WORLD TRADE
ORGANIZATIONWT/GC/W/475
20 June 2002
(02-3425)
SECOND DEDICATED DISCUSSION ON ELECTRONIC COMMERCE
UNDER THE AUSPICES OF THE
GENERAL COUNCIL ON 6 MAY 2002
Summary by the Secretariat of the Issues Raised1
At the Fifth Session of the Ministerial Conference in Doha Members agreed to continue the
Work Programme on Electronic Commerce, and instructed the General Council to consider the most
appropriate institutional arrangements for handling the Work Programme and to report on further
progress to the Fifth Session of the Ministerial Conference.
With regard to future work on e-commerce, at its meeting on 19-20 December 2001 the
General Council agreed that a further dedicated discussion on cross-cutting issues related to electronic
commerce would be held under the auspices of the General Council early in 2002.
The second dedicated discussion on cross-cutting issues took place on 6 May 2002 under the
auspices of the General Council and was Chaired by Mr. Andrew Stoler, Deputy Director-General,
with the aim of building on the examination of these issues undertaken in the first dedicated
discussion of this matter on 15 June 2001 (WT/GC/W/436).
The attached list of cross-cutting issues identi fied by delegations, which served as the agenda
for the first dedicated discussion, also served as the agenda of the second dedicated discussion.Members also had before them written contributions submitted by Canada
2 and Japan3, as well as a
Background Note by the Secretariat.4
At the end of the dedicated discussion, it was agreed that the Secretariat would prepare a
factual report on the discussion under its own responsibility, and that Mr. Stoler, Deputy Director-General, would make an oral report on the discussion to the General Council at its meeting on 13-
14 May 2002.  The main views expressed by delegations in the course of the discussion under each of
the cross-cutting issues identified are summarized below.
1. Classification of the content of certain electronic transmissions
• Many delegations highlighted the classification issue as a key element in the Work
Programme, and felt that it was not desirable to try to seek a definitive determinationof the classification of digital products in their entirety as either goods or services.
They were also of the view that the moratorium on the imposition of customs duties
on electronic transmissions should be maintained, if not made permanent.  Others felt
                                                     
1 This document has been prepared under the Secret ariat's own responsibility and is without prejudice
to the positions of Members or to their rights or obligations under the WTO.
2 Job No. (02)38 (8 May 2002).
3 WT/L/451 (1 May 2002).
4 Job No. (02)37 (1 May 2002).WT/GC/W/475
Page 2
that given the limited range of products at issue, a determination with regard to
classification could usefully be made.  In one delegation's view, the real issue was
classification of the contents of certain e-communications.
• Several delegations were of the view that there was a need to establish a global
framework that was predictable, robust and applicable to future developments, and
that technological developments  and rapid changes in the marketplace should not be
considered as obstacles to reaching a common understanding on the classification
issue;  however, any policy on electronic transmissions should be technologically
neutral.
• Regarding the suggestion by one delegation that a case-by-case determination was the
best approach – given the relatively narrow range of products that could be delivered
electronically – one delegation asked what sort of criteria would be used in such anapproach, and suggested that it should be possible to reach a collective decision on
classification.  Several delegations stressed the need for a clear distinction between
content and carriage.
• Regarding the intellectual property content of certain electronic transmissions, one
delegation noted that any intellectual property contained in the data delivered
electronically would exist irrespective of whether the item was defined as a good or a
service.  However, since not all items delivered electronically contained intellectual
property, and since intellectual property rights differed among jurisdictions, any
determination of whether the TRIPS Agreement applied to a particular item would
also have to be made on a case-by-case basis.
• The non-paper submitted by Canada entitled "The Classification of Software
Delivered Electronically", highlighted what that delegation felt were some of the key
issues regarding how to classify electronic deliverables with a physical equivalent
(using software as an example – the cust omer can download the digitized product or
use it online), such as how the GATT and GATS apply to electronic transmissions,and the implications and potential impact of a "goods" versus "services"
classification.  It was explained that the intent of the paper was merely to raise certain
issues and not to state any position on the classification question.
• Several delegations cited the importance of the classification issue to the current
negotiations on both goods and services.  In this context, a number of delegations
raised questions regarding Canada's paper, and expressed concern regarding the
classification implications of the software example in the paper.  One delegation,
referring to professional services such as architectural, engineering and fashion
designs, said that many electronic do wnloads with a physical equivalent had a
Harmonized System tariff line.
• Others commented that Canada's paper alluded to some of the practical problems
involved in  imposing customs duties on e-commerce, and stressed that all issues
relating to e-commerce should be examined within the context of the need to maintain
a liberal trading environment for e-comm erce.  One delegation suggested that a
greater commitment to liberalization in the context of both the GATT and the GATS
would make the issue of classification less relevant, and said that the status quo
should be to not roll-back the current liberalized trading environment for productsthat could have both a physical and a virtual form.WT/GC/W/475
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• The Background Note prepared by the Secretariat outlined some of the issues raised
concerning classification, on the basis of previous discussions and writtensubmissions.  It also examined some of the implications of the questions that had
been raised, in particular in the context of the basic features of the GATT and the
GATS, as well as elements relating to the different classification systems currently in
use.
• One delegation sought explanations from the Secretariat regarding Paragraph 12 of
the Background Note.  Several others said that the Note was a useful contribution on
this issue, and one delegation suggested that the Secretariat provide the relevant
GATT and GATS categories for products at issue in discussions on classification.
• Another delegation recalled that it had argued for a GATS treatment of digitized
products, and that some delegations had been concerned that a GATS approach couldresult in less favourable treatment.  However, it and several other delegations noted
that the Secretariat Note observed that when fully liberalized, there would be few
differences between a GATT and a GATS approach to classification.
• A number of delegations agreed that a majority of electronically transmitted products
were indeed services, but that there was still a lack of clarity with regard to the
classification under GATT or GATS of certain products which could be deliveredboth in electronic form and on a physical carrier. Other delegations did not agree that
all electronic deliveries should be and were services, and one delegation took issue
with the assertion in the Secretariat Note that there was little disagreement that the
vast majority of online trade involved services covered by the GATS.  Several
delegations stressed the need for legal clarity and predictability on the classificationissue.
• One delegation cited a number of issues it felt should be discussed and tackled from
the GATS perspective, such as jurisdiction in the light of the distinction betweenModes 1and 2 of the Services Agreement.  Another delegation referred to discussions
in the International Telecommunications Union (ITU) on the information society, andsuggested exploring ways the WTO might take part in those discussions, and vice
versa.
2. Development-related issues
• The submission by Japan (WT/L/451) on its international cooperation in the area of
Information Technology (IT) highlighted four important fields of its IT assistance,
namely, intellectual contributions to policy making and institution building, human
resource development, assistance in building an IT infrastructure and network
systems, and promotion of IT utilization in the implementation of development
assistance.
• One delegation commented that e-commerce could play a major role in eradicating
poverty, in that it had great potential to stimulate economic development and growthin countries at all levels of development.  In its view, the liberalization of
telecommunications services markets was fundamental to the development of e-
commerce.  In addition, the Information Technology Agreement (ITA) was vital to
furthering affordable access to information technology equipment;  the growth anddevelopment of e-commerce also depended on an enabling legal and policy
environment.WT/GC/W/475
Page 4
• One delegation suggested that it might be useful to clarify which of the issues listed
under "Development-related issues" on the ag enda would merit further treatment in
the dedicated discussions, given the mandate and competence of the WTO;  this
might provide a better focus for the discussion of development-related issues.
3. Fiscal implications of e-commerce
and
4. Imposition of custom duties on electronic transmissions
• A number of delegations expressed appreciation for the seminar on "Revenue
Implications of E-Commerce" held under the auspices of the Committee of Trade andDevelopment (CTD) in April, which they felt had been very useful.
• Regarding the request, made by several Members at the first dedicated session, for
national experiences in dealing with taxation issues relevant to e-commerce, onedelegation provided three sources of information on how its country and certain other
countries were dealing with these issu es:  an OECD report in 1998 entitled
"Electronic Commerce Taxation Framework Conditions,   and two reports by her
government on how to apply the principles set out in that report, which were available
on the Internet at "www.ato.gov.au".
• Another delegation recalled that a study by UNCTAD
5 had been presented in the
CTD seminar, and noted that the methodology used in that study in measuring the so-
called revenue losses of both developing and developed countries had also included
revenues resulting from internal taxation.  In its view, nothing being discussed under
the Work Programme on Electronic Commerce had any bearing on a Member's right
to impose internal taxes on electronic deliveries;  the Declaration on ElectronicCommerce applied only to custom duties, and internal taxation and customs duties
were clearly two separate things;  however , a relevant issue for discussion in the
present forum was the question of how to apply taxes to electronic deliveries.
• One delegation was of the view that in the realm of trade liberalization, the focus on
tariffs should be on reducing and not raising them, and countries that sought to
impose duties on electronic transmissions ran a risk of marginalizing themselves
compared to countries which kept cyberspace duty-free.  In its view, by discouraging
the use of the Internet as a delivery medium for digital products, a country reduced
the use and development of such services, thereby reducing a source of potential
revenue generation in the form of domestic taxation of those services.  The key pointwas that if imposed, any internal taxation should be applied in a non-discriminatory
manner.
• Regarding the agenda for the dedicated discussions, one delegation suggested that
items 3-5 could be taken up together from an overall perspective of revenue
implications.
5. Competition
• One delegation commented that while there was great efficiency in the electronic
marketplace, there was also the potential for anti-competitive behaviour;  however,the present discussion should not rush into the development of potential obligations
                                                     
5 "Tariffs, Taxes and Electronic Commerce – Revenue Implications for Developing Countries"WT/GC/W/475
Page 5
or recommendations for future competition-policy initiatives;  addressing global e-
commerce competition issues would require a long-term international dialogue that
would take into account the work of other international organizations such as the
International Competition Network and the OECD.  It was further observed that e-
commerce appeared to be creating opportunities for increased competition in marketsthat had previously been insulated by private barriers such as distribution systems.
• Another delegation said that e-commerce issues relating to competition had direct
implications for ongoing negotiations, particularly in the area of services, and wereclosely linked to the question of determining whether Modes 1 or 2 of the Services
Agreement would capture the transactions involving digital deliveries.
5. Jurisdiction and applicable law/other legal issues
• Several delegations agreed that the issue of jurisdiction and applicable law/other legal
issues was important, and that it should continue to be considered as an individualitem in future dedicated discussions.  One delegation suggested that the United
Nations Commission on International Trade Law model law on electronic commerce
could help promote harmonization of laws across jurisdictions, and said that its own
law on electronic transactions had been based on that model and had proved to beeffective.WT/GC/W/475
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ATTACHMENT
Electronic Commerce:  Cross-Cutting Issues Identified by Delegations
The list below containing cross-cutting issues relevant to electronic commerce was prepared
on the basis of the discussions at the General Council meeting on 8 May 2001 and at an informal
consultation held on 6 June 2001.
This list is not exhaustive and is intended to serve as a basis for further discussion.  It includes
issues which were raised by numerous delegations, and should not be interpreted as indicating a
consensus amongst Members on them.
1 Classification of the content of certain electronic transmissions
Including:
• definition of "e-commerce";
• concept of technological neutrality;
• issue of "likeness".
2. Development-related issues
Including:
• participation of developing countries in e-commerce;
• access to infrastructure and technology;
• transfer of technology;
• capacity-building;
• technical assistance;
• access to developed and developing countries' markets for developing countries' producers
and suppliers;
• promoting the use of information technology;
• how to ensure that e-commerce benefits developed and developing countries;
• movement of natural persons.
3. Fiscal implications of e-commerce
4. Relationship (and possible substitution effects) between e-commerce and traditional
forms of commerce
5. Imposition of custom duties on electronic transmissions6. Competition
Including:
• constraints on development of e-commerce due to the concentration of market power;
• competition and domestic regulations;
• competition and intellectual property rights.
7. Jurisdiction and applicable law/ other legal issues
8. Other
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