RESTRICTEDWORLD TRADE
ORGANIZATIONWT/COMTD/M/40
26 June 2002
(02-3551)
Committee on Trade and Development
Fortieth Session
NOTE ON THE MEETING OF 25 APRIL 2002
Chairman:  H.E. Mr. Toufiq Ali (Bangladesh)
Subjects discussed:
A. A DOPTION OF THE DRAFT AGENDA ...........................................................................................2
B. O BSERVERS ............................................................................................................................... ..2
(i) Request for attendance for ad hoc observers..............................................................................2
(ii) Further Consideration of request for obs erver status by League of Arab States, the
Organization of the Petroleum Exporting Countries (OPEC), the Gulf Organization
for Industrial Consulting, the Organisation Internationale de la Francophonie, and
the Common Fund for Commodities...........................................................................................2
C. T ECHNICAL COOPERATION AND TRAINING ................................................................................2
(i) Progress Report on the Implementation of  the Coordinated WTO Secretariat Annual
Technical Assistance Plan 2002 (WT/COMTD/W/95/Rev.3) .....................................................2
(ii) Report on the Pledging Conference.......................................................................................... ..2
(iii) Statement by the Chairman of the Committee on Budget, Finance and Administration
in Relation to the Coordinated Implementation of the Technical Assistance Plan.....................9
(iv) Report on the 2001 Activities of the Training Institute (WT/COMTD/W/96) ...........................10
(v) Technical Cooperation Audit Report 2001 (WT/COMTD/W/97) .............................................14
D. C ONSIDERATION OF ARTICLE XVIII A S MANDATED BY PARAGRAPH 12 O F THE
DOHA MINISTERIAL DECLARATION (WT/MIN(01)/D EC/1), T HE DECISION ON
IMPLEMENTATION -RELATED ISSUES AND CONCERNS (WT/MIN(01)/17), A ND IN
CONJUNCTION WITH TIRET 3 OF JOB(01)/152/R EV.1 O F 27 O CTOBER 2001 ..........................18
E. R EPORT OF THE SEMINAR ON REVENUE IMPLICATIONS OF E-C OMMERCE .............................20
F. R EPORT ON THE INTERNATIONAL CONFERENCE ON FINANCING FOR DEVELOPMENT ...........20
G. P ARAGRAPH 51 O F THE DOHA DECLARATION ON IDENTIFYING AND DEBATING
DEVELOPMENTAL AND ENVIRONMENTAL ASPECTS OF THE NEGOTIATIONS , IN
ORDER TO HELP ACHIEVE THE OBJECTIVE OF HAVING SUSTAINABLE DEVELOPMENT
APPROPRIATELY REFLECTED ....................................................................................................21
H. E LECTION OF THE CHAIRPERSON OF THE SUB-COMMITTEE FOR LEAST -DEVELOPED
COUNTRIES ............................................................................................................................... .23
I. O THER BUSINESS ......................................................................................................................24
ANNEX I ........................................................................................................................ .......................25
ANNEX II....................................................................................................................... .......................27WT/COMTD/M/40
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A. ADOPTION OF THE DRAFT AGENDA
1. The Chairman indicated that the draft agenda for the meeting was contained in
airgram WTO/AIR/1758/Rev.1 of 19 April 2002.
2. The agenda was adopted.
B. OBSERVERS
(i) Request for attendance for ad hoc observers
3. The Chairman recalled that at previous sessions of the Committee on Trade and Development
(CTD), it had been agreed that the following inte rgovernmental organizations be invited on an ad hoc,
meeting-by-meeting basis:  the Arab Maghreb Union (AMU);  the Economic Community of West
African States (ECOWAS);  the Economic C ooperation Organisation (ECO);  the Inter-Arab
Investment Guarantee Corporation;  the Islamic Development Bank (IDB);  the Organisation ofAfrican Unity (OAU);  Organisation of the Islamic Conference (OIC);  the South Centre;  the South
Pacific Forum;  the United Nations Environment Programme (UNEP);  the West African Economic
and Monetary Union (WAEMU);  and the World Intellectual Property Organisation (WIPO).  He
proposed that those organisations be invited to the next formal meeting of the CTD.
4. It was so agreed.
(ii) Further Consideration of request for obser ver status by League of Arab States, the
Organization of the Petroleum Exporting Countries (OPEC), the Gulf Organization for
Industrial Consulting, the Organisation Internationale de la Francophonie, and the Common
Fund for Commodities
5. The Chairman said that at the last few meetings, the Committee had had before it a number of
outstanding requests for observer status.  They came from the League of Arab States, OPEC, the Gulf
Organization for Industrial Consulting, the Organisation Internationale de la Francophonie, and fromthe Common Fund for Commodities.  The positions of delegations were well-known and on the
record.  Unless there had been any recent change of position, he proposed that the Committee revert to
those requests its next formal meeting.
6. It was so agreed.
C. TECHNICAL COOPERATION AND TRAINING
(i) Progress Report on the Implementation of the Coordinated WTO Secretariat Annual
Technical Assistance Plan  2002 (WT/COMTD/W/95/Rev.3)
(ii) Report on the Pledging Conference
7. Deputy Director General Mr. Ravier said that he would give the third update by the
Secretariat on the implementation of the WTO Secretariat TA Plan for 2002 authorized by Members
of the CTD on 6 March 2002.  The update would focus on nine points of importance for WTO
Members in general and technical assistance (TA) beneficiaries in particular.WT/COMTD/M/40
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8. The first related to the Pledging Conference.  The outcome of the WTO Pledging Conference
held on 11 March 2002, had been positive and signficant.  Donors had kept their word to commit
themselves to provide predictable funding.  It was also important to highlight the role that the
Conference had had in facilitating a policy dialogue among Members and multilateral agencies to
better coordinate their technical cooperation activities with the mandates from the Doha DevelopmentAgenda.  A full report had been circulated in document WT/COMTD/37.  The Pledging Conference
held in March 2002 was the first of its kind.  It would be an annual event in the future.  At each annual
event, the occasion would combine the pledging of contributions with maintaining the necessary
policy dialogue on how to improve the design and delivery of WTO trade-related TA.
9. His second point concerned the implementation of the 2002 Technical Assistance Plan.
Implementation of the Plan was progressing at a reasonable rhythm even if it was somewhat slower
than the Secretariat wished.  As of 25 April 2002, a total of 150 activities had been undertaken,totalling 23 per cent of planned activities.  That was somewhat below the expected rate as the date of
25 April corresponded to approximately one third of the year.  However, with the filling of the WTO
Secretariat positions opened in the L-series which would be recruited according to a fast-track
procedure, the Secretariat would be able to step up the delivery of TA activities in the second half of
the year and be better equipped to meet the ambitious targets established in the 2002 TA Plan.  TheSecretariat had been invited by Members in the Negotiating Group on Non-Agricultural Market
Access, and the Working Group on Trade and Investment to report on TA activities underway and
those envisaged, and how they would contribute to the ongoing negotiations and the different work
programmes.  Members of those bodies had expressed a reasonable degree of satisfaction with WTO
TA.  The rate of implementation was critically dependent on the extent to which beneficiary countriesprovide fixed, reliable dates for activities to be delivered in their countries.  Frequently, dates were not
given on time, and scheduled dates were moved, dislocating the timely delivery of planned activities.
10. As a third point, he informed the Committee that the Technical Assistance Management
Committee (TAMC) had established a LAN-based format for monitoring the rate of the
implementation of the TA Plan, and harmonizing and institutionalising back-to-office reports.  WTOback-to-office-reports would remain  internal to the Secretariat, but Members would have the right to
know the rate of implementation.
11. His fourth point concerned the training component in WTO TA Activities.  Recently, some of
the beneficiaries had been weighing the relative merits of WTO seminars and technical workshops, on
the one hand, vis-à-vis  more in-depth training, on the other. Members had recognized and accepted
the indispensable value of WTO seminars and national technical workshops.  All the seminars and
workshops in the TA Plan had been requested by the beneficiary countries.  However, beneficiarycountries had also conveyed that they wished to see an increase and strengthening of the training
component in WTO TA activities.  The Secretariat was responding positively to that request.  There
was a strong and growing training component in WTO TA coming broadly from (a) the regular and
short trade policy courses conducted by the Training Institute, in Geneva, listed in document
WT/COMTD/W/89/Rev.1;  and, (b) the training activ ities (mainly of two to three weeks duration) in
the agreed TA Plan (WT/COMTD/W/95/Rev.3), which were held outside Geneva.  The training
component in the 2002 TA Plan totalled approximately 17 activities.
12. His fifth point was related to the Doha Development Agenda Training for Senior Policy
Makers.  To further consolidate the training component as part of the agreed TA activities, and to
concretely respond to the need expressed by Members, the Technical Cooperation Division waselaborating on Annex I of the TA Plan.  The Technical Cooperation Division had worked closely with
Senior Management on that design.
13. Deputy Director-General Miguel Rodriguez-Me ndoza, who had worked on the design of the
intensive training courses for senior policy makers, said that Annex I of the TA Plan called for theWT/COMTD/M/40
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initiation of a training programme on the Doha negotiations.  The programme focussed on the training
of trade negotiators of WTO Members and Observers from developing countries and economies in
transition specifically on the issues central to the Doha Development Agenda.  The main purpose was
to strengthen those countries effective participation in the Doha negotiations and work programme
through policy analysis and a deepened understanding of the issues involved.  The Secretariat was inthe process of implementing that programme which was complementary to other TA and capacity
building activities included in the Annual TA Plan.  The Secretariat was planning to conduct a series
of two-week training activities on the Doha ne gotiations and Work Programme for government
officials with responsibility in the Doha negotiations.  The programme took into account the
experience of a successful course that the WTO, together with the Organization of American States
and the Georgetown University, had been conducting for the past five years.  The Secretariat
attempted to replicate that experience in other regions as part of the mandate for TA and capacitybuilding adopted by the Ministers at Doha.  The purpose of that programme was not to focus on an
explanation of the WTO Agreements, but rather to concentrate on the Doha negotiating issues.  In that
sense, it was a pilot activity devoted to increasing the understanding of the negotiating issues and
proposals, and to facilitate the participation of developing countries in the debate.  To achieve that
task, the Secretariat was not only counting on the expertise of its own staff, but also on that ofindependent experts and resource persons from  the various regions.  The Advanced Training
Programme the Secretariat was working on would be im plemented in two phases.  In a first phase, the
Secretariat contemplated to organize up to eight trai ning activities.  Two in Africa, two in Asia, two in
Latin American and the Caribbean, one in Transition Economies and one for Arab countries.  That
first phase would cover the period from April 2002 to  the Mexico Ministerial Conference.  In the
second phase of the programme, which extended between the Mexico Ministerial and the end of the
negotiations, the intention was to organize a second set of training activities in all the regions
involved.  Although financing for those activities was secured by the Doha Development Agenda
Global Trust Fund, the Secretariat was in the process of contacting some regional organizations,
including regional development banks, as well as some academic institutions in the various regions tomake the courses a joint effort by the institutions  concerned.  In preparation for those activities, he
had been in touch with a number of delegations.  Specifically, he had met with the African countries,
with the CARICOM countries, with the CEFTA+ gr oup and with China, and it was his intention to
continue the dialogue with other developing country Members to get their insights and advise as to
how to make the activities meaningful, and actually  to strengthen the participation of developing
countries in the negotiations.  He had received support and enthusiasm for the programme from the
countries concerned, and would keep the CTD informed of further developments regarding theimplementation of the training activity.
14. Deputy Director General Mr. Ravier continued with his sixth point relating to ownership
through self-financing participants.  He underscored the necessity for increased beneficiary ownership
in WTO TA.  Ownership could be expressed in various ways.  It had to be recognized that WTO
training and TA activities were integral parts of human resources development (HRD), a keycomponent of national economic development.  WT O delivery of training and TA could only be a
supplement to the necessary national expenditures fo r HRD.  One was not a substitute for the other.
In that regard, he was pleased to report that some delegations were considering self-financing the
participation of government officials in selected WTO training activities.  That was a welcome
development since it would give a greater degree of ownership.  He recommended it to otherdelegations who were in a position to do so.  He said that he wished to re-emphasise a point
mentioned in a previous update;  it was necessary for TA beneficiaries to also include their TA
priorities and demands either in their Poverty Reduction Strategy Papers (PRSPs) or in their national
plans for economic development.  PRSPs were the basis for World Bank and International Monetary
Fund policy lending and grant support.  It was important  to know that trade-related TA activities and
priorities were integral to national development plans, and should be reflected as such in those plans
and/or strategies for poverty reduction.WT/COMTD/M/40
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15. The seventh point related to regional development banks.  The WTO Secretariat was
continuing its collaboration with regional and sub-regional organizations;  the Director-General had
convened a meeting with the Heads of Regional Development Banks, on 3 May 2002 at the WTO.  It
would begin with a private meeting between the Director-General and the Heads of the Regional
Development Banks, Memoranda of Understanding would then be signed, followed by a Press
Conference.  After short presentations by the Heads of the Regional Development Banks, there would
be an interactive session in the form of a dialogue between the Heads of the Regional Development
Banks and WTO Members on the theme:  "Develop ing Partnerships: Cooperation Between Regional
Development Banks and the WTO in Responding to Capacity-Building Needs of the Doha
Development Agenda".  That seminar would be an opportunity to further develop joint activities in
beneficiary countries to implement the Doha Development Agenda.
16. The 4th "Geneva Week" was the eighth topic.  It had begun on 21 April 2002 and was
underway with full participation and high quality presentations.  Non-Resident participants were
currently attending the meeting of the CTD.  He urged Members to interact with the Geneva Week
participants to the fullest extent possible.  In 2002 there would be two Geneva Weeks: the 4th Geneva
Week, currently underway, and the 5th Geneva Week, scheduled for October.  The Geneva Weeks
were financed from the WTO regular budget.
17. The last point was on the WTO TA Plan for 2003 on which the Director of the Technical
Cooperation Division would speak.
18. Mr. Chiedu Osakwe, Director, Technical Cooperation Division said that the Secretariat had
initiated the process for designing the WTO TA Plan for 2003.  2001 and 2002 were transitional years
in WTO technical cooperation.  A far-reaching re-organization had been undertaken in 2001 of boththe structure of the Technical Cooperation Division and the elaboration of the New Strategy.
Post-Doha, in interaction with Members in the CTD,  the architecture of the WTO TA Plan had been
significantly changed and Members had assisted the Secretariat in designing the 7 pillars of the
Secretariat response to the TC mandates in the D oha Ministerial Declaration.  However, there had
been a considerable rush and the work had been done under pressure.  It was the intention of theSecretariat to present a draft TA Plan for 2003 to the CTD after the summer break.  To that end, the
Secretariat wished to invite Members and Observers to submit their requests for TA for 2003 to the
Technical Cooperation Division before the end of July 2002.  The requests received would be
processed on the basis of consultations with the requesting countries.  Requests should include clear
indications of venue, for both regional and national activities, and dates.  The Secretariat had began
early as one of the difficult challenges that the Secretariat had faced in the implementation of earlier
TA Plans was inability to plan ahead because of the late receipt of requests.  Forward planning would
assist the Secretariat, Members and Observers to limit ad hoc requests.  While the Secretariat had kept
ad hoc requests in the 2002 Plan to a minimum, the intention was to hold it to zero in the 2003 Plan,
except in the most exceptional of circumstances.  Ad hoc requests had had a damaging effect on WTO
TA Plans and had affected implementation and delivery of agreed activities.
19. A similar invitation and message would be extended to partner organizations and agencies.
The Secretariat would be asking them to inform the Secretariat of any invitations they intended to
extend to the WTO Secretariat, asking for resource persons, for their programmes and activities
in 2003.  The WTO Secretariat needed to immediately plan for them.  In the past few years, the
Secretariat had received many invitations from othe r international agencies, both at the multilateral
and regional level, inviting the WTO Secretariat to participate by providing resource persons.  Most ofthe programmes and activities of many international organizations were essentially focussed on the
work of the WTO.  However, many of the invitations were received at the last minute and classified
as urgent.  The WTO Secretariat treated those invitations as TA as they could not be classified as
anything else in the WTO budget.  To be able to respond to them, the Secretariat had to plan ahead.
Unlike previous years, the Secretariat would not be able to respond positively if it did not plan well inWT/COMTD/M/40
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advance.  Members were invited to provide the Secretariat with any ideas they might have, for
improving on the design and the architecture of the WTO TA Plan.  He thanked Members for
assistance given with the Plan currently under implementation.  If delegations had further ideas at a
conceptual level, the Secretariat would be happy to receive them with a view to improve the quality of
WTO TA.
20. Deputy Director General Mr. Ravier said that he wished to say a few words on the recent
initiative of the Director-General, as set out in his communication of 4 April 2002 to all Geneva-based
ambassadors.  That initiative proposed the holding of parallel three-month trade policy courses in
English in Nairobi and in French in Rabat.  The programme of those courses would be substantially
the same as that of the residential courses run by the WTO Training Institute in Geneva.  The first
series of courses was intended for officials from African countries.  Should the experience prove
positive, it could be extended to other parts of the world.  The project was a joint undertaking with therespective universities of those two cities.  The courses would, insofar as it was possible, not be given
by WTO officials, but by various experts select ed from amongst retired GATT and WTO officials,
and among experts proposed by Members in response to an invitation from the Director-General, or
from experts put forward by the host institutions or  donors within the framework of project financing.
He pointed out that the project was an addition to and fell outside both the "normal" activities ofWTO Training Institute, of which the Committee had already been informed at a previous meeting,
and the consolidated technical assistance programme under the Doha Trust Fund.  It was an
additional, and as yet unfunded, activity.  Neither did it replace any other scheduled activities of
which Members had been informed.
21. The representative of the European Communities asked whether the Secretariat could expand
on some of the basic parameters of the delivery of TA, in particular with respect to paragraph 2 of the
Coordinated WTO Secretariat Annual Technical As sistance Plan 2002, in which the coordination with
well-defined inter-agency groups and multilateral agencies was mentioned.  At the end of small roman
(i) of paragraph 2 there was a commitment to inform the Membership of partnerships under
negotiation in the many areas where the WTO was not the best placed to deliver TA.  Although thereseemed to be progress with regional banks, he asked how contacts with other agencies had evolved as
there were many other international organizations or agencies with which the WTO should cooperate.
He also requested additional information on the in-house coordination, and especially with respect to
how the TAMC had functioned.  That information w ould be useful in ensuring that some of the
themes in the plan were being followed up in a manner which met the expectations of the Members.
Nevertheless, his delegation was pleased with the numerous initiatives that had been elaborated on.
22. The representative of Mauritania said that WTO TA was evolving in the right direction.  It
was important to intensify and enlarge the content of  the WTO TA activities.  The requests made for
more innovative TA than the usual seminars seemed to have been taken into account.  The improved
programming and evaluation mechanisms of WTO TA were also welcome.  His delegation thanked
all the donors who had contributed to the Doha Development Agenda Trust Fund.  The
communications sent a political message that all delegations and the Secretariat had to work togetherin order for current hopes to materialize.
23. The representative of Uganda said that his delegation was pleased with the direction WTO
TA activities were taking.  He agreed that the short time-frame for planning had made it difficult for
the Secretariat to include elements of the Doha Development Agenda into the 2002 TA Plan.
Advance preparations for the 2003 Plan were welcome and he urged other Members to take advantageof that.  Although there were problems with the Integrated Framework (IF), there was the idea to
extend it to other countries.  He said that his delegation saw a problem with such an extension as the
IF still was a pilot scheme.  Before a pilot scheme could be extended it had to be ensured that it was
effective and working.  He therefore asked the Secret ariat to explain the future plans in that regard asWT/COMTD/M/40
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the LDCs were getting worried that in an attempt to  widen the scope of the IF, its effectiveness might
be lost even before it had been perfected.
24. The representative of Barbados said that it was critical to plan ahead in the design of TA
plans.  It was not the least important for beneficiaries to articulate their requirements at an early stage
and her Government would attempt to meet the deadlines set.  However, she urged that it not beforgotten that situations constantly evolved and that a certain level of flexibility therefore had to be
included in all programmes and plans designed.  She did not urge for ad-hocism but for some
flexibility.  There should be a preparedness to respond to the needs of developing countries as those
needs became apparent.  She welcomed the informa tion regarding the training activities for senior
government officials.  It was important to ensure that new initiatives were sustained into the future.
25. The representative of Djibouti said that his Government profited to a large extent from WTO
TA.  A seminar on services had been organized in September 2001 for the LDCs and another was
being prepared for on trade and environment for September 2002.  He asked whether the Secretariat
could consider prolonging the seminars which lasted for less than one week as it was impossible to
understand the WTO system in just three days.  So short seminars used donor money which could be
better spent, and implied lost time for Secretariat staff.  The participants would not get a result out of
it which corresponded to their needs either.  The last seminar in Djibouti had lasted three days withabout forty participants.  He asked whether these participants really had obtained a knowledge which
corresponded to their needs.  On the contrary, the three week courses for LDC officials gave
satisfactory results as did the three months courses.
26. The representative of Morocco said that that his delegation was pleased that Nairobi and
Rabat had been chosen as the cities in which courses would be organized.  That was an innovative
initiative which would have large value added.  A certain level of expertise in the organization of
short-term training courses had been acquired in his country.  A successful national seminar had
recently been held (15-19 April 2002).  His Government would not spare any effort to make the new
initiative successful as concerned the new logistical and administrative steps to be taken.
27. The representative of the United States asked whether the Secretariat could provide
delegations with a general idea of the type of activities included in the 23 per cent of the forecasted
activities that had been undertaken.  That would give delegations a better idea of progress in the
implementation.
28. The representative of Malaysia said that WTO TA were implemented more smoothly when
supported by funding.  She welcomed the Secretariat's intention to developed the TA Plan for 2003 by
the end of 2002.  That Plan could hopefully address some concerns raised with respect to the 2002
Plan, such as better country and regional distribution of TA activities and a balancing of the unmetneeds from 2002 by including them in the 2003 Plan.  She wished to hear more about the proposal for
a two-faced training of trade negotiators programme.  In light of the dynamism of the negotiations, an
intensive first phase of the programme, before the Mexico Ministerial Conference, could provide
benefits as the skills acquired could be utilized during the remaining part of the negotiations, in
particular after the Mexico Ministerial Conference.
29. Deputy Director General Mr. Ravier proposed that the Secretariat would make a report to the
next meeting of the CTD on cooperation with other international organizations as a number of precise
pieces of information could be provided.  With respect to internal Secretariat coordination he said that
a Technical Cooperation Management Committee (TAMC) had existed for almost a year.  The TAMC
met once a month and comprised the relevant directors and one representative of each substantiveDivision as WTO TA activities increasingly were carried out by the substantive divisions and not by
the Technical Cooperation Division.  Those meetings were productive.  As information wasWT/COMTD/M/40
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exchanged, it was a learning process for all involved.  It permitted to keep the coordinated character
of TA between the activities, information, fo llow-up, audit and financing of all WTO TA.
30. Mr. Chiedu Osakwe, Director, Technical Coope ration Division confirmed that there was no
intention to extend the IF beyond the 49 LDCs.  That position had been taken by the heads of agencies
in paragraph 7 of their Communiqué of 26 February 2002.1  However, there were several non-LDCs
which had asked for the model of the IF to be applied to the assistance they received.  Those
Governments considered that the totality of their trade development needs would be better met by the
agencies working jointly on the basis of the IF con cept.  The agencies were considering applying the
concept to other countries.  As they had received specific requests in that regard, there was a
favourable disposition in the agencies to do so.  The reason was also that the Members had asked the
agencies to coordinate better, to seek coherence and to be complementary in the way they responded
to the priority needs of non LDCs as well as LDCs.  It was no question of a simple extension of theIF, nor would the resources of the Trust Fund be ap plied to non LDCs.  What was considered was an
extension of the application of the concept.
31. He went on to say that he shared the view that there had to be some flexibility in the delivery
of WTO TA, and there would be a certain degree of flexibility.  However, flexibility was not another
name for ad-hocism.  That there would be flexibility did not mean that ad-hoc requests would beaccommodated.  The CARICOM had approached the Secretariat to readjust by replacing some of the
activities earlier suggested by new projects.  There was a flood of requests from different
organizations to the WTO Secretariat.  The WTO Secretariat therefore needed to be rigorous and
disciplined in its responses in order to be able to deliver on the commitments made in a manner that
would be qualitatively satisfactory.  With respect to  cooperation with other agencies, he said that the
WTO had a good working relationship with several agencies such as UNCTAD, UNEP, ITC, WCO
and had an active dialogue with UNIDO, OECD and some others.  The challenge was to find
appropriate co-financing arrangements.  He did not believe that there was any expectation that the
WTO would be funding the totality of the costs out of the Doha Development Agenda Trust Fund for
activities with other agencies.  Discussions with other agencies were ongoing.  The issue of the lengthof seminars had to be looked at in its totality in response to the requests.  With respect to the type of
activities delivered so far in 2002 he said that they covered all themes in the Plan.
32. The Chairman said that the Committee had received good information on the technical
cooperation and training programmes undertaken by the WTO Secretariat.  It was important that the
WTO Secretariat responded to the Members-driven agenda in terms of technical cooperation and
capacity building.  There were a number of observations from the floor pointing to the need to look at
the issue of capacity building beyond TA per se .  The medium and long term perspectives of capacity
building had to be considered in addition to the seminars and  workshops which were valuable in the
short run.
33. The representative of Canada recalled the comment made earlier with respect to sustainability
both in terms of funding, and more so in terms of the capacity of the WTO Secretariat.  Additional
valuable creative outreach activities were being added.  However, the agenda of other activitiesdelivered was large and it was a question of bearing in mind that at some point the organization might
have to turn requests down.
34. The Chairman said that he did not believe that the funds available to the WTO Secretariat
always permitted it to respond to every request made.  A selection had to be made.
35. The Chairman said that he believed that the comments would be taken into account as the
WTO Secretariat designed its programme of TA for 2003.
                                                     
1 WT/IFSC/1.WT/COMTD/M/40
Page 9
36. The Committee took note of the reports and the comments made.
(iii) Statement by the Chairman of the Committ ee on Budget, Finance and Administration in
Relation to the Coordinated Implementation of the Technical Assistance Plan
37. The Chairman said that as  many of the technical cooperation activities under the Co-ordinated
WTO Secretariat Annual Technical Assistance Plan were financed through a new Global Trust Fund,
the Committee on Budget, Finance and Administration (CBFA) and the CTD were jointly responsible
for the execution of the Plan and keeping the spending commitments under periodic review.  A report
would therefore be given by Mr. Neil McMillan, who was the Chairman of CBFA.
38. Mr.Neil McMillan, Chairman of the CBFA, said that it was worth recalling that at its meeting
held on 19-20 December 2001, the General Council had approved the terms of reference of the Doha
Development Agenda Global Trust Fund (DDAGTF) contained in the report of the CBFA
(WT/BFA/56).  In particular, the General Council had approved a target of CHF 15 million for theDoha Development Agenda Global Trust Fund for 2002.  Three miles-stones were attached to that
amount in terms of the payment of the funds into  the WTO Secretariat Bank Account.  An amount
equivalent to:
- 25 per cent of that target (i.e. CHF 3.75 million) should have been deposited into
WTO bank account by the end of 2001;
- 75 per cent (i.e. CHF 11.25 million) should have been deposited by the end of March
2002;  and the aim was for
- 100 per cent (i.e. CHF 15 million) to be deposited at the end of June 2002.
39. In addition, a buffer account of CHF 1 million was created out of the 2000 WTO budget
surplus to cover temporary shortfalls in the Trust Fund in case contributions did not keep pace with
activities’ expenses.  The monitoring of the achievements of those mile-stones were jointly entrusted
to the CTD and the Budget Committee.  Since then, the CTD had approved the Co-ordinated WTOSecretariat Annual Technical Assistance Pl an for 2002 (WT/COMTD/W/95/Rev.3) and the
Secretariat had estimated the total cost of that Plan at CHF 17.3 million, after deduction of an
ambitious amount of cost sharing (CHF 5 million) with other institutions, including UNCTAD and a
number of regional development banks.
40. The pledging conference held on 11 March had produced an unprecedented level of pledges
from Members
2.  At that conference, donors had announced pledges totalling CHF 21.2 million to the
Trust Fund for 2002 and a further CHF 3.7 million of earmarked contributions.  Those figuresincluded transfers of existing funds to the Trust Fund, but not those funds for which the Secretariat
had no instructions from Donors to date in terms of a transfer into the Trust Fund.  As the decision
taken in December 2001 made clear, where such funds can be used to support the new Trust Funds'
activities, they would so be used.  Thus, there was scope for the use of funds which were heavily
earmarked still to support the objectives of the Trust Fund overall.  The downside of the otherwise
rosy situation was that funds had been slow in reaching the WTO bank account.  In March 2002, the
Secretariat had to use up to 80 per cent of the buffer account to cover expenses and commitments
which it had already been undertaking according to the Plan.  The balance of the Trust Fund was back
in the black and the buffer account replenished.  The 75 per cent target for receipt at the end of March
had been missed.  The Trust Fund had by the end of March only received CHF 5.3 million ofcontributions instead of the target level of CHF 11.25 million as mandated in the General Council’s
decision.  That was against a level of pledges which was almost 50 per cent higher than the target of
                                                     
2 Document WT/BFA/SPEC/73.WT/COMTD/M/40
Page 10
CHF 15 million initially agreed by Members.  According to the General Council Decision, it was for
the CTD and the CBFA to closely supervise whether those benchmarks had been met.  Furthermore,
when contribution receipt targets were manifestly not met, it was for those to bodies to report to the
General Council and for them to meet on an urgent basis to discuss the matter.  He would therefore
convey the same message to the meeting of the General Council on 14 and 15 May 2002.  By 17 April2002, the total new funds had risen to 7.9 billion and further contributions had been received from
Ireland and Estonia, which brought the total receipts of the Trust Fund up to CHF 8.4 million.
Document WT/BFA/SPEC/73 would be reissued with  any further updates for the meeting of the
General Council.  If there were imminent payments which Members wished to bring to the attention
of the Secretariat, not reflected in the document, he encouraged Members to inform the Secretariat.
41. As a personal final comment he said that the contributions had fallen short of what the
Membership collectively had agreed in December 2001 to pay into the account of the Trust Fund.  Itwas understandable that delays occurred in turning pledges into actual payments.  However, he
recalled that all had agreed when adopting the decision in the General Council to an ambitious set of
benchmarks, with the aim of all funds being remitted to the Secretariat by end of June 2002.  The
reason was that there was a link drawn in the Doha Ministerial Declaration between the availability of
TA and the agreement of delegations to deal with the issues set out there.  It was therefore importantto provide the funds pledged as quickly as possible, to allow the Secretariat to deliver on an ambitious
Plan in a short time.  Delegations owed it to them selves to provide the means for capacity building so
that capacity building could play the positive role in the Doha Development Agenda which was
foreseen in the Doha Ministerial Declaration.
42. The Committee took note of the statement by the Chairman of the Committee on Budget,
Finance and Administration.
43. The Chairman said that there was a slight revision to be made to document WT/COMTD/37.
It had been pointed out that that report on the pledging conference did not directly reflect the
references to Japan's pledge and contribution.  The Secretariat would correct that.
(iv) Report on the 2001 Activities of the Training Institute (WT/COMTD/W/96)
44. The Chairman said that the report on the 2001 activities of the Training Institute, contained in
document WT/COMTD/W/96, indicated that the Training Institute had gone through large changes
and carried out numerous activities in 2001.
45. Deputy Director General Mr. Ravier said that Members would recall that in 2001 the Training
Division had been reconstituted as the Training Institute and that its mandate had been considerably
extended.  That had led to a complex transition period for the Training Institute.  In fact, that
transition period had continued into the year 2002 to  enable the Institute not only to come to terms
with the new functions it had been assigned, but also to adapt to the doubling, under the 2002 budget,
of the three-month trade policy courses held in Geneva which were its main activity until
December 2001.  The report before Members covered the year 2001. He said that in his view that
report provided a clear presentation of the Training Institute's activities.  Nevertheless, he wished to
make two further comments with respect to the document which he hoped would assist Members'
discussions.  First, the Institute had used the second part of 2001 to lay the necessary foundations for
the introduction of a number of new activities.  That largely unseen groundwork consisted, in
particular, of coordinating and harmonizing not only the selection procedures for participants and the
arrangements for their stay, but also the training materials and programmes of the various courses.
Most of those changes would only become visible in the course of the year 2002.  To bring up to datethe information contained in the report (docum ent WT/COMTD/W/96), he provided the following
details for the current year:WT/COMTD/M/40
Page 11
• 4 three-month trade policy courses would be organized in 2002:
− the 19th trade policy course (in English) had been completed almost three
weeks earlier ;
− the 20th trade policy course (in Spanish) would begin the following week;
− the 21st and 22nd trade policy courses (in English) would take place for the
first time in parallel in the coming autumn in the new training rooms, which
would have been fitted out by the end of August.
• 2 three-week WTO induction courses for LDCs would be organized in 2002:
− the first course (in English) had been completed over three weeks earlier;
− the second course (in French) was scheduled to take place, in November.
• 3 one-week specialized courses on Dispute Settlement (in English with interpretation in French
and Spanish) would be organized in 2002:
− the first course had taken place two weeks ago;
− the second course would take place at the end of July;  and
− the third would take place in December.
• 3 WTO induction days would be organized in 2002:
− the first induction day had been held in February;
− the second would be held in May;  and
− the third was scheduled for the autumn.
• A first series of internet-based training courses was due to begin in the coming autumn on the
basis of the results of a pilot scheme.
• The first phase of a Training-of-trainers project had been launched in the spring, for WTO
officials engaged in technical cooperation or training activities.  It was due to be followed at
the end of the year by a second phase designed for officials from developing countries.
• Various cooperation projects with the academic community would be set up over the course of
the year.  To begin with, particular emphasis would be placed on building the capacities of the
African continent.
46. He said he would be in a position to provide Members with more details concerning the
implementation of those various projects at a future meeting of the Committee.  His second comment
concerned coordination between the Training Institute's activities and the technical cooperationactivities carried out by other divisions of the Secretariat.  He pointed out that a TAMC had been
established in June 2001.  That body was currently in operation, providing a link between all the
Divisions engaged in technical cooperation and training.  The activities of the Training InstituteWT/COMTD/M/40
Page 12
presented were thus an integral component of the coordinated approach taken by the Secretariat.  The
WTO Secretariat distinction between technical cooperation and training could appear artificial,
especially as the TA activities would be further enriched by training components.  However, the
current Secretariat structure contained two different Divisions:  one Technical Cooperation Division
charged with the activities outside Geneva and a Training Institute mainly carrying out theGeneva-based activities.  However, there had to be close and constant coordination between the two
and the two were under his responsibility.
47. The representative of Barbados said that the new functions of the Training Institute such as
the training of trainers and distance learning were two mechanisms which seemed important to
facilitate capacity building and allow access to training of ever increasing number of beneficiary
participants.  She asked whether any further information was available regarding how the second
phase of the training of trainers programme would be conducted, through what institutions and withwhat timing.  She recalled from earlier meetings that the Training Institute had hoped to provide
fellowships to allow participants to come to Geneva on a regular basis, and she hoped that the
Training Institute would be able to meet the regular turn-over in the future.
48. The representative of the European Communities said that his delegation had advocated the
idea touched upon in paragraph 13 of the report, which was that, in its training activities the
Secretariat attempted to work, as much as possible, together with the numerous academic institutions
around the world, within the European Communities and within developing countries, who had
didactic expertise to train people.  His delegation wished to hear more about progress in that respect.
He encouraged the Secretariat to cooperate as closely as possible with the established institutions in
the countries concerned who had the specific knowle dge required in training when implementing the
new training-related activities.  There were synergies to be made in making the best use of joint
programmes and joint modules.
49. The representative of Switzerland said that he wished to raise a point on which he saw
synergies with the following point on the Agenda.  The Training Institute had a project, mentioned in
paragraph 11 of the report, to train WTO staff involved in the delivery of TA.  It would be beneficialif, during those training courses, there were consideration and discussion regarding how to implement
the suggestions in the report by the Technical Coope ration Audit.  The training of trainers courses
were the ideal place to creatively tackle the suggestions by Technical Cooperation Audit.
50. The representative of Uganda said that he wished to emphasize the importance of the
synergies with other organizations referred to in paragraph 14 of the report.  There was an example
from the recent training course where, after the training course, there had been a meeting with some
representatives and the Commonwealth Secretariat to  discuss how the training could apply to their
countries.  Cooperation with other organizations would provide participants with more in-depth
knowledge of the issues covered in the training co urses.  He encouraged further such cooperation and
agreed with the delegation of the European Communities about the usefulness of cooperation between
the WTO Secretariat and the academic community, in particular in developing countries, as
mentioned in paragraph 13.  His delegation encouraged increased such cooperation.  The training theDirector General had proposed for Nairobi and Rabat would go some way to strengthen indigenous
capacity.
51. The representative of Djibouti asked how the distance learning courses would benefit certain
countries and continents with weak infrastructure.
52. The representative of Thailand said that, as a former beneficiary of the training courses, she
was pleased to hear about the progress of the Training Institute.  She asked whether the Training
Institute would be given additional funding to increase the number of participants.  The courses given
were important for developing countries.  The cooperation with other institutions and academiaWT/COMTD/M/40
Page 13
mentioned in paragraph 13 was important.  At the Pledging Conference, her delegation had mentioned
that the Government of Thailand, in cooperation with UNCTAD, had established the International
Trade-Related Training Institute at the Chualalongkorn University.  That was a well-known university
in Thailand with good facilities to hold training courses, in particular on trade-related issues and she
urged the WTO Training Institute to cooperate with it for possible regional training.
53. Deputy Director General Mr. Ravier said that what he had presented was a list of activities of
the Training Institute.  Those activities were in the process of being profoundly renewed, diversified
and extended.  The aim was to have an Institute which could provide a large range of activities in
order to respond to Members' varying needs.  On e of those was the cooperation with universities.
That was the fastest growing area of the Training Institute's activities and the area which would
develop the most in the near future.  One of the reasons for the creation of the more independent
Training Institute was to facilitate a deepened cooperation with universities.  There were almost dailycontacts between the WTO Training Institute and various other training institutions and universities
which asked to collaborate with the WTO Training Institute.  One of the current tasks of the Training
Institute was to see how to build the network with all those institutions.  The idea was to have contacts
with institutions all over the world.
54. The representative of the Arab Maghreb Union asked whether it would be possible for his
organization to have access to the training of trai ners programme.  He also wished to know if the
seminar to be held in Rabat would be open to re gional organizations.  The Arab Maghreb Union had
its headquarters in Rabat.  He reminded delegations that before the Doha Ministerial Conference, the
Arab Maghreb Union had called for a symposium on the Doha Agenda.  His organization maintained
the request, but with the topic of the post Doha Work Programme.
55. Mr. Claude Mercier, Director, the WTO Training Institute said that numerous fruitful contacts
had been maintained with a large number of academic institutions, both in developed and in
developing countries.  The Training Institute was in the process of finalizing a strategy as the large
number of contacts required adequate responses within the means at the disposal of the Institute.  The
various parameters that would guide the institute in its contacts with other institutions were beingfinalized.  The main emphasis was on academic institutions in developing and developed countries
which had strong collaboration networks of contacts and cooperation with developing countries.  The
WTO Training Institute had not been able to move faster in that respect as that activity was not
funded.  It was the only activity which had been left out of the budget and the Doha Development
Fund.  His small team was doing its best with the means available.  It was anticipated that the
networking with universities would at some stage ov erlap with the training of trainers programme.  It
was unavoidable that links would have be made with established learning institutions as the passingon of knowledge was the basic concept of the training of trainers programme.  The university
networking would link to activities such as the trai ning of trainers but also to the distance learning
Internet-based courses.  The second phase of the training of trainers would be a more complex one
than the first one.  The first step was to train th e WTO personnel to improve their training delivery
and design capacity.  It was in that respect mostly a presentation skills course.  Phase two includedtraining officials from governments and possibly universities to become trainers.  They should acquire
the same presentation skills.  However, that presupposed that the "trainers to be" already were experts
in WTO matters.  Phase two was thus both presentation skills training and training in presenting the
content of the WTO Agreements in a better way.  Instead of the three-day training provided to WTO
staff, they would receive a more than two week, or ev en longer, training.  The plan of how to go about
the second phase was still under consideration.  One decision that had to be taken was whether to
bring the participants to Geneva or whether there would be training in the regions or the countries.
Another element under consideration was to use the former participants in the regular training
programmes who had since been based in capitals.  As they already knew much about the WTO, they
were ideal trainers.  The aim was to have a definitive plan at the end of 2002.  The Secretariat wouldbe able to say more about it at the July or October meetings of the Committee.  There had been aWT/COMTD/M/40
Page 14
question regarding fellowships and if the WTO would continue to grant them.  He was happy to
confirm that that was the case as the fellowships came under the regular budget.  The regular budget
had even provided for an increase in fellowships, in addition to the more stable and sustainable
financing.  The regular activities did not yet include the recent initiative of the Director-General for
regional courses in Nairobi and Rabat.  Those were to be financed separately and they had not beenincluded in the regular budget or the Global Trust Fund.  There was no change in the policy with
respect to the granting of the regular fellowships.  Regarding distance learning and the participation in
the pilot phase, he said that a group of between 60 and 65 people had been selected from former
training course participants and other colleagues in capitals who had offered to help adjust and
improve the distance learning programme.  An assessment was to be made after the six weeks.  It was
a new activity and the WTO wished to do it well.  The software and the user-friendliness of the
material had to be tested.  That was why the Institute proceeded with an initial pilot project before itwas expanded.  The first real course would be launched in the fall of 2002.  How to select the
participants for that course would have to be decided.  However, the number of potential beneficiaries
from that kind of activity would be limited only by the number of tutors that could be guaranteed at
the WTO, as the programme was based on two-way communication.  The participants had to have
access to a tutor at the WTO or elsewhere, e.g., professors at a university.  Ultimately, all developingcountries would be touched by the programme.  As to the university networking, a number of ideas
had been received following the request by the Director General for places where training could be
carried out. There had been responses from Latin America, various parts of Asia, the South Pacific
region and central and eastern European countries as well as from Arab countries.  The potential was
there but the Training Institute had only begun to look at them and what would become the overallpolicy of networking with universities.  At the mome nt, the main effort was focussed on organizing, at
short notice, the two courses in Africa in the summer  of 2002. On another matter, he recalled that the
second joint course between the WTO Training Institute and the Commonwealth Secretariat had
recently been held.  It was a special programme of two weeks held at the end of the three-month
training course.  The participants seemed to have enjoyed the specific, tailor-made programme.Lastly, the question of whether regional organizations would be invited to the courses in Rabat and
Nairobi had not yet been considered.
56. The representative of Mauritania said that his delegation was satisfied with the direction in
which the WTO training activities were developing.  His delegation supported the request made by
the representative of the Arab Maghreb Union as the regional dimension was essential for the
multilateral trading system and as the WTO and its Members would gain from developing synergies
with regional organizations.
57. The representative of Tunisia said that his delegation supported the request made by the
representative of the Arab Mahgreb Union regarding the participation of that organization in the WTO
training activities in Rabat.
58. The Committee took note of the report and the comments made.
(v) Technical Cooperation Audit Report 2001 (WT/COMTD/W/97)
59. The Chairman said that it was the first time the CTD had received a report from the Technical
Cooperation Audit.  The report for the activities carried out in 2001 was contained in document
WT/COMTD/W/97.  The author was Mr. Paul Roli an, Director of the WTO Technical Cooperation
Audit.
60. Mr. Paul Rolian, Director of the WTO Techni cal Cooperation Audit said that the CTD had
before it in document WT/COMTD/W/97 the first annual report of the Technical Cooperation Audit.
The report covered the period from February 2001, when the function had been created, to
31 December 2001.  Judging from the repeated references that had been made by Members to theWT/COMTD/M/40
Page 15
importance of a system of evaluation for the WTO TA programme, that report responded to a real
need that had been identified by Members.  He hoped that the report could serve as a basis for
discussion and guidance from Members both for future TA activities and for the evaluation thereof.
He would confine his introductory remarks to highlighting three main points.  The first concerned the
context or, the background.  The report recalled that the year 2001 had been a year of transition.  Notonly was it the year in which the evaluation function had been established, in response to Members'
clearly expressed desire, but it had also been the year, in October, in which the strategy for WTO TA
had been debated and approved  in the CTD, giving a new direction to that aspect of the WTO's work.
Reflecting those changes, the Technical Cooperati on Division had been reorganized and had absorbed
the unit dealing with the IF and LDCs.  The Training Division had been renamed the Training
Institute and given an expanded mandate.  A TAMC had been created as had a focal point in each
Division, responsible for TA matters.  Some 400 TA activities, more than ever before, had beencarried out.  That was also the year that saw an en d to the debate that had not entirely subsided as to
whether TA was or was not a core function of th e Organization.  Certainly, the Doha Development
Agenda could leave no doubt that it was.  As the report pointed out, those developments were not
merely of academic interest.  In the absence of agreement on the legitimacy of TA as part of the
mandate of the WTO, it would have been difficult to conduct a strategically coherent programme ofTA, and even to evaluate it.
61. He continued by saying that his second point concerned the question of methodology.
From 1999, work had begun on the development of a monitoring and evaluation system for WTO TA,
with the assistance of a consultant.  That work had been promising but had been abandoned before
being completed when the consultant left the Organization.  When the TCA had been established,action had therefore been taken to revamp the function of TA monitoring and evaluation.  In doing so,
due account had been taken of the work that had been carried out prior to February 2001, as had been
the high priority given to TA by Members and the TA Strategy adopted by the Committee.  The main
conceptual work had therefore been the development of a methodology for the evaluation of WTO's
TA, to reflect the specific nature of that assistance.  He acknowledged the contribution made by theDepartment for International Development of the UK Government, which had sponsored that work
through a dedicated trust fund.  The methodology that had been approved by the Director-General was
briefly outlined in paragraphs 9 to 14 of the report, but the full methodology, which was in the
Director-General's Notice to Staff (OFFICE(02)/40) , had been distributed to Members as well.  In
relation to the methodology, three observations could be made:
(a) The WTO's TA portfolio consisted of a large number of activities (around 400 in
2001 and over 500 in 2002) almost exclusively in the form of training andcapacity-building, which were of short duration and covered a great number of
different topics, i.e. they were fragmented.
(b) Because WTO TA was of that nature, the more common forms of evaluation
methodology had not been found to be entirely relevant.  One of the most challenging
aspects of evaluation in the WTO context was to establish yardsticks for measuringlong-term impact.  The methodology addressed both that aspect and what had been
called process aspects, for which criteria of success were easier to determine in terms
of long-term sustainability.
(c) The resources devoted to evaluation were limited in relation to the number of
activities that had to be covered.  That was why the methodology envisaged a sharedresponsibility between the Technical Cooperation Audit and the providers of TA.
Inevitably, most of WTO's TA would be the subject of self-evaluation by the
providers themselves, and the methodology went into some detail in setting out the
framework for such self-evaluation.  The fact of the matter was that without self-
evaluation, if only the resources of the TCA were to be used, the basis for drawingWT/COMTD/M/40
Page 16
any conclusions about WTO TA would simply be insufficient.  The role of  TCA
would be inter alia to conduct evaluations on a broader basis, bringing together
information and drawing lessons from the self-evaluations and from its own, more
generic studies.
62. He went on to say that the third main point that the report drew to the attention of the
Committee concerned some of the observations made and the lessons learned  during the first year of
operation.
(a) The first of those was that over all, the quality of execution of WTO's TA was high.
It was not just the Auditor who said that;  it had been confirmed consistently in
feedback from participants and in consultations with representatives of beneficiary
Members.  WTO staff were on top of that aspect of their work, professional in their
approach and dedicated to what they were doing.  It was worth recalling in thatconnection that most of them were not hired for their skills in delivering TA, and that
in the period under review the pressure on them of competing work priorities
remained high.
(b) The second observation was that making TA successful called for a cooperative effort
between the WTO Secretariat (providers) and Members (beneficiaries).  Thatcooperation could take several forms, from purely practical ones – pre-activity
logistics, meeting room arrangements, security, back-office assistance, hospitality,
etc. – to more substantive issues relating, for example, to the selection of participants
in WTO TA activities.  Appropriate selection of those who would participate in
training activities meant that those activities would have a greater chance ofproducing substantive results than they would otherwise.  In a demand- and Member-
driven context, the selection of participants was obviously a matter for Members, but
they could and do enhance the impact of TA activities when they ensured that those
who participated really were concerned in their day-to-day work by the issues under
discussion, and were likely to remain in the trade business.  More outreach to sectorsother than government also turned out to be a factor which adds value to TA.
(c) Third, TCA had observed that there was a need for the Secretariat to continue to
focus on what was termed "upstream" activities, namely analysis of the needs of
Members and design of TA.  For example, the report made the point that a simple
thing, such as clearly setting out the objective that was being sought in a given
activity or cluster of activities, should be an automatic step in planning for TA.  The
identification of needs could rely on more than just the input from Members;  TPRreports, the work of Committees, and cooperation with other agencies might also be
factored in.  Thinking about objectives had to begin early in the process of
determining the programme of activities.  The DDA and the strategy for TA would be
helpful in that respect.
(d) Fourth, with regard to sustainability, which was the most difficult aspect to evaluate,
there had been confirmation that the value of TA was enhanced when beneficiaries
recognised that they had more than a passive stake in the process.  The success of TA
activities over the longer term would depend on factors such as the following:
(i) beneficiary governments had national strategies that ensured that participants
and other stake holders gained maximum benefit from WTO TA;
(ii) beneficiaries continued with their own capacity-building activities even after
WTO TA had ended, in order to consolidate and extend the results;WT/COMTD/M/40
Page 17
(iii) beneficiaries took steps to ensure that WTO TA activities were extended
beyond the immediate recipients to other government and non-governmental
actors in the national context.
(e) Fifth, at almost every TA activity that TCA had attended, remarks had been made
concerning the fact that the WTO type of assistance addressed only one aspect of thetrade capacity deficit faced by developing countries, and in particular by LDCs.
Those remarks echoed those that had been made also in the Committee.  Having a
fuller understanding of the Agreements and rules underpinning the multilateral
trading system was important, but so was having concretely the possibility of taking
advantage of the opportunities that were beckoning, or at least overcoming the main
obstacles to trading more.  While TA evaluation had not focussed particularly on that
aspect, it would be interesting to observe the extent to which, for example, the idea ofmainstreaming WTO policy into national policy, and the IF programme could
constitute a response to that concern that was so deeply felt.
63. Much had been done in 2002 as well that would have an impact on TA activities;  the
preparation of an annual plan specifically tied to the Doha Development Agenda, and a pledging
conference that had produced commitments almost double those of previous years, would have animpact on TA activities, was would the onset of mandated negotiations.  But that was for future
reports.
64. The representative of Switzerland said that his delegation did not consider the auditing
mechanism and such reports as instruments for criticizing those providing TA, but as a means of
learning and improving the TA provided.  The recommendations of the TCA seemed useful and hisdelegation expected that they be seriously taken into consideration and that there would be follow-up
upon them.  Mr. Rolian had provided a comprehensive overview and had outlined the main findings.
However, he said that four aspects were of particular importance to his delegation.  The first was the
need to set clear objectives for the various groups of TA.  Close dialogue with the beneficiaries could
assist in setting such objectives.  As a second point, his delegation would welcome continued effortsin defining the tasks of, and the interface between, the operational divisions and the TC Division.  His
third point was that the selection of the participants in the different courses was crucial.  Increased
attention had to be given to that aspect, both by the Secretariat and by the beneficiary countries.  It
might help to analyze the reason why participants in the Trade Policy Courses seemed to remain
longer in the trade area than participants in other courses.  Collaboration between the WTO and
agencies specialized in networking, such as the International Centre for Sustainable Development
(ICSTD), might therefore be helpful.  As the four th point he said that his delegation supported the
ideas mentioned in the last chapter of the report under the heading "Lessons Learned", although his
delegation was aware that they were not easy to implement.  However, some reflection on them was
worthwhile.  That included the suggestion that expa nding the duration of the seminars at the expense
of reducing the overall number of seminars, would, in the long run, prove beneficial for all.  Given the
Doha Work Programme and the pressing need for TA related to it, it was probably not somethingwhich could be done in 2002 or 2003.  Nevertheless, it should be kept in mind for the future.
65. The representative of the European Communities said that his delegation was one of those
which had underlined the need for more coherence and improved evaluation of WTO TC.  It was not a
coincidence that one of the European Communities' Member States had taken the initiative to pay for
much of the preliminary work of the Technical C ooperation Audit.  His delegation therefore remained
attached to that exercise.  He noted that the basis for the audit had been nine projects and forty
back-to-office reports.  His delegation would appreciate it if the basis would be broader the second
time.  However, it was a good start.  A more in depth analysis of some of the issues involved would
be helpful in the next report.  For example, paragraphs 17 and 21 dealt with the important question of
demand-drivenness and objectives.  His delegation found it worrying that paragraph 17 stated thatWT/COMTD/M/40
Page 18
"Members are on the whole receptive to discussing with the Secretariat priority areas and other details
based on the Secretariat's experience".  That did not correspond to his delegation's mainstreaming
dogma which was firmly established and which stipulated that measures planned and objectives set
should be part of the overall development strategies of the beneficiaries.  His delegation would be
pleased if more could be done to deepen that important preliminary step before other measures weretaken.  The question of sustainability had been highlighted by other delegation.  It would be a key
point to follow up on to see how difficult it might be to measure success, track the impact and see how
WTO TA could be improved.  More than ever after the Doha Ministerial Conference and the
commitments made there, Members were under pressure to live up to the TA commitments made and
had to ensure that the activities were effective.  The report of the TCA would help delegations answer
the question whether the TC provided had been effective or not.  He therefore encouraged the
Secretariat to continue on the chosen track.
66. The Committee took note of the oral report and the comments made.
D. CONSIDERATION OF ARTICLE XVIII A S MANDATED BY PARAGRAPH 12 O F THE DOHA
MINISTERIAL DECLARATION (WT/MIN(01)/D EC/1), T HE DECISION ON IMPLEMENTATION -
RELATED ISSUES AND CONCERNS (WT/MIN(01)/17), A ND IN CONJUNCTION WITH TIRET 3
OF JOB(01)/152/R EV.1 O F 27 O CTOBER 2001
67. The Chairman said that in paragraph 1.1 of the Decision on Implementation-Related Issues
and Concerns (WT/MIN(01)17), Ministers had reaffirmed that:
 "… Article XVIII of the GATT 1994 is a special and differential treatment provision
for developing countries and that recourse to it should be less onerous than toArticle XII of the GATT 1994."
The need to revisit Article XVIII was originally recognized in tiret three of Job(01)/152/Rev.1 of 27
October 2001 which stated that:
"A complete review of Article XVIII shall be undertaken with a view to ensure that it
subserves the original objective of facilitating the progressive development ofeconomies in developing countries and to allow them to implement programmes and
policies of economic development designed to raise the general standard of living of
their people."
Tiret 1 of the same document (Job(01)/152/Rev.1) stated that:
"only the Committee on Balance-of-Payments shall have the authority to examine the
overall justification of BOP measures."
He said that it was his understanding that th e Committee on Balance-of-Payments was considering
section B of Article XVIII and would report to the General Council at the end of the year 2002.  It
was now up to the CTD to consider what should be done with regard to the remaining elements of the
Decision of Ministers adopted at the Doha Ministerial Conference relating to Article XVIII of GATT.
68. The representative of the United States said that her delegation reserved its position on the
issue of which was the appropriate WTO body for dealing with tiret 3.  Her delegation was not
persuaded that the CTD would be the appropriate bo dy to address that tiret.  However, for the
purposes of fulfilling Member's obligations in 12.(b) of the Doha Ministerial Declaration, her
delegation would not oppose having a discussion in the CTD on Article XVIII, excluding
Article XVIII:B handled by the Committee on Balance of Payments, and proceed to the reportWT/COMTD/M/40
Page 19
required in 12.(b).  The Council for Trade in G oods (CTG) might be the more appropriate body for
dealing with Article XVIII:C.
69. The representative of India said that before she would reintroduce the proposal set out in
document WT/GC/W/63 and recalling the discussion s on sections A and C of Article XVIII, she
sought clarification from the Secretariat in light of the comment made by the representative of theUnited States.  She wished the Secretariat to comment, in view of the terms-of-reference of the CTD,
on whether issues related to governmental assistance to economic development, which was the title of
Article XVIII, were to be dealt with in the CTD.   Her delegation observed that sections A and C of
Article XVIII, and Section 4(a) specifically, were limited to economies which could only support low
standards of living and were in the early states of development.  That meant that Article XVIII was a
development provision.  She asked the Secretariat to clarify whether the CTD was the relevant body
by reference to paragraph 12 of the Ministerial Declaration.
70. The representative of Argentina said that his delegation did not mind Article XVIII being
discussed per se , and he did recognize the existence of a proposal in that context under
implementation.  However, in light of the heading of the Agenda item, he stated that his delegation
did not recognize document Job(01)/152/Rev.1 to have any status in the context of the Doha
Ministerial Declaration.
71. The representative of India referred to footnote 2 of the Decision on Implementation-Related
Issues and Concerns, which stated that "A list of these issues is compiled in document
Job(01)/152/Rev.1."  The issues referred to were to  be deemed as outstanding implementation issues.
That Job-number document drew its status and relevance from a ministerial decision.
72. The representative of the United States said that it was her delegation's understanding that
Article XVIII:C, in various forms, had been handled in the CTG.  Delegations might benefit from
further research as to how it was handled in the GATT.  However, her delegation did not oppose
consideration of the implementation proposal.  The reference in the footnote mentioned by the
representative of India was to define what constituted an outstanding issue for purposes of the
implementation exercise.
73. The representative of Canada said that although his delegation agreed to discussion of the
implementation proposal in the CTD, it was without prejudice as to what constituted the appropriate
body to examine issues arising under GATT Article XVIII.
74. The Chairman said that the delegation of Bangladesh had sought protection under
Article XVIII:C for selected categories of commodities.  However, his delegation had not selected the
body to which the matter would be referred.  His delegation had only forwarded its request to the
Director General of the WTO who, in turn, had referred it to the CTG.  That was why the notificationof Bangladesh had appeared in the CTG.  Howeve r, that was in a different context than the Doha
Ministerial Declaration.
75. A representative of the Secretariat said that tiret 3 referred to a review of Article XVIII which
might be understood to be different from the question of whether any delegation wished to make use
of the provision.  As the review under tiret 3 was a different question, it might not be possible to drawon past experience for guidance.
76. The representative of India said that her delegation appreciated that history would not provide
guidance on the relevance of the CTD in that respect.  However, the CTD's own terms of reference
might give some light.  Her delegation attached importance to the issue and wished to see that it be
dealt with in the manner in which the ministers at the Doha Ministerial Conference had required it tobe dealt with, which was to provide a report by the end of the year 2002.WT/COMTD/M/40
Page 20
77. The Chairman said that he understood the Secretariat's problem in providing a factual position
immediately on the subject.  He therefore requested the Secretariat to provide historical background
on the question raised by the representative of India.  He would arrange for consultations on the issue
and it would remain on the Agenda of the CTD until a decision on how to handle it had been taken.
78. The representative of India said that that approach was acceptable as long as the discussion on
the matter was suspended in order for expeditious consultations to be held.  It was urgent to deal with
the issue and her delegation did not wish it to be postponed.
79. The representative of the United States could accept to suspend discussions on the condition
that the suspension did not affect treatment of Article XVIII:C in other fora.  More specifically, she
referred to Article XVIII:B issues dealt with in the Committee on Balance-of-Payments and other
Article XVIII:C issues.
80. The Chairman said that he had understood that invocations of the different sections of
Article XVIII were different matters from what was supposed to be addressed under the Doha
Ministerial mandate.  Article XVIII:C issues raised by the delegation of Bangladesh would continue
to be handled in the CTG without prejudice to what was happening in the CTD.
81. The representative of Sri Lanka said that it had to be kept in mind that the CTD was the body
overseeing all special and differential treatment provisions.  Article XVIII was a particularly
important special and differential treatment provision.  The CTD therefore had a role to play in that
regard.  A special session of the CTD had been created to deal with issues related to special and
differential treatment.  Special and differential treatment was a matter for the CTD.  However,
whether it was dealt with in the special or regular sessions did not matter as the objective of
enhancing the utility of those provisions remained the same.  She agreed that consultations on thematter would be useful and that the discussion should be suspended.
82. The Committee suspended discussions on the item and requested a factual report by the
Secretariat on the issue raised by the representative of India.  It also decided to hold informal
consultations on the matter.
E. REPORT OF THE SEMINAR ON REVENUE IMPLICATIONS OF E-C OMMERCE
83. The Chairman said that many delegations might have attended the seminar which had been
organized under the auspices of the CTD.  The theme chosen by delegations had been "Revenue
Implications of E-commerce".  In his absence, Ambassador Whalen of Ireland who was the chair of
the Services Council had agreed to chair the seminar.
84. The text of Ambassador Whalen's short oral report and her extensive written report are
annexed to this report.
85. The Committee took note of the oral report.
F. REPORT ON THE INTERNATIONAL CONFERENCE ON FINANCING FOR DEVELOPMENT
86. The Chairman said that, in the absence of deputy director general Mr. Ablassé Ouedraogo,
Mr. Patrick Low, Director of the Development and Economic Research Division would provide the
Committee with a report of the International Conference on Financing for Development.WT/COMTD/M/40
Page 21
87. Mr. Patrick Low, Director of the Development and Economic Research Division said that, the
International Conference on Financing for Development had been held on 18-22 March 2002 in
Monterrey, Mexico, where the "Monterrey Consensus" had been adopted.  The Monterrey Conference
had marked the first quadri-partite exchange of views between governments, civil society, the
business community, and institutional stakeholders on global economic issues, and key financial anddevelopment issues.  The Monterrey Concensus document, addressed six main themes:  (i) domestic
resource mobilization in developing countries;  (ii) the role of private capital flows;  (iii) the role of
trade;  (iv) international development cooperat ion, including the role of Official Development
Assistance (ODA);  (v) debt;  and (vi) "systemic issues" relating to the framework of international
cooperation on economic, financial and developmental questions.  The document highlighted the
importance of trade and recognized that in many cases, trade was "the single most important external
source of development financing".  The statement by the Director-General to the conference, whichspelt out his views on the importance of trade in a broader development context, had been made
available on the WTO website.  In a section of the Monterrey Consensus document entitled  "Staying
Engaged", all stakeholders had been urged to participate actively in the follow-up to the Conference.
The discussions at the Conference on poverty reduction, development and coherence were being seen
as part of a process which started with the UN Millennium Summit, had been advanced by the WTODoha Ministerial Decisions, and was to be continued with the World Summit on Sustainable
Development, scheduled to be held in Johannesburg, South Africa, in late August/early
September 2002.  The Sustainable Development Summit, was also being seen by some as an
opportunity to have an early stock-taking of the results of the Monterrey Conference and effectiveness
in carrying out the operational aspects of the Mo nterrey Consensus.  Additional information on the
Conference, including the text of the Monterrey Consensus, the Plenary sessions, the twelve
Roundtables and the various side-events might be found at the web-site address www.un.org/esa/ffd.
88. The Committee took note of the statement made.
G. PARAGRAPH 51 O F THE DOHA DECLARATION ON IDENTIFYING AND DEBATING
DEVELOPMENTAL AND ENVIRONMENTAL ASPECTS OF THE NEGOTIATIONS , IN ORDER TO
HELP ACHIEVE THE OBJECTIVE OF HAVING SUSTAINABLE DEVELOPMENT APPROPRIATELY
REFLECTED
89. The Chairman said that Paragraph 51 of the Doha Ministerial Declaration stated that:
"The Committee on Trade and Development and the Committee on Trade and
Environment shall, within their respective mandates, each act as a forum to identify
and debate developmental and environmental aspects of the negotiations, in order tohelp achieve the objective of having sustainable development appropriately
reflected."
The Committee on Trade and Environment (CTE) had already decided to keep paragraph 51 as a
standing item on the Agenda.  At the last regular session of the CTE, delegations had had the
opportunity to come forward with id eas as to how to approach the issue.  It had then been suggested
that the CTE have a first exchange of views on the matter at its October 2002 meeting.  Some
delegations had indicated that they considered it premature to discuss Paragraph 51 at the current
stage of the negotiations.  Further informal consultations would be held in the CTE.  The  CTD also
had to deal with the subject, in accordance with the decision in paragraph 51.  He sought Members'
views on how they wished to proceed with that directive from Ministers.
90. The representative of the European Commun ities said that he wished to present some
preliminary ideas of how to deal with paragraph 51 and he encouraged other delegations to consider
the issue.  His delegation believed that it was a potentially useful paragraph in the Doha DevelopmentWT/COMTD/M/40
Page 22
Agenda as it would allow delegations to have focussed debates on one of the main overall objectives
of the Doha Development Agenda.  The question was where to start and how to make the work
systematic and useful.  His delegation had presented some ideas in the CTE.  Those ideas had not
been very structured and might have been too ambitious.  The first reaction from other delegations
had been to go slow and to think about them furthe r.  What his delegation wished to discuss was the
idea of starting off modestly by providing a basis for how work could proceed.  That had led his
delegation to realize that if any delegate was asked how far  the work on the development dimension
of the Doha Ministerial Declaration had progressed, it would be difficult to respond.  That delegate
would have to ask his colleagues dealing with othe r bodies what they were doing in their respective
bodies, under what items they spoke about development, and how work was progressing.  Because of
that difficulty his delegation suggested some kind of a tracking exercise or all comprehensive exercise
to identify progress in various bodies, focalised and centralised in the CTD.  Some sort of score boardor document that the WTO Secretariat would collect in  interaction with the various bodies.  A state of
play to regularly monitor what happened with respect to development in other bodies.  It would be
one single paper which would regularly be updated which showed what actually was going on with
respect to development, containing short paragraphs of what happened with respect to the IF, TA,
S&D, the Working Group on Trade, Debt and Finance, Transfer of Technology, Small Economies,and the Sub-Committee on LDCs for example.  This paper did not have to be very detailed but should
allow delegations to see the ongoing work in a comprehensive way.  He asked other delegations
whether they thought that it would be useful for the CTD to ask the Secretariat to consider and
explore the idea and suggest the approach to be taken.  His delegation believed that it would allow
delegations to be more specific and to identify themes for focussed discussions on individual itemswhen it became clear how and where progress was being made.  That exercise might also be useful for
providing the public at large with an idea of what happened with respect to development in the WTO.
The round was called the Doha Development Agenda and delegations had to be able to respond to the
question of what progress was being made with respect to development.  His delegation's proposal
was meant to be a tool to assist in that respect by providing a concise assessment through a continuoustracking exercise throughout the negotiations and during the execution of work programmes.  Without
asking for an immediate decision, he asked for other delegations' reactions.
91. The representative of the United States said that her delegation would welcome a consultation
on the proposal by the representative of the European Communities and on how to proceed.  Her
delegation agreed with the general purpose and attitude offered by the European Communities in
relation to paragraph 51 of the Doha Ministerial Declaration.
92. The representative of India said that all Members would need to reflect on the idea put
forward by the representative of the European Communities and on how to proceed with the issue in
the CTD.
93. The representative of Norway said that his delegation supported the proposal by the
representative of the European Communities.  He encouraged reflection on the proposal and
consultations on what would be the most appropriate and practical way of dealing with it.
94. The representative of Canada suggested that there be reflection on the question of cooperation
between the CTD and the CTE as the paragraph 51 mandate and the issue of sustainable development
concerned both bodies.  There had already been some discussion on cooperative reporting in the CTE.
95. The representative of the United States said that her delegation also saw merit, in light of
paragraph 51, in having some kind of relationship between the CTD and CTE.  However, her
delegation envisioned that the chairpersons of the two bodies kept each other informed about progress
in their respective fora.WT/COMTD/M/40
Page 23
96. The representative of Djibouti said that, before moving forward with the issue and
considering future work, it was necessary to evaluate what had already been done.  It was important to
consider how the two Committees could work together and keep delegations abreast of progress.
97. The Chairman said that the matter was complex, given that it covered a wide range of issues
and that two different committees dealt with it.  He had already discussed it with the chairperson of
the CTE and they would continue such consultations.  Delegations seemed to need time to reflect on
how to proceed and on the proposal made by the representative of the European Communities.
98. The Committee agreed that Paragraph 51 of the Doha Ministerial Declaration be a standing
item on the Agenda, and that informal consultations be held on it.
H. ELECTION OF THE CHAIRPERSON OF THE SUB-COMMITTEE FOR LEAST -DEVELOPED
COUNTRIES
99. The Chairman said that the Committee annually had to select the chairperson for its Sub-
Committee on Least-Developed Countries.   The consultations that he had conducted in cooperation
with the Secretariat had resulted in the proposal  for Ambassador Molander of Sweden to chair the
Sub-Committee.  He asked if the CTD could elect Ambassador Molander to chair the Sub-Committee
on Least-Developed Countries.
100. It was so decided.
101. The Chairman said that the Sub-Committee on Least-Developed Countries had, over the past
twelve months, been under the chairmanship of Ambassador Simon Fuller of the United Kingdom.
The Chairman said that as chairman of the CTD, and as a representative of an LDC himself, he
wished to express his deep appreciation to Ambassador Fuller.  Ambassador Fuller had made asignificant contribution to the Sub-Committee and the work of the Sub-Committee had, in turn,
contributed to the process of integrating the LDCs into the multilateral trading system.  The period of
his chairmanship had been a distinctive one during which much was achieved.  The Sub-Committee
had agreed to the substantive contributions of the WTO deliverables to the thematic session on trade
at the Third UN Conference on LDCs
3 which was held in Brussels in May 2001.  In the period of his
stewardship, the Sub-Committee had lent its support to the LDCs in preparing for the ministerial
meeting in Zanzibar as part of the overall preparatory process for the Doha Ministerial Conference.
Above all, the Sub-Committee had appreciated Ambassador Fuller's leadership in the negotiations that
led to the adoption of the WTO Work Programme for LDCs in February 2002.  Ambassador Fuller's
leadership and deep personal commitment had been a critical factor behind the concrete results
achieved.  On behalf of the Sub-Committee he formally expressed appreciation for
Ambassador Fuller's work.  To carry forward the good work, the Sub-Committee was fortunate thatAmbassador Molander of Sweden had agreed to take on the chairmanship and he welcomed his
election as chairman.
102. The representative of Uganda said that, on behalf of the LDCs, he wished to reiterate their
appreciation for the commendable work of Ambassa dor Fuller and the progress the LDCs had been
able to make within the WTO during his chairman ship.  He also looked forward to working with
Ambassador Molander and ensured him of their full cooperation.  The challenge he faced, contained
in the Work Programme for the LDCs, was how to mainstream the programme of action into the
WTO activities in order for the commitments entere d into therein to be fully reflected.  The LDC
group ensured the incoming chairman of their support.
                                                     
3 WT/COMTD/LDC/M/24WT/COMTD/M/40
Page 24
103. The representative of Sweden said that, on behalf of his ambassador who deeply regretted not
to be able to attend the meeting, he wished to express gratitude to Members for electing him
Chairman of the Sub-Committee on Least-Developed C ountries.  It was a great honour for his country
Sweden and for him personally.  The Government of Sweden was fully committed to supporting the
efforts of LDCs to integrate into the multilateral  trading system and the global economy.  In that
regard, the WTO had a significant role to play.  LDC's integration required special consideration from
other Members of LDCs' interests and concerns.  It also required active commitment from LDCs in
the work of the WTO.  He wished to assure Members of the CTD of his deep personal commitment to
the task of LDCs' integration process.  The election was a great honour and a big responsibility, which
he accepted.  He believed that the effective execution of the role required of the Sub-Committee
already was underway with the adoption of the WTO Work Programme for LDCs.  He would attach
priority and his full attention to the implementation of the Work Programme in the Sub-Committee.He recognized that there was substantive work to be done, including focussed attention on market
access opportunities for LDCs; accessions; trade-related TA, including through the IF; and
mainstreaming and following up on Ministerial Decisi ons in favour of LDCs.  He counted and would
rely on the support of the WTO Secretariat and all Members, in particular the LDCs, in moving that
work forward.  The CTD and the Sub-Committee were essential for making the WTO system as awhole respond to the interests of the LDCs.  Finally, as part of the acceptance remarks, he paid tribute
to Ambassador Fuller who had, over the last year, worked to achieve significant and concrete progress
on LDCs' issues, in the Sub-Committee.  He hoped to draw on his considerable experience.
104. The representative of Bangladesh said that during Ambassador Fuller's chairmanship of the
Sub-Committee on LDCs, the delegation of Bangladesh had felt that Ambassador Fuller had
supported and cooperated with them in conducting the business of the Sub-Committee.  The WTO
Work Programme on LDCs, instructed by Ministers of the Doha Ministerial Conference had been
adopted under his chairmanship.  That was a remarkable achievement.  The hard work and sincere
efforts of Ambassador Fuller had helped delegations to adopt the Work Programme.
105. The representative of Djibouti said that his delegation wished to thank Ambassador Fuller for
all he had done for the LDCs, and in particular for his open mind and the easy and direct contacts he
had had with delegations.  His government had always played an important role when it came to
supporting LDCs' development.
106. Ambassador Simon Fuller of the United Kingdom said that it had been a great honour for him
to serve as the Chairman of the Sub-Committee.  The CTD had made the right choice when choosing
his successor.  There was a rule in the British House of Commons that in no circumstances
whatsoever could previous speakers be accused of having been untruthful.  However, some of the
remarks regarding his own contribution to the work of the Sub-Committee over the past year came
close to what Winston Churchill once described in an effort to get around that rule as
"terminologically inexact".  That there had been a solid body of achievements over the past year was
due to his colleagues.
107. The Chairman said that although Ambassador Fuller left the chairmanship of the Sub-
Committee, he would continue to be associated with its work.
I. OTHER BUSINESS
108. The Chairman reminded delegations that the provisional date for the following formal
meeting of the CTD was Monday, 1 July 2002.
109. No other business was raised under this Agenda Item.WT/COMTD/M/40
Page 25
ANNEX I
Seminar on “Revenue Implications of E-commerce”
WTO, Geneva, 22 April 2002
Oral Report by the Chairperson
110. Upon the request by delegations and as part of the Committee on Trade and Development's
Work Programme on Electronic Commerce, a seminar on the topic of "Revenue Implications ofE-commerce" was held under the auspices of the Committee on Trade and Development on Monday,
22 April.  In the absence of the Chairman of the Committee on Trade and Development, I had the
pleasure to chair the seminar.  A more extensive writ ten report will be attached to the minutes of this
meeting.
111. A general introduction to the topic with some recent trends in e-commerce, a description of
the taxation-related issues at stake, what the situation for developing countries looks like and the
WTO perspective were given in the morning session.  In the afternoon, the speakers provided
different country and private sector experiences.
112. Delegations learned that there was a dramatic drop in firm's spending on information
technologies in late 2001 due to the general economic situation but that the private sector expects toincrease technology spending in the near future.  E-commerce's next wave is productivity increases
via the use of technologies.  Firms must thus harness technology to drive productivity.
113. An  overview of the problems raised by taxation of electronic commerce and of the initiatives
that are currently being undertaken to resolve them was presented.  Three technical features of the
Internet and Intranet systems likely to have significant impact on the operations of tax systems are the
lack of central control, the lack of central registration and the difficulty of tracing transactions.
114. It is not sales of tangible products carried out through electronic networks but rather sales of
digital products that raise novel and difficult questions for the collection of consumption taxes.  The
implications of the technological changes for territorially based taxed systems are vast.  First, there is
the sheer increase in cross-boarder transactions.  Second, the digitization of information creates
difficulties in defining the source, origin and destination of both consumption and production.  The
principle challenge is to determine how to implement geographically limited tax systems in atechnological environment that renders geographical borders essentially irrelevant.  The difficulty of
tracing transactions enhances the danger of increased tax avoidance and evasion.  The most significant
issues raised by the advent of e-commerce for income tax regimes are those relating to jurisdiction to
tax and the characterization of income.  The problems concerning the application of consumption
taxes are generally recognized as having more immediacy than the issues concerning direct taxation.
115. Considering 1999 figures, it is clear that the share of digitized products in world trade is
extremely small.  It constitute about one per cent of world exports and imports and about 0.4 per cent
of developing country exports and imports.  The shares of digitized product import revenue of total
government revenue is only about 0.4 per cent in developed countries and 0.6 per cent in developing
countries.
116. Electronic commerce poses both challenges and opportunities for developing countries.  The
challenges includes the potential tariff revenue losses which are higher in developing countries than in
developed countries, although they are still very small in terms of overall government revenue.
However, the potential tax revenue losses from value added taxes are significant in developed
countries.  Developing countries will be net e-commerce importers in the short to medium term.WT/COMTD/M/40
Page 26
117. There was also a presentation of issues related to the classification issue of whether digital
deliveries fall under the GATT or the GATS framework.  The classification issue is important because
of the structural differences between GATT and GATS.  The levels of benefits under GATT can differ
significantly from those availabl e under GATS in the short term.  Questions that need to be
considered in this context include:
1. What are the implications of e-commerce for the promotion of economic
development and what are the implications for development of erecting barriers to e-
commerce?
2. What are the implications for expanding trade and economic growth of legal
uncertainty about how WTO agreements apply to e-business and e-trade?
3. Transparency, legal certainty, predictability and spreading of economic growth
equitably are what the trading system is all about.
4. Does WTO risk falling behind as commercial players continue apace to adopt and
employ the new advances in technology in commercial trade?
118. The afternoon session provided country and private sector experiences.  There was agreement
that e-commerce is business as usual apart from the poorer developing countries who need toconcentrate on the build up of human and physical infrastructure.  Electronic commerce can provide
additional opportunities for development, especially for developing countries losing their comparative
advantage in traditional economic sectors.  Some speakers said that many developing countries stand
to gain much more by maintaining an environmen t in which electronic commerce can flourish, rather
than introducing new, cumbersome and restrictive measures to tax digital products and services andthat they should not stand in the way for the development of e-commerce.
119. Estimates suggest that up to 90 per cent of e-commerce is business to business.  E-commerce
helps reduce the cost of information flows which some companies estimate to 40 per cent of
investment costs, and it can facilitate the harvesting of further benefits from existing systems.
Companies will continue to optimize according to their needs, but will not necessarily exploit the
Internet to avoid taxes.
120. In conclusion it seems that e-commerce poses both challenges and opportunities to developed
and developing country governments and companies alike.  The direct effects on government revenue
through tariff losses seem to be very small whereas the effects on the efficiency of an economy can be
large.WT/COMTD/M/40
Page 27
ANNEX II
Seminar on "Revenue Implications of E-commerce"
WTO, Geneva, Monday, 22 April 2002
Report by the Chairperson of the seminar, H.E. Mrs. Mary Whalen
Introduction
121. A seminar on electronic commerce (e-commerce) was held under the auspices of the
Committee on Trade and Development (CTD) on 22 April 2002.  This seminar was part of the
Committee's Work Programme on Electronic Commerce4 under the overall WTO Work Programme
on Electronic Commerce5.  Three seminars on e-commerce have been organized under the auspices of
the CTD.  Their proceedings have fed into the regular work of on e-commerce in the CTD and
participation has been open to WTO Members and Observers and international intergovernmental
organizations with observer status in the CTD.  The first seminar, held on 19 February 1999, provided
delegations with a general introduction to e-commerce and development under the headings:
"Potential for Electronic Commerce for Businesses in Developing Countries" and "Infrastructure and
Regulatory Issues at the Government Level".6  The 14 June 2001 seminar provided an in depth
analysis of what governments can do to facilitate the use of e-commerce for development.7
Delegations had requested that this year's seminar focus on the revenue implications of e-commerce.A general introduction to the topic with some recent trends in e-commerce, a description of the
taxation-related issues at stake, the situation for developing countries and the WTO perspective were
given during the morning session.  In the afternoon, the speakers provided different country and
private sector perspectives.  (See programme annexed)
122. As background, the Secretariat had provided a bibliography on revenue implications of
e-commerce contained in document WT/COMTD/W/98.  It includes articles, books and working
papers published between 1997 and 2000, as well as the addresses of three Internet sites which offer
interesting papers on e-commerce, taxation issues as well as other related material.  The bibliography
was intended to facilitate delegations' preparations for the seminar and deepening their understandingof the revenue implications of e-commerce.
The private sector perspective
123. Delegations heard that there was a drop in spending on e-commerce in late 2001 due to the
overall economic downturn.  The information technology (IT) boom is over and doing business using
electronic means is business as usual for the private sector.  However, the decrease in the spending on
e-commerce is not a sign of a lack of interest in information technologies on the part of company
executives.  It is rather due to the limited availability of financial resources.  The private sector
experimented with information technologies in the 1995-2000 period, which led to the over-spendingthat created the IT "bubble".  Firms currently tend to spend on internal information technology rather
than on external e-commerce. Nevertheless, the private sector expects to increase technology
spending over the next few years.
                                                     
4 WT/COMTD/35.
5 The WTO Work Programme on Electronic Commerce, adopted by the General Council on 25
September 1998, is contained in document WT/L/274.
6 The report of the 1999 seminar can be found in document WT/COMTD/18.
7 The report of the 2001 seminar is an attachment (beginning on page 32) to document
WT/COMTD/M/35.WT/COMTD/M/40
Page 28
124. Even companies dealing in physical products such as oil and gas use e-commerce.  In order to
be competitive in a market where mergers and acquisitions are daily affairs, companies need to be
global and use e-business.  Globalisation of large business affects both developed and developing
countries.  It is becoming increasingly expensive to extract oil.  It is therefore necessary to reduce
costs to be competitive.  One way is to reduce costs of extraction and refining.  Another is tomaximize the use of scarce and dispersed resources.  New information and communication
technologies (ICTs) are useful in that respect.  Firms take advantage of the technical advances that
ICTs provide and have completely different ways of transferring information than just a couple of
years ago.  They need to innovate with the use of modern technologies to lower transaction costs and
improve market information to deal with intensified competition.  ICTs are also used to identify best
practices, to mitigate risks, and in training.
125. The large majority of on-line trade is going to be business-to-business (including raw
materials to manufacturing and manufactures to distribution) rather than business-to-consumer
e-commerce.  It will not only involve business-to-business trade in developed countries but also
between developed and developing county companies and among developing country firms. Business-
to-business e-commerce is shown to have taken off much faster than business-to-consumer trade.
Reasons given include the diversity of consumers, geographical differences, and consumer concernson security issues.  Estimates suggest that over 90 per cent of e-commerce is business-to-business.
Apart from business-to-business and business-to-consumer e-commerce, firms are also using e-
commerce internally.  E-business includes e-learning and e-collaboration where electronic contacts
replace physical presence, always with the aim of re ducing internal and external transaction costs and
achieving better, quicker, safer and cost-efficient information flows.  Even in "physical" activitiessuch as building an oil field, information costs amount to 40 per cent of total costs.
126. Forrester expects that the next development in e-commerce is going to be driven by
companies using the technology already acquired to increase productivity.  That firms currently do not
have the new resources to spend does not mean that they can not make productivity gains.  Forrester
forecasts that firms using net-based technologies to  streamline procurement have the potential to add
about 15 per cent productivity by 2012.  It has to be noted that these productivity gains are not
immediate.  It will take at least five years before the productivity gains begin to become visible.
127. The future "executable Internet" will be more interactive and create a conversation with the
user rather than only providing answers as is the case with today's Internet.  It will also be "extended"
in that it will be able to link the digital world to the physical world.  One example is using tags as
sensors and through radio frequency identification (RFID) or global positioning system (GPS) make
the supply chain more efficient by keeping track of trucks, their content, the traffic situation and thedemands of different storage areas.
128. The Internet creates a demand for new products and services.  Tangible goods will become
digitised and transformed into services.  Instead of buying a pipeline, an oil company might in the
future buy a "guaranteed flow-through" service.  The service provider would, through digitised
monitoring from anywhere in the world, ensure a sa tisfactory flow.  Many of these kinds of services
are today provided from the United States.  However, it is possible that such service providers will
move to developing countries with good infrastructure but lower costs in the near future.
129. Taxation on procurement of tangible goods across borders has led to consolidation of
suppliers and created opportunities for good local suppliers in new markets.  There are other effects of
taxation on procurement of intangible goods across bord ers.  Internet is a powerful delivery platform.
Intellectual property will be distributed using the Internet, Intranet and  Extranet but will be difficult
to track.  From the business perspective, they are efficient as travelling employees can have remote
access to the company software for example.  Co mpanies can optimize according to their needs by
managing access through corporate wide Intranet for example.  In the services area, companies canWT/COMTD/M/40
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buy services from people still located abroad as their services can be transferred digitally, instead of
bringing skilled people to their offices.  Companies will continue to optimize the use the Internet as a
transaction, delivery and communication tool according to their needs, but will not necessarily exploit
the Internet to avoid taxes.
E-commerce challenges to taxation regimes
130. An overview of the problems raised by the advent of e-commerce for taxation, and of the
initiatives that are currently being undertaken to resolve them was presented.  The implications of
technological changes for territorially based taxed systems are vast, partly because of the sheer
increase in the number of cross-boarder transactions.  Second, the digitization of information creates
difficulties in defining the source, origin and destination of both consumption and production.  Theprincipal challenge is therefore to determine how to implement geographically limited tax systems in
a technological environment that renders geographical borders essentially irrelevant.  E-commerce
influences the operation of tax systems in several ways.  It:
- has the ability to establish public and private communication systems on a global
basis;
- reduces the need for intermediaries in business transactions;
- enables encrypted communication;
- integrates business functions such as design and production;
- provides greater flexibility for international business organization;  and it
- leads to the physical disintegration of economic activities (location of supplier,
provider, user, customer).
131. Four technical features of the Internet and Intranet systems likely to have significant impact
on the operation of tax systems are:
- the lack of central control;
- the lack of central registration;
- the difficulty of tracing transactions;  and
- the weak correspondence between domain names (Internet address) and actual
location.
132. One of the most significant issues raised by e-commerce for income tax regimes is related to
jurisdiction.  Countries generally exercise jurisdiction over taxable income on the basis of residence orsource.  Both are likely to become more elusive with e-commerce. “Permanent establishment” and
"fixed base" are difficult to determine w ith respect to electronic transactions.
133. The difficulty of tracing transactions and verifying the parties to a transaction also enhances
the danger of increased tax avoidance and evasion.  Insofar as a jurisdiction is relying on the residence
principle as the basis for taxation, e-commerce will provide enhanced opportunities to move incomeout of high-tax jurisdictions.  Source-based taxation is at least as difficult, as e-commerce does not
seem to occur in any particular physical location but takes place in the nebulous world of cyberspace.
134. Another problem for income tax regimes is the characterization of income.  E-commerce is
generating countless transactions that raise income characterization issues whose resolution is
uncertain under existing categories of income.  The characterization of income either as royaltyincome or as business profits might have important implications for developing countries and
countries in transition.  For example, a developed country company might have some kind of
subsidiary in a developing country that uses and pays for the services of a database from the main
company.  The main company could then attempt to have that income classified as business profits inWT/COMTD/M/40
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order to avoid to pay tax in the developing country, claiming that it does not have any permanent
establishment in that country.  The developing country government could argue that the payment in
question is royalty income and that it has the right to impose a withholding tax as the source of the
royalty income would be the developing country.  On e important question with respect to direct taxes
is thus what the appropriate rules are for the division of the taxable income between differentcountries.
135. Abandoning the source-based principle in favour of the residence-based principle in the
context of e-commerce would violate accepted international norms of tax policy.  In addition, it is by
no means clear that residence-based taxation provides a panacea for the difficulties of assigning
income from e-commerce on a source basis.  A residence-based rule raises troublesome questions of
international tax equity.  A shift to residence-based taxation would be a boon to the United States as
the world’s leader in the production of electronic content.  The reduced need for a seller or serviceprovider to have a physical presence in the country of the customer threaten to shift the balance of
taxing jurisdiction and revenue in favour of the country of residence.  Since income flows between
developed and developing countries often are severely out of balance, such a shift could have
significant revenue consequences.
136. A third problem for income tax regimes is the potential for transfer pricing.  Defining the
price of a physical good transferred between related enterprises might be difficult enough.  Defining
the price of digital transfers is even more difficult as the units within which the transfers are made are
difficult to trace and as the value might to a large extent be intangible.
137. The problems concerning the application of consumption taxes are generally recognized as
having more immediacy than the issues concerning direct taxation.  In examining the impact of e-commerce on consumption taxes, a distinction should be made between value added taxes (VAT) like
those adopted by members of the European Union and the retail sales tax (RST) in force in the United
States.  The problems created by e-commerce for indirect taxation are in many ways analogous to
those for direct taxation.  For example, the jurisdictional problems of getting remote vendors into the
taxing regimes are the same.
138. It is not business-to-business or business-to-consumer sales of tangible products effected
through electronic networks that raise novel and difficult questions for the VAT, but rather business-
to-business and business-to-consumer sales of digital products.  Although the large majority of
e-commerce transactions are business-to-business, it is the business-to-consumer sales of digital
products which has drawn most attention.  There is not yet any perfect system for the collection of
indirect taxes on electronic deliveries. Consumers might have to self-assess how much VAT they are
obliged to pay.  Software to trace transactions is available, although expensive.  It is a question of theprice the user is willing to pay for the accuracy sought.
139. Characterization is important because liability for the VAT depends on the place of supply,
and the determination whether a supply is one of goods or services is critical in determining if and
when the VAT is due as well as establishing the party responsible for paying it to the taxing
authorities.
140. As transactions are increasingly digitized, mechanisms to tax consumption where it occurs
have to be put in place.  There are no real divergences of view in that respect.  Governments need to
agree on how to divide the income tax base among themselves.  The challenges posed by e-commerce
for tax administration are enormous.  However, the implications of modern information technologies
for tax administrations are not exclusively negative.  New technologies create increased opportunitiesfor streamlining tax administration by replacing paper documentation with electronic data interchange
(EDI), by providing for electronic filing of tax returns, and by automating other aspects of tax
reporting and compliance.  Some countries might almost be able to "skip the paper generation".WT/COMTD/M/40
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Nevertheless, even if the many technical issues are resolved, political questions, which may be even
more formidable will remain.  However, it is possible to arrive at an effective, even if not perfect, tax
regime in a world of e-commerce.
Implications for developing countries
141. Tax revenue constitutes more than 80 per cent of total government revenue in developed
countries and just below 80 per cent of developing country government revenue.  Import duties
account for a small share of 2-3 per cent of total government revenue in developed countries, whereas
it is more important for developed countries where it accounts for almost 20 per cent.  Customs duties
are normally levied on physically imported goods.  The increase in the number of goods that can be
traded digitally, and the customs moratorium on electronic transmissions, have raised the possibilityof a loss of customs revenue, especially for developing countries.
142. The products concerned are a limited group.  Digitized products can be defined as products
that can be identified by HS code, delivered physically (via carrier medium such as cd, tape, diskette,
hard copy), and be transformed into digital format and transferred digitally (via networks).  Digitized
products include items such as books, newspapers  and other printed material, software, recordedmusic, film, video and video games.  According to 1999 statistics, developed countries accounted for
more than 80 per cent of both imports and exports of these products.  However, digitized products
accounted for less than one per cent of the value of world imports and exports respectively and less
than half a per cent of developing country imports and exports.  Nevertheless, the growth of
developing country digitized exports has been higher than the corresponding growth rates fordeveloped countries in the last few years.  This indicates that developing countries are increasing their
share of digitized exports.
143. Considering the tariffs on products that could be delivered in digitized form over the Internet,
developing countries applied an average MFN rate of about 15 per cent whereas in developed
countries the figure was under 4 per cent in 1999.  However, there are large variations betweenindividual countries in each group and between products.  Although developing countries only import
about 20 per cent of world digitized imports, the hi gher import duties they levy means that developing
countries receive more than 60 per cent of world tariff revenue from products in this category.  Other
duties levied on imports of products that could be delivered in digitized form over the Internet include
customs surcharges such as fees, uplifts, statistical taxes and port taxes which on an average adds
about 7 per cent to the customs tariff, and internal taxes such as VAT, sales taxes and consumption
taxes which add an additional 15 per cent to the tariff.  World tariff revenue on digitized productsamounted to just less than one billion US$ in 1999 whereas the figure is 8 billion US$ when other
customs surcharges and internal taxes are included.
144. Although developing countries receive the largest share when tariff revenue alone is
considered (about US$ 0.6 billion out of the world total of almost one billion US$), developed
countries have the lion's share when all import revenue, including consumption taxes are considered.Nevertheless, tariff revenue from digitized products in 1999 was minimal to total government revenue
in both developed (0,04 per cent) and developing countries (0,16 per cent).  The share of total
government revenue stemming from the revenue of imported digitized products is 0.6 per cent in
developing countries and 0.4 per cent in developed countries.  The potential relative revenue losses
are thus relatively higher in developing countries than in developed countries although they are small
in terms of overall government revenue.  As developing countries generally tend to rely to a greater
extent on tariffs for their government revenue, any tariff reduction is costly.  This is nothing specific
to e-commerce.WT/COMTD/M/40
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145. Developing countries are likely to remain net e-commerce importers in the short to medium
term in spite of their current high growth rates of e-commerce exports.  Despite that, e-commerce
offers several opportunities for developing countries.  Duty-free imports of electronic deliverables
will provide consumers and the private sector in developing countries with cheaper imports,
especially as software is becoming increasingly important for businesses wishing to engage ine-commerce.  E-commerce will spur cross-border trade and the highest growth rates are in developing
countries.  Developing countries are diversifying into exports of ICT-related products and services
and are gaining market shares.
WTO specific considerations
8
146. The e-commerce classification issue concerns whether digital deliveries of certain types of
products fall under the General Agreement on Tariffs and Trade (GATT) or the General Agreement
on Trade in Services (GATS) framework.  This issue seems to have become one of the most difficult
and sensitive issues of the entire WTO Work Programme on e-commerce.  The classification issue
relates to other questions such as customs duties and the potential differences in how internal taxes are
dealt with.  However, the classification issue is not  only a revenue consideration, it is also linked to
levels of liberalization and benefits across the two agreements.  In this connection, it is important to
note that the Moratorium on customs duties on electronic transmissions relates only to customs duties
and not to other taxes.
147. Under the overall WTO Work Programme on e-commerce, the Council for Trade in Services
has observed that the majority of online trade consists of services.  It had also been observed, althoughno final conclusion has been arrived at, that the m odes of supply through which services are defined
in the Services Agreement (GATS) make no distinct ions with regard to the technologies involved in
the delivery.  There are no references or exclusions of any technology that might be used for
electronic supply.  If that could be formally agreed, it would mean that existing obligations and
commitments of the GATS apply to e-commerce in services.  With regard to goods, the Council forTrade in Goods has observed that when a purchase is made on-line but the product delivered
physically, the normal GATT rules apply.  However, the Council for Trade in Goods has left open the
question of how to treat a product that can be traded in either physical or digital form.
148. It is important to keep in mind that only a narrow range of media products may currently be
imported under HS classifications and/or downloaded online.  Trade in these products amounts to
approximately 1 per cent of total merchandize trade and less than 1 per cent of total duties collected
world wide.  Moreover, only some on-line products are concerned as much of what can be deliveredelectronically is regarded as services.  The vast majority of services are therefore not at stake.  Most
media and entertainment products never did cross borders in physical formats and are clearly regarded
as services, such as television and radio programming and broadcasting for example.  Approximately
99 per cent of merchandise trade and more than 99 per cent of duties collected world wide are not at
stake and there has not yet been any dispute with respect to the classification problem.
149. The GATT covers the physical carrier medium, but it is not clear whether that includes the
content or if it is irrespective of it.  It can also be questioned whether new forms of "carriage" without
a physical medium is part of the GATT and what that content is.  The question goes to the heart of the
definition of information.  The GATS appears to cover the development, production, and distribution
of information and entertainment, as well as the live performance and adaptation of radio and TVbroadcasts.
                                                     
8 The views expressed with respect to the WTO specific considerations were those of an individual
Secretariat staff member, speaking in her personal capacity , and do not reflect any views on the part of the WTO
Secretariat.WT/COMTD/M/40
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150. As already noted, classification has become a pivotal issue because of the structural
differences between the GATT and the GATS.  The essence of GATT is to reduce or eliminate tariffs
over time through the binding of tariff concessions, but tariffs are permitted under those rules.
National treatment of internal taxes is obligatory under GATT.  On the other hand, tariffs are so
uncommon in services trade that the GATS does not even mention them.  National treatment forinternal taxes is negotiated service by service under GATS.  Levels of benefits extended by GATT
can thus differ significantly from those available under GATS in the short term.  While quantitative
restrictions are prohibited under the GATT and national treatment is obligatory, under GATS the
progressive elimination of barriers to trade is negotiated and national treatment progressively
implemented.  The differences between the agreements are largely eliminated if the full
implementation of each is considered.  In addition, the scope of the GATS is wider.  The main
difference between the two agreements remaining with full liberalization would be the scope.  TheGATS covers not only the imports of a product but four different modes of supply and there are
benefits accruing to the suppliers of the products, in particular through "commercial presence" mode.
Generalizing, it can be said that the GATT corresponds to the GATS mode 1 which is "cross-border
supply".  The classification issue is thus both limited to a small group of products which can be traded
on-line and/or physically, and to only one of the four modes of supply under the GATS.
151. Some of the products concerned can and do enter markets under both GATT and GATS at the
same time depending on the "carriage" or delivery vehicle used.  This may continue to be the case for
some time to come.  In some cases, the content is similar or even identical but receives different
treatment depending on whether GATT or GATS applies.  Even if the status quo was accepted as an
option some classification work might still be needed as neither GATT nor GATS classificationschemes may fully or unambiguously cover some of the products or content concerned.  If the
products concerned were classified as goods it may clarify the situation with respect to tariffs and
national treatment for these products.  However, it could have unintended consequences for the scope
of the GATS as it might affect the status of other on-line services beyond those actually at issue.  On
the other hand, if the products concerned were to be classified as services, it may clarify the status ofmost forms of e-commerce.  It would nevertheless leave open the issue of differing treatment of
similar products delivered by physical and electronic means and it could raise questions on the GATT
status of the content of digital products that remain traded in physical formats.
152. What needs to be considered with respect to tariff revenue is how significant the value of
GATT tariffs are on these products and what the status of tariffs is under GATS.  As concerns tax
revenue, Members are entitled to non-discriminatory internal taxes under both GATT and GATS and
need to consider the feasibility and desirability of taxing on-line products.  With respect to the levelsof benefits, the implications of classification concerns for products traditionally subject to sensitivities
and trade restrictions are different from the implications for products for which freer trade has been
the norm.  Delegations will have to consider if it is reasonable that a determination on classification,
in itself, might result in the removal of barriers on certain products or in the evaporation of benefits
heretofore available for others, and if there is a case for possible consideration of sector-specificsolutions for certain products.
153. In considering the classification issue, the broader picture has to be kept in mind with
questions such as:
- the implications of e-commerce for the promotion of economic development;
- the implications for development of erecting barriers to e-commerce;- the implications for expanding trade and economic growth of legal uncertainty about
how WTO agreements apply to e-business and e-trade when transparency, legal
certainty, predictability and spreading of the benefits economic growth equitably are
what the trading system is all about; whether;  andWT/COMTD/M/40
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- the WTO risks falling behind as commercial players continue to adopt and employ
the new advances in technology to commercial trade.
154. It was mentioned that developing countries might not wish to rush into multilateral disciplines
before understanding the implications for the sector.  However, it was also said that the understandingof some delegations is that the existing rules al ready apply to e-commerce.  The cost of imposing
tariffs or taxes on electronic transmissions will be larger than the revenue that can be collected.
Internally in the US there is a moratorium on imposing new or discriminatory taxes.
Government Experiences
European Communities
155. The European Communities (EC) has experience of  the implications for consumption taxes of
e-commerce, specifically in relation to the Euro pean Union Value Added Tax (VAT) system.  The
current urgency is the potential competitive imbalances that could be created.  The EC is not of the
view that there is a need for an international moratorium on domestic taxes on e-commerce.However, there is a need for an international ag reement on fundamental principles.  One of the
building blocks was laid at the OECD's Ottawa Conference in 1998 where, as far as consumption
taxes are concerned, there was a measure of agreement on two general principles.  One was that if e-
commerce transactions are to be taxed, then taxa tion should accrue to the jurisdiction in which
consumption takes place.  The second was that for consumption tax purposes, these transactionsshould not be treated as goods.  When the European Union considered applying these principles to its
own tax systems there were some potential points of tension.  Three possible paths could be taken.
One was to wait for e-business to mature before taking any action.  The second was to adopt a
moratorium on e-commerce taxes and remove them where they had already been applied.  Thirdly,
there was the path the EC opted for, which was to change the tax system to take account of cross-border transactions in e-commerce where they cause tension within the domestic regime.
156. The Council of the European Community is currently in the process of changing the VAT
legislation to take into account specific problems raised by e-commerce.  The new laws will take
effect on 1 July 2003.
9  The EC is the first large jurisdiction to attempt to implement the OECD
principles.  The reasons include that the EC ha s a VAT system with a general tax on consumption
(whether a good or a service).  For businesses there is a provision for credit for input tax.  These
changes are not revenue driven.  The intention is rather to rectify a competitive imbalance.  What hadhappened was that the EC effectively taxed exported services while imported services became tax
exempted.  The potential for competitive imbalance was found in the areas of software, Web-hosting,
programme maintenance, data processing, entertainment, music, sports events, distance teaching and
gambling.  The tax rules with respect to broadcas ting were changed at the same time, as the tax
problems were similar and as convergence in technology will bring them together.  The competitiveimbalances occur where EU-based companies are required to pay VAT whereas companies supplying
EC consumers from a base abroad are tax exempted.  What the EC will do is to change the place of
supply (taxation) in order for all companies supplying EC consumers with digitally delivered services
to be taxed equally.  The EC attempts to introduce the changes to create a level playing field without
disrupting legitimate business activities.
157. Whether or not to tax services and intangibles is a matter for each jurisdiction.  The EC has
always sought to tax them without putting domestic companies at a disadvantage.  The technologies
                                                     
9 The detailed text and some comments to the legislation is available on the website: www.europa.int
(under taxation).WT/COMTD/M/40
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exist to make such a system work in practice.  Most tax systems deal with business-to-business
taxation on a self-assessment basis in the jurisdiction where consumption is deemed to take place.
The place of taxation for consumption is not always easy to determine for intangibles, especially
where intangibles are linked to physical goods.  Such cases create opportunities for businesses to split
the transactions among different companies.  For in ternal business-to-business transactions the EC has
a system with tax collection taking place in one of the 15 EC Member states.  The new tax laws will
be put in place for an initial three-year period after which the evolution of e-commerce will be
evaluated.  It can be asked why, for a relatively small area of activity, has EC gone the trouble to
make a significant change in a tax system to attempt to collect taxes from companies which do not
have a physical presence in the jurisdiction.  The reason is the potential importance of e-commerce for
the tax-base for the European VAT system.
Malaysia
158. Though e-commerce has the potential to increase productivity and even increase revenue for
developing countries the experiences in the developing world differ as to the gains that can be
attained.
159. The Malaysian Government has the vision for Malaysia to be a developed nation by 2020 but
with strong moral and ethical values and an equitable distribution of wealth.  The idea is to go from an
information society through a knowledge society to  a value-based knowledge society considering both
social and economic aspects.  The tool is the Multimedia Super Corridor (MSC) which will enhance
Malaysia's competitiveness.  The strategy is first to  offer an ideal multi-media environment to attract
world-class companies which in turn can catalyze Malaysian companies to become world class overtime.  The Malaysian MSC is more than just a technology park.  It has special cyberlaws, policies and
practices and modern infrastructure.  The seven flagship applications are smart schools, multi-purpose
cards, electronic government, telehealth, R&D clusters, borderless marketing centers and a
Worldwide Manufacturing Web.  Progress to date (i.e. during the seven years the project has existed)
include almost 700 companies with MSC status out of  which 50 are world-class, the initiation of the
Government multi-purpose card, growing investments in technology and high value-added economic
activities, rapid growth in sales and exports, creation of new knowledge-based employment
opportunities, growth in higher learning institutions, increased SME participation, and spin-offs to the
rest of the economy including enhanced productiv ity.  The idea is for the MSC to expand to all of
Malaysia before 2020 and for Malaysia to leap-frog into leadership in the knowledge economy.  It is
estimated that when 20 per cent of the Malaysian population has access to the Internet, e-commerce
growth will really take off.
160. Some lessons have been learned.  Nations need to identify clusters for industrial development
and reposition themselves to be at the centre of the virtual marketplace.  E-commerce reduces the
transaction costs which represent a large portion of the activities within an economy, thus leading to
efficiency gains.  E-commerce has also led to the destruction of the vertically integrated value chain.
Consumers have the choice of new intermediaries or no intermediaries at all.  Enhanced information
and new channels make it easier for companies to buy at lowest cost and sell at highest price.  The
global implications are that first movers enjoy entrenched positions.  Companies will move location if
the policies are more favourable elsewhere.  There will be winners and losers in the knowledge age
and companies and governments need to be ready.  Government interventionist policies are needed to
correct for market imperfections.  Capital will gravitate towards a few "hubs" which have developed acritical mass of users and producers.  Developing countries might soon become attractive.
161. E-business may be used to circumvent non-tariff barriers and gain access to the protected
service sectors of emerging economies.  The Government of Malaysia is concerned with the impact of
e-commerce on taxation.  The concerns are based on the growth of virtual organizations which cannot
be tracked as electronic trade does not require the physical presence of the people or agenciesWT/COMTD/M/40
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involved, the absence of a clear definition of "transaction" for tax collection purposes, and the
potential loss of revenue due to increased tax evasion and the "black economy".
162. Other pressing issues for the Government, demanded by vendors, include requests for
standard guidelines (regulations) for e-commerce, the endorsement of credible merchants, the
promotion of local e-commerce products and serv ices, consumer protection, IP protection and
enforcement, and grants and subsidies.  The existing  legal framework in Malaysia is insufficient.  The
role of existing regulators has to be reviewed.  Changes to the regulatory framework is necessary to
boost consumer confidence.  The aim is to expand existing laws to apply equally to online and offline
transactions with minimal and light-handed interventions.  Self regulation is promoted and consumer
guidelines should be drawn up.  There have been conflicts between trademark rights and registration
of domain names and there has been inequality in bargaining power in registration of domain names.
Much work is needed to develop an intellectual property management system.  Another challenge forthe Malaysian Government is to enact new la ws based on the UNCTIRAL Model Law to apply
contractual principles to e-commerce.  The domestic laws for settling disputes also need to be revised
to take the electronic business environment into account.
163. The Malaysian Government has come across several difficulties in taxing e-commerce.  For
income taxes it has experienced the difficulty of applying "source-based" taxation and the question ofwhether a server is considered a "physical presence" for tax purposes.   Another difficulty experienced
is that the tax provisions do not cover multi-jurisdictional transactions and that there are enforcement
problems as information can be encrypted and lack audit trails.  The Government might consider the
introduction of stringent regulations as to identity, legislation that would impose a duty on the Internet
Service Provider (ISP) to obtain information from businesses registering with them, and powers todecode encrypted private data.  It might also attempt to renegotiate double tax agreements as in
current agreements it is not clear whether websites or host servers are permanent establishments
subject to tax.  The Malaysian Stamp Duty Act of 1949 based on paper instruments is difficult to
enforce on electronic documents. The Government might try to extend the stamp duty to electronic
documents.  For other types of taxes the difficulties include the fact that record keeping requirementsare based on paper documents.  Enforcement provisions should provide for electronic records.  The
delivery of intangible goods increases the ease of avoiding the payment of duties and current
provisions for enforcement are insufficient to capture e-commerce transactions.  The monitoring,
audit and investigative powers of the Government therefore need to be enhanced to take modern
information technologies into account.
164. It has to be recognized that E-commerce will transform the national and global economic
landscape and the emergence of a new breed of companies providing services in cyber-space.  Theborderless nature of e-commerce will expose countries to the effects of liberalization and
globalization and it is imperative for nations to be "e-ready."  They need to focus and develop skills in
the knowledge-intensive areas required by global markets such as e-commerce tax advisors and e-
commerce lawyers.  A clear policy framework is required to create a climate for growth of the ICT
sector.
Barbados
165. The experience of Barbados shows that it is possible for small countries and small suppliers to
take advantage of e-commerce opportunities.  One example is a St. Lucian entrepreneur who
attempted to sell a "cocoa-stick" out of which one could make hot cocoa, on the Internet.  He targetedthe St. Lucian diaspora in North America and Eur ope.  After two days he had to shut the Website
down.  The problem was that he had sold three years of supply.  This story shows that the
opportunities are there, but they need to be backed by business plans to take account of unforeseen
circumstances.  Flexibility to involve other people and build alliances is also necessary to meet market
demand.WT/COMTD/M/40
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166. E-commerce provides an opportunity to the developing world for a significant period of
economic expansion in an increasingly interconnected world.  It provides the potential for more
sustainable development, the creation of better jobs, expanded world trade and improved social
conditions.  It offers the possibility of breaking the cycle of incremental change with marginal
improvements or stagnation by vastly improving efficiency, reducing transactions costs andexpanding both markets and products at an unprecedented rate.  E-commerce involves much more
than transactional activity.  It involves marketin g, customer service, problem solving and research.
Research is vital for many businesses who need to tr ack things such as commodity prices to keep the
local suppliers honest.
167. New challenges have arisen and will continue to arise in areas such as taxation, where
governments will continue to seek to protect revenue streams.  The Government of Barbados believes
that this should be done without distorting economic and technological choices.  Any changes requirea reassessment of the effectiveness of government policies towards commerce and of traditional
commercial practices and procedures, most of which were formed in an analogue world with a
different image of commerce in mind.  Present e xperiences with e-commerce fall into two broad
categories: trade in physical and digital products and trade in a growing number of services.  Because
of the nascent stage of development of e-commerce there is much uncertainty about the nature of thetrade that will take place in intangible or digital products and a difficulty in determining the
classification of such products as goods or services.
168. At present all electronically ordered and/or paid physical products are taxed at the port of
entry through the application of import duties and VAT.  However, electronically transmitted products
such as software, music and video, and other services escape both import duties and VAT.  This lossin revenue for the Government of Barbados must be balanced with the need to encourage the growth
of e-commerce to maximize the sale of goods and services from Barbados to the rapidly expanding
global electronic market place.
169. In light of the potential for the expansion of the economy by utilizing e-commerce to reach a
wider market and to focus on specific high yield cu stomers, the Government of Barbados believes that
it would not be prudent to implement direct taxation on trade in digital products and services
delivered through electronic means at this time.  Thus the Government of Barbados supports the
provisional agreement not to introduce any new tax on electronic transmissions through which digital
products and services are delivered.  Governments must also be mindful of the rapidly changing
technological environment and the introduction of second Internet (II) that will expand the range and
complexity of e-commerce through the introduction of high speed transmissions coupled with
enhanced security systems.  This will introduce new products and new ways of conducting businesswhich are unpredictable at this time.
170. The Government of Barbados will continue to develop systems that integrate with e-
commerce and facilitate the clearance of physical goods through the port.  In this regard there is an
existing system of integration of express delivery carrier operations with the customs department
which facilitates the automatic download of an aircraft's manifest upon take off which allows for theautomatic generation of tax computation for the entire manifest and the payment of all import duties
and VAT for all cargo upon landing.  This system can be expanded to all air and sea freight carriers.
The technology can thus be used to enhance the discipline and the accuracy of the current system of
tax collection.  As e-commerce is a dynamic activity, it would be imprudent to burden the private
sector with cumbersome regulations and tax systems which would inhibit experimentation in thecurrent period of developing new products, services  and delivery systems.  A vision could be the
steam engine developed in Europe with a man carrying a red flag walking in front of it to ensure that
it did not go too fast.  The Government of Barbados does not intend to put any red flags in front of the
Internet.  Barbados stands to gain much more by  maintaining an environm ent conducive to the growth
and development of e-commerce than by introducing new and restrictive measures to tax digitalWT/COMTD/M/40
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products and services at this point in time.  Barbados's experience to date does not indicate a
significant loss in revenue while there has been a po sitive contribution in several areas.  This includes
the expansion of the hospitality industry and the development of repeat customers, direct marketing of
local products, and the development of new business opportunities that expand economic activity
beyond the island shores into the region, the Western Hemisphere and the global marketplace.
Kenya
171. The perspective of Kenya is quite different to that of Malaysia and Barbados.  The
Government of Kenya recognises the important role that e-commerce can play for trade and
development and in particular for poverty alleviation.  However, the current focus is on developing
policies which recognize the electronic aspects of trade in transforming the economy into a modern
market economy.  This is done through various initiatives.  First, the Poverty Reduction StrategyPaper (PRSP) recognizes that ICTs have an important role to play in poverty alleviation.  Trade and e-
commerce are also important in that respect.  The telecommunication and postal sector policy
statement of 1999 is another initiative.  Third, Kenya is a participant in the New Partnership for
African Development (NEPAD).  Finally, the Government had set up a sector Working Group on
Information Technology under the Ministry of Finance and Planning.
172. The state of the information technology infrastructure in Kenya gives a picture of the
development of its e-commerce.  Access to the Intenet is exclusively controlled by "Jambo Net",
which is a subsidiary of the state-controlled Telkom Kenya.  "Jambo Net" sells bandwidth to various
Internet Services Providers (ISPs).  Although more than a hundred ISPs have been licenced by theCommunications Commission of Kenya (CCK.) as requir ed, only about 30 are operational.  Similarly
Telkom Kenya has the exclusive rights for the provision of international Very Small Aperture
Terminal (VSAT) facilities.  The following statistics gives an indication of the use of e-commerce in
Kenya:
- Teledensity is pegged at 4 lines per 100 people in urban areas and 0.16 rural in areas;
- Internet access is limited to about 200,000 people out of a population of 30 million;
- 50 per cent of the users are multi-national corporations, international corporations and
NGO'S;
- Less than 5 per cent of the users are government and educational institutions;
- There are only about 50,000 e-mail accounts;
- The number of ".ke"-domains was about 1,700 in 2001;
- Most websites are run by exporters of products or services, i.e.
(i) Tours and Travel 50%
(ii) Hotels and Restaurants 20%
(iii) Arts and Handicrafts 16%
(iv) Agriculture 4%
(v) Manufacturing 1%
(vi) Shipping 1%
173. From the above information it is clear that the level of usage of the Internet in Kenya is
relatively low.  The challenges of e-commerce development in Kenya include to:WT/COMTD/M/40
Page 39
- develop a policy framework on e-commerce.  A common policy spanning many different
ministries and government agencies is necessary but currently lacking.
- adopt a legal framework, possibly based on the UNCITRAL model law.  There is as yet
no legal framework covering electronic transactions.
- develop the telecommunications infrastructure, especially in rural areas where
70 per cent of the population live, but where access to electricity, telephone and financial
services is limited and costs high.
174. Kenya is a developing country that relies heavily on import duties to supplement government
revenue to meet various development objectives.  Out of KShs. 200 000 million collected every year,
direct taxes contribute about a quarter while indirect taxes contributes slightly over half of the total
revenue.  Only import duties and VAT on imports together accounts for a quarter of total governmentrevenue.  Since 1997 import duties collected have shown an upward trend, although as from the
year 2000 the increase has been marginal.  This latter can be attributed to the liberalisation measures
being undertaken both at regional and internationa l level and particularly within the COMESA as
member states adopt the Free Trade Area.
175. The growth of e-commerce has great potential to expand markets, productivity and
competitiveness.  The challenge and dilemma for the Government is how to tax the increased revenue
arising from e-transactions.  On the other hand Kenya's competitive edge is in the agriculture and
manufacturing sectors and the priority concern for the Government is rather how to enhance access to
the Internet to improve productivity in those sectors rather than how to tax Internet transactions.  The
major challenges therefore include:
- enhanced technical and institutional capacity to monitor e-transactions;
- human resource development;
- compliance and enforcement, especially in the large informal sector;  and
- improved communications infrastructure.
176. Although intellectual property rights in Kenya are governed by the Industrial Property Act,
the onus of monitoring infringement of intellectual property rights rests with the owners.  The
Government will only act on enforcement.  One private sector organization, the Music Copyright
Society Kenya (MCSK), has been active in monitoring the infringement of copyrights and they have
in certain cases been successful.  Other rights holders do not have associations.
177. The Government of Kenya recognises the important role that e-commerce can play in trade
development and particularly in poverty alleviation and that the country needs to catch up with e-commerce.  A national Task Force on e-commerce was therefore established in 1999 with the
mandate of enhancing the use of e-commerce.  The task force has now been re-constituted and
registered as an independent organization: the Nationwide Task Force on E-Commerce (NTFECOM).
The initiatives have been strengthened further through the International Trade Centre's (ITC)
"E-Trade Bridge"-Programme for Kenya which is spearheaded by NTFECOM.  Through thisprogramme the NTFECOM has been able to identify Kenya's e-commerce strengths and weaknesses
and is currently in the process of translating the E-Trade Programme into a policy document for
submission to the Government.  The Government should then prioritize:
- policies for facilitating e-trade;
- telecommunications infrastructure;- the legal and regulatory framework;
- the financial environment;
- human and institutional capacity building;  and
- the e-commerce support network.WT/COMTD/M/40
Page 40
178. Delegations felt, in conclusion, that there is need to continue the debate and further analytical
work including impact studies to get a clearer picture of the implications of e-commerce for the
development of developing countries in fulfilment of the Doha Development Agenda.  It seems that e-
commerce poses both challenges and opportunities to developed and developing country governments
and companies alike.  The direct effects on government revenue through tariff losses seem to be verysmall whereas the effects on the efficiency of an economy can be large.WT/COMTD/M/40
Page 41
PROGRAMME OF THE SEMINAR ON
REVENUE IMPLICATIONS OF E-COMMERCE
The seminar is being organized under the auspices of the WTO Committee on Trade and
Development.  The proceedings are intended to serve as an input into the Committee's considerationof the issue of electronic commerce as part of the overall WTO Work Programme.
Chair : Ambassador Mary Whelan, Ireland
10:00-11:00 First Session: Trends in e-commerce
• Statistics on the evolution of e-commerce
• Recent developments and forecasts
Panellist: Mrs. Julie Meringer, Group Director, European Research and
Managing Director UK, Forrester Research.
11:00-12:00 Second Session:
Revenue effects of e-commerce and the underlying information technology
Overview
• How the development of e-commerce affects and may affect government revenue
(customs tariffs, consumption taxes,  income taxes)
• How information technologies provide opportunities for tax authorities
Panellist: Mr. Walter Hellerstein, Francis Shackelford Professor of Taxation - University of
Georgia Law School, United States
Development Dimension
• Sources of government revenue in developing countries, dependence on tariffs and
taxes
• Current taxation practices in developing countries
• Implications of the moratorium on customs duties on electronic transmissions for
developing countries
• Other revenue implications of e-commerce for developing countries:  sales tax, profit
tax, etc.
Panellist: Dr. Susanne Teltscher, Economic Affairs Officer, E-Commerce Branch,  UNCTAD
12:00-13:00 Third Session:
Fiscal implications of e-commerce:  A WTO perspective
• GATT/GATS implications for customs duties (discrimination, progressive
liberalization and classification)
• GATT/GATS implications for internal taxation (non-discrimination, regulatory issues
and classification)
• Issues related to harmonization
• Considerations relating to the moratorium on customs duties on electronic
transmissionsWT/COMTD/M/40
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Panellist: Mrs. Lee Tuthill, Counsellor, Trade in Services Division, WTO
13:00-15:00 Lunch Break
15:00-16:30 Fourth Session:
Government and Private Sector Experiences
• Government experiences
• Private sector experiences
Panellists: Mr. Arthur Kerrigan, Head of Sector, International Services, Electronic Commerce
and Financial Services,  Directorate-General for Taxation and the Customs Union,
European Communities
Mr. Suhaimi Nordin, Senior Manager, E-Commerce, Multimedia DevelopmentCorporation, Malaysia
Senator Philip Goddard, Special envoy for technology, trade and investment, Prime
Minister's Office, Barbados
Mr. Morten Sven Johannessen, Corporate Project Leader for E-business, Statoil,
Norway
Mr. James M. Kiiru, Department of External  Trade, Ministry of Trade And Industry,
Kenya
__________