrelatedtodigitaltradesoon,interaliabasedonproposalsforsolutionspointed

outinthispaper,couldbeonestepinthisdirection.

68

11.AnnexTable1:OpenbasicissuesfortheWTOregardingdigitaltradeandpossiblesolutionsIssues PossiblesolutionsDefinitionofe-commerce/digitaltrade - Keepworkingdefinition

- IfalldigitallydeliveredproductsandservicesaretobeservicessubjecttotheGATS,nofurtherdefinitionofe-commerceisnecessary

Needforclarificationofapplicabilityofagreements

- ClassificationofalltangiblegoodsincludingiforderedorpaidforviatheInternetasproductssubjecttoGATT

- ClassificationofalldigitallydeliveredproductsandservicesasservicessubjecttotheGATS

- (Possibly:classificationofalldigitallydeliveredproductsasgoodsundertheGATT)

- (ClassificationofallotherservicesasservicessubjecttotheGATS)

NeedforclarificationonGATSmodesofsupply

- ConsensusbyMemberstoclassifyasmode1- Untilagreedon:examinationofdifferentmodesofsupplybyPanel/AppellateBodyinnextDS-casesrelatedtodigitaltrade

NeedforMemberstoupdateGATSschedules

- IncorporationofmostfrequentCPC-list- Useofanegativelistapproach

Needtoaddressrisingbarriers - IfclassificationasservicesunderGATS:- RecognizethealreadyexistingprovisionsintheGATS,theAnnexonTelecommunications,the4thprotocoltotheGATS,andtheReferencePaper

- IncludelanguageintheGATSdirectlyaddressingrelevantissuessuchasdatalocalizationmeasuresbasedonlanguageusedinFTAs

- (IfclassificationunderGATT,workwouldneedtobecarriedoutrespectively)

Source:Ownelaboration

Table2:RootcausesofstandstillandpossiblesolutionstoovercomeRootcauses PossiblesolutionsOperatingofWTO,includingneedforconsensus

Longterm:WTOreformleadingtoamoreflexibleandagileorganization

OperatingoftheWorkProgramme Establishapermanentforumformoreactive,flexiblenegotiations

MandateoftheWorkProgramme Widenthescopeofthemandateincludingprovisionstowardsrule-making

Digitaldivide&knowledgegaps - BuildingacommonknowledgebetweenWTOMembersbycapacityandcapabilitybuildingthroughWTOSecretariatandMembersadvancedindigitaltrade

69

- EngagewithInternetgovernanceorganizationsinaregular,coordinateddialogue

MembersinactiveleadingtofewDSBcases

- MoreengagementandactivitybyMembersintheshort-tomid-termuntilclarificationisachievedonapolicylevel

NarrowscopeoftheWTO/TradeliberalizationfocusofWTO

WidenscopeoftheWTOinthelong-term:- IdentifytraderelatedissuesofdigitaleconomywithrelevanceforWTOpossiblybasedonproposalbytheEUandco-sponsors(JOB/GC/97/Rev.1)andincloseworktogetherwithotherorganizations

- Developmorecomprehensiveframeworkasdigitalizationaffectsmoreandmoreareasoftrade

Source:Ownelaboration

70

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