RESTRICTEDWORLD TRADE
ORGANIZATIONWT/COMTD/W/51
23 November 1998
(98-4673)
Committee on Trade and Development
DEVELOPMENT IMPLICATIONS OF ELECTRONIC COMMERCE
Note by the Secretariat
1. At its meeting on 25 September 1998, the General Council agreed on a Work Programme on
Electronic Commerce, according to which, inter alia :
" The Committee on Trade and Development shall examine and report on the development
implications of electronic commerce, taking into account the economic, financial and development
needs of developing countries.  The issues to be examined shall include:
- effects of electronic commerce on the trade and economic prospects of developing
countries , notably of their small- and medium-sized enterprises (SMEs), and means of
maximizing possible benefits accruing to them;
- challenges to and ways of enhancing the participation of developing countries in
electronic commerce, in particular as expor ters of electronically delivered products:
role of improved access to infrastructure and transfer of technology, and of movement
of natural persons;
- use of information technology in the inte gration of developing countries in the
multilateral trading system;
- implications for developing countries of the possible impact of electronic commerce on
the traditional means of dist ribution of physical goods;
- financial  implications of electronic commerce for developing countries." 1
2. This Note has been prepared by the Secretariat as a first step in assisting the Committee on
Trade and Development with its discussions on electronic commerce.  The note does not attempt togive an exhaustive or in-depth coverage of issues relating to electronic commerce.  Rather, it aims to
set out some aspects of electronic commerce in order to help delegations better understand how
developing countries' trade and economic development may benefit from or be affected by it, and
what will be required for them to participate in electronic commerce and to share in the benefits it can
offer.  The note also aims to address, in a pre liminary way, a number of issues related to electronic
commerce that have been identified by developing country delegations in various WTO meetings as
being of potential interest or concern.
                                                     
1 WT/L/274 of 30 September 1998.WT/COMTD/W/51
Page 2
Introduction
3. There is no universally agreed definition of electronic commerce.  However, in the WTO
Work Programme on Electronic Commerce "electronic commerce" is understood to mean the
production, distribution, marketing, sale or delivery of goods and services by electronic means.2  A
commercial transaction can be divided into three ma in stages: the advertising and searching stage, the
ordering and payment stage and the delivery stage.  Any or all of these may be carried out
electronically and may therefore be covered by the concept of "electronic commerce".
4. Any product that can be reduced to a digital format can be delivered electronically.3  That is
the case today with music, books, films, computer software, patterns and designs, many financial
services, architectural plans, and so on.  Such products may also be delivered by non-electronic means
(e.g. by physically transporting books or computer tapes and diskettes containing information, or by
one or other of the modes of delivery used by service suppliers);  it has also been possible for sometime to trade many of them electronically usin g means such as the telephone and the fax machine.
5. The introduction and rapid spread of the Internet has established electronic commerce as an
important means of carrying out commercial transactions.  In this regard, electronic commerce is a
result of the large technological advances that have b een made in the last decade or so in facilitating
telecommunications and transmitting information.  As noted below, access to moderntelecommunication systems is therefore a – perhaps the – defining element of electronic commerce.
6. In their broadest sense, the development implications of electronic commerce derive both
from the benefits that developing countries may reap from use of these new technologies and from the
physical, economic, juridical and policy constraints th at may inhibit them from doing so.  Knowledge
and information are essential factors of production and valuable commodities in their own right inmany areas of development policy.  Investment in human and technical infrastructure is therefore
necessary to enhance the participation of developing countries in electronic commerce; on the other
hand such investment may yield significant externalities, not only in the field of electronic commerce,
but in other areas of development.
Electronic commerce as substitute or complement for traditional trade flows
7. To a certain extent, electronic means of delivery may substitute for other means.  In this case,
an increase in the value of electronic commerce will be offset by a decrease in the value of other
competing activities:  an increase in the value of international commercial transactions conducted via
the Internet, for example, may mean a decrease in the value of those conducted by mail, the
movement of service suppliers or consumers across borders, or the physical shipment of goods.
8. Electronic commerce may also create the possibility for additional international commercial
transactions.  To the extent it may reduce transaction costs and increase efficiency and competition,
electronic commerce can help reduce prices and increase international demand.  It can thus allow new
trade flows to develop which may otherwise not have been considered commercially viable because
the transactions involved were either prohibitively expensive or physically difficult to undertake in the
absence of electronic transmission:  examples include trade in on-line education services, medical
services, consulting services and databank retrievals.
9. In addition, electronic commerce can be a complement to traditional means of conducting
trade.  It has a place alongside the physical transportation of goods, for example, by providing
                                                     
2 WT/L/274 of 30 September 1998.
3 No attempt is made in this Note to enter into the question of whether commercial transactions
conducted electronically involve "goods" or "services", in the WTO sense of these terms.WT/COMTD/W/51
Page 3
complementary means for international market research, advertising and marketing, purchasing
intermediate inputs, and making payments electronically.
Is electronic commerce of interest to developing countries?
10. Electronic commerce may be of particular interest to developing countries if it can help their
consumers and producers, particularly small and medium sized enterprises (SMEs), overcome someof their traditional drawbacks in trade, such as distance to markets and lack of information about
market opportunities and available supply.  However, electronic commerce cannot solve all trade-
related problems of developing countries, particularly not those related to domestic supply capacity.
Some developing countries may already have the capacity to produce items that can be delivered
electronically, while others might, in a first phase, only use the Internet as a tool for advertising,
searching or purchase of products from abroad.
Potential benefits from electronic commerce to developing country consumers
11. Electronic commerce should lead to an increased choice of products, lower priced products,
products of better quality and faster delivery of products . Electronic means make it easier for a
potential consumer to gather information about the available world-wide supply of a product; and may
also enable new suppliers to enter the market.  Lower prices and higher quality products should result
from increased competition between suppliers and from reduced costs of delivery and overalltransaction costs. 
4
12. An enlarged choice of products might be of particular importance to consumers in developing
countries in which local supply is more limited than in most developed countries.  Lower prices of
higher quality items should also be of particular importance to developing country consumers who
have, on average, lower incomes than developed country consumers.  Reduced delivery costs may bea relatively greater advantage to consumers in most developing countries than to the majority of the
consumers in developed countries, to the extent that delivery costs are a greater share of the total cost
of a product in developing than in developed countries.
Potential benefits from electronic commerce to developing country producers, particularly
small and medium sized enterprises
13. By opening additional market opportunities, electronic commerce has the potential to bring
many benefits to developing country producers.  First, the same benefits as accrue to developing
country consumers will accrue to developing country producers if they import items that are traded
electronically.  Second, to the extent that electronic commerce opens access to new trade-related
information flows for developing country companies (for example, on large government or private
purchases announced for bidding on the Internet), this should, in itself, enhance the export
possibilities of developing countries.
14. Electronic commerce may reduce not only the handicaps presented by physical distance from
buyers but also other barriers to entry.  To sell, it may no longer be necessary to maintain physical
establishments abroad;  "virtual shops" and contact points on the Internet may enable storage to be
close to the production site (and also reduce the need for extensive – and expensive – inventories) and
distribution to be made directly to the consumer.  Increased advertising possibilities world-wide may
be of interest to small and medium sized enterprises in developing countries that traditionally find it
difficult to spread information to potential consumers abroad.  Virtual shops may not necessarily need
                                                     
4 The WTO study on electronic commerce gives examples of potential cost savings in the financial
sector.  For example, the cost of a banking transaction on the Internet is estimated at only half the cost of PC-
based banking and one eighth of the cost of a transaction over a bank counter.WT/COMTD/W/51
Page 4
very large expenses to establish, even though complicated Internet sites do require a certain
investment.
15. Electronic commerce may also enable developing country companies with no physical
establishment abroad to eliminate or reduce costs as sociated with middlemen in selling their products
(for instance in tourism, it may be possible for hotels, tour-organizers etc. to establish direct contactwith their customers, complementing or avoiding  middlemen and potentially building new capacity).
16. Other gains for developing countries may include increased efficiency in public procurement
through greater speed, efficiency, accuracy and transparency.  Electronic commerce has the potential
to improve procurement processes by making business opportunities easily accessible to a wider
audience, increasing the efficiency of the procurement workforce, improving the quality and accuracy
of procurement-related documents, reducing procurement lead/order times and increasing
competition.
17. Many products ordered and sold electronically may still need to be physically delivered.
Electronic commerce may therefore increase the potential for delivery services.  Electronic commerce
is also expected to increase demand in all sectors linked to the infrastructure necessary to conduct
electronic commerce.  Increased demand offers new export opportunities and it is possible that
electronic commerce will boost international trade in general, providing new export opportunities tocompanies in both developed and developing countries. 
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18. On the other hand, suppliers of items currently sold exclusively by local producers on
developing country markets might face increased competition from foreign companies selling the
same type of products electronically.  In order to survive, local suppliers must then be flexible and
efficient enough to meet such competition.  There is thus an urgent need for developing countrycompanies in businesses likely to face competition from suppliers using electronic means to prepare
themselves to face this increased competition.
Physical infrastructure requirements for conducting electronic commerce
19. The physical infrastructure requirements for conducting electronic commerce depend on the
type of electronic commerce in question.  Delivery of an item through the Internet requires moreadvanced technology than ordering a product by telephone which is later delivered physically.  A well
functioning, modern telecommunication infrastructure and a satisfactory distribution of electricity are
two basic requirements for electronic transactions.  Access to computer hardware, software and
servers are other requirements for conducting electronic commerce through the Internet.
20. The Internet is the only means that allows all stages of a commercial transaction to be
conducted electronically.  Apart from sending electronic messages (E-mail) or browsing information
on the World Wide Web, the Internet is also used for closed networks to which only a limited groupof users have access, most commonly within or between companies in the form of Intranet or
Electronic Data Interchange (EDI).  It is through the latter use of the Internet, commerce among
businesses, that Internet commerce is e xpected to show the greatest growth. 
6
21. The number of computers in the world directly connected to the Internet has grown from less
than a million in 1992 to almost 30 million by January 1998, with the number of users of the Internetestimated to be about 100 million in January 1998.
7  However, this growth is geographically unevenly
distributed.  The United States has by far the largest number of Internet users, estimated at 21 million
                                                     
5 WTO, Special Studies 2, p. 32.
6 WTO, Special Studies 2, page 25.
7 ITU, 1998, World Telecommunication Development Report, Geneva page 83.WT/COMTD/W/51
Page 5
already in 1996, and about 70 per cent of the Internet websites are located in the United States. 8  The
geographical concentration is even more pronounced in terms of the value of transactions as more
than 85 per cent of world Internet revenue in 1996/97 was generated in the United States.
22. In general, developing countries lag far behind developed markets in the availability of
technical requirements for conducting electronic commerce. For example, 65 per cent of householdsin the world have no telephone, whereas 90 per cent of households in high income countries have a
telephone.
9  Furthermore, telecommunications service in developing countries may often be
unreliable, high cost or both. There are also enormous differences in access to telecommunications
both between and within developing countries.  For instance, while the majority of the population in
developing countries live in rural areas, over 80 per cent of the main telephone lines are located in
urban areas.
23. Technical innovations and new financing and management approaches might help speed up
teleaccessibility in the future.  Government policy can also affect telecommunications access (see
below). Radio or satellite based telecommunications networks may be used to extend
telecommunications infrastructure to remote parts of developing countries;  however, whether a
country can skip the stage of fixed-line telecommunications and only rely on radio-based networks is
debatable.  Most countries will probably need to rely on a combination, for example, of fixed-linenetworks in urban areas and radio-based networks in rural areas.
24.  A recent study by the International Finance Corporation (IFC) on the use of Internet by
corporations in developing countries shows that within developing country companies using the
Internet, fewer people in each company have acce ss to the Internet than in developed country
companies.
10  The primary benefit of the Internet mentioned by developing country companies is the
use of E-mail, used for communications both within the company and externally.  However, many of
the developing country companies that use the Internet already have their own homepages and use the
Net to make searches.  Other uses such as financial and credit transactions are relatively less frequent,
possibly reflecting the state of financial regulation, contract law and other general business legislation
or practice in the countries concerned.
25. In addition to the cost of basic computer equipment, the cost of using the Internet depends on
several factors, including the price of routers and other computing facilities and to a lesser degree on
the wages of operators . Such charges may be significantly higher in developing than in developed
countries, reflecting inefficiency of telecommunications;  thus, the average cost of a subscription to a
dial-up Internet connection in Africa is quoted by  ITU as USD 75 per month compared to USD 10 in
the United States and USD 15 in the United Kingdom, significantly higher in real terms once lower
incomes are taken into account.  Further, the cost of local or long-distance telephone calls givingaccess to the Internet can be significantly higher in developing countries, while, for example, in the
United States local calls are generally free.
11
26. Like other means of communication, the Internet has an external effect in that it becomes
more important the more it is used.  The more people connected, the more people can be reached
                                                     
8 ITU, 1998, page A-79, and WTO, Special Studies 2, page 25.
9 Access to telecommunication is often measured by "teledensity" which gives the number of main
telephone lines per 100 inhabitants.  About a quarter of the world's countries have a teledensity of less than one
and another 47 countries only have between 1.4 to 8.6 main telephone lines per 100 inhabitants.  This should becompared with a teledensity of between 27.8 and 68.3 for a group of 46 countries with the highest number ofmain telephone lines per 100 inhabitants.
10 John A. Daly and Robert R. Miller, Corporations' Use of the Internet in Developing Countries, 1998,
International Finance Corporation, Discussion Paper Number 35, The World Bank, Washington, D.C.
11 NUA Internet Surveys, Weekly Editorial, 15.05.98, "Constraints to the Development of the "Wired"
Economy in Africa", Tom Butterly.  http://www.nua.ie.WT/COMTD/W/51
Page 6
through E-mail, the more information is placed on the Internet, and the more valuable it becomes for a
user to be connected to it.  That externality might be particularly important for companies in
developing countries.  If few of their suppliers and clients are connected to the Internet it is not very
important for them to be connected either.  However, as Internet connectivity grows in developing
countries it becomes increasingly important for developing country firms to have access to and berepresented on the Internet as well.
Enhancing availability of physical infrastructure for electronic commerce
27. As noted, a functioning and reliable telecommunications network is a principal requirement
for conducting electronic commerce.  Among the factors affecting telecommunications access that a
government can influence are the regulatory environment, prices and public information or opinion.
28. Capital investment is needed to increase telecommunication access.  The initial costs of
infrastructure may be high, involving the installatio n of a central exchange, building a satellite earth
station, wiring a first loop, etc.   However, ITU avers that more households than have access to private
telecommunication lines could actually afford it c onsidering the costs of telecommunications services
and household income; the report suggests that the discrepancy might be due to tariffs being set
higher than average cost, inefficiencies, fi nancial constraints or market restrictions.
29. If widespread access to telecommunications at low prices can enhance the capacity of a
country to participate in electronic commerce, a policy goal might be to enhance access and reduce
prices.  Allowing private competition in telecommunications could be one step towards that goal.
This does not necessarily mean giving up the ability to control the operation of the sector;
Governments can still formulate criteria for access and prices, for example, with the aim of favouring
marginal classes of low-volume telephone users as well as increasing access to domestic telephonelines. However, a balance must be struck between the desire to reduce the price to increase
affordability (and thereby broaden access) and the need to ensure funding for new investments.
30. Government policy can also affect access to computer hardware and software.  Most
developing countries do not have domestic production of computer hardware and software, even if
there are important exceptions.  Computer equipment therefore needs to be imported and becomes aneasy target for gaining budget revenue.  However, high customs duties and sales taxes effectively
reduce access to computers and related equipment.  One goal for a government policy aimed at
increasing its country's participation in electronic commerce should therefore be to reduce the cost of
computer equipment to the end user.  This can be achieved through a combination of measures,
including for example duty-free or low-duty access for computer equipment; ensuring competition in
supply, reductions or concessions in sales, income or corporate taxes etc.
31. Access to the Internet can also be affected by policy decisions.  The International
Telecommunication Union has stated that even though  income level is a key determinant of Internet
development in a country, it is not the only one.  "Other factors include sector infrastructure, policies,
service and equipment pricing and social factors, such as age and education."
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32. Governments also have the possibility of actin g at the international level by signing and
following agreements (such as commitments under the GATS or the ITA) which ensure potentiallocal and foreign investors of a climate conducive to investment.
                                                     
12  ITU, "African Telecommunication Indicators" 1998,  page 14.WT/COMTD/W/51
Page 7
Human infrastructure requirements for electronic commerce
33. Apart from the physical infrastructure requirements for conducting electronic commerce,
human infrastructure needs differ from those for conducting other forms of trade.  The more of the
stages of a commercial exchange that are carried out electronically, the more specific skills are
required.  Basic computer knowledge and knowledge of the Internet is needed even if only the searchfor a product is made through the Internet.  Howeve r, if foreign Internet sites are to be browsed,
extensive language knowledge may be an additional requirement.  If a product is to be advertised
through the Internet, skills in designing an Internet site are necessary, and if an electronic payment is
to be accepted there is a need for people with skills in electronic money transfer.  No matter whether a
computer, a telephone, a fax or a TV is used, there is also a need for people with skills in servicing
those machines.
34. Most developing countries do not yet possess a widely skilled workforce in the above-
mentioned fields even if some are well advanced in the process of building up such capacity.
13  Many
entities in developing countries may experience a significant shortage of well-educated, computer-
literate personnel;  in addition, there is likely to be a high turnover of information technology staff.14
It might therefore be desirable to facilitate the movement of natural persons so that personnel with thenecessary skills can be hired by companies experiencing shortages in such personnel.  Universitiesmay be ill-equipped to provide the training in information technology demanded by the private sector,
while individuals who acquire education and skills usable abroad may be retained by the offer of well-
paid jobs.  In addition, given that the majority of Websites currently are in English, language may be a
barrier to Internet use for some developing countri es.  Capacity-building in the field of information
technology, in the knowledge of the existence of a global market for such skills, is therefore crucial.
The development of electronic commerce therefore puts a premium on the development of education
policies, to ensure that training institutions' curricula meet with the needs of industry.
Effects of electronic commerce on education and training in developing countries
35. An active policy towards new technologies is likely to have beneficial effects on demand for
education and training in relevant courses.  In turn, electronic commerce itself can contribute to theeducational process, for example through distance courses via the Internet which may enhance
educational possibilities and the quality of the education offered.  Universities can link up with each
other in a way that enable universities in developing countries to get access to databases and other
valuable information they would otherwise be unable to access or afford.  Private companies
specialized in education can sell their courses on-line and provide their material through the Internet.
Self-studies gain a new dimension in interactive courses.  Not only do connections via the Internet
provide access to vast sources of information, they can also ease contacts and cooperation betweenstudents.
36. However, it is important to note that these benefi ts are not automatic.  The first to benefit will
be the segments of the populations of developing countries that are relatively well off.  It will take
time and commitment from policy-makers before the poorest segment of populations can benefit.
Extensive basic education and access to the required infrastructure are necessary requirements for thebenefits to materialize.
                                                     
13 A skilled workforce is not a requirement unique to electronic commerce.  The lack of skilled workers
is also a problem in other forms of trade. Even with unemployment as high as up to 50 percent, there are stillchronic skill shortages in many industries in developing countries. (NUA Internet Surveys) The difference is,however, that electronic commerce requires a highly edu cated workforce in the areas of information technology
and languages.
14 NUA Internet Surveys, Weekly Editorial, 15.05.98, "Constraints to the Development of the "Wired"
Economy in Africa", Tom Butterly.  http://www.nua.ie.WT/COMTD/W/51
Page 8
Effects of electronic commerce on employment in developing countries
37. Sectoral employment opportunities evolve with changes in the demand and supply of
products.  If electronic commerce is seen as replacing other forms of trade, increased use of electronic
commerce in developing countries may lead to a relative decline of employment in traditional tradingsectors as the need for outlet facilities diminishes.  However, this may be offset by a rise in
employment in delivery and after-sales services, as consumers order products which need to be
physically delivered.
15  There should also be an increased demand for manpower in all sectors
expected to grow with electronic commerce;  namely,  sectors producing products with the potential
to be traded electronically, and sectors related to development and maintenance of the infrastructure
necessary for conducting electronic commerce.  Even if some of the tasks demanded can be
performed at a distance from the customer, others are necessarily linked to the geographical locationof the customer.  Delivery services of physical g oods and the physical installation of computers and
servers are examples of duties that need to be performed at the same geographical location as the
customer.  Employment opportunities will therefore arise in those sectors in the developing countries
that participate in electronic commerce.
38. In addition, and most importantly for developing countries with a large and highly skilled
workforce, there may be increased employment opportunities to satisfy demand for various services
that can be carried out in developing countries and transferred electronically to a company located in
another country.  Examples of such services w ould be accounting, legal, computer consultancy
services and other business services.
Effects of electronic commerce on the movement of natural persons
39. The development of electronic commerce may have various and sometimes opposing
consequences in the area of "movement of natural persons".  On the one hand, some developing
countries have been able to develop expertise in areas like software development, in which their
nationals become skilled consultants whose services are demanded abroad.  The fulfilment of this
demand may be impeded by restrictions applied on the movement of natural persons.  On the otherhand, as noted, skilled computer scientists attracted overseas may well be retained by the offer of well
paid jobs, coupled with work permits:  possibly lead ing to a permanent loss of skills and income for
the country of origin.
40. One consequence of electronic commerce (in the sense of doing business by electronic means,
as distinct from physical presence) may therefore be that more technical or consultancy-type work can
be carried out in the developing country from which the consultant comes, rather than in the country
where the service is demanded.  As noted in the Secretariat paper for the Council for Trade inServices (S/C/W/68), this should facilitate sales of services in which developing countries have a
comparative advantage that they have so far been  unable to exploit because of restrictions on the
movement of natural persons.  This should be a net benefit to the exporting country both in terms of
income and of retained skills.
Electronic commerce and transfer of technology
41. Access to technology may be a key issue for the development of electronic commerce in
developing countries.  It would be wrong to say to that electronic commerce, by itself, necessarily
leads to transfer of technology from developed to developing countries.  However, a country that is
engaged in electronic commerce will by necessity acquire the knowledge required for conducting such
                                                     
15 WTO, Special Studies 2, p. 31.WT/COMTD/W/51
Page 9
trade.  As electronic commerce develops in a country, it will have spin-off effects on the development
of the information technology sector in that c ountry.  A developing country which encourages
electronic commerce and with a climate conducive to investment is likely to attract foreign investment
in sectors related to information technology.  In addition, it is possible that developed country
companies that see market opportunities in developing countries will transfer some technology inorder to be able to explore those market opportunities.
Effects of electronic commerce on investment in developing countries
42. A climate conducive to investment in general is the best way to attract investment.  A country
open to electronic commerce and new information technologies is likely to attract additional interest
from foreign investors.  Despite the attraction of low production costs, communications and distance
have previously discouraged foreign companies from establishing in developing countries;  as noted
above, electronic commerce may lessen these physical constraints.  Active promotion of electroniccommerce might, therefore, make foreign firms more interested in investing in a variety of sectors,
including telecommunications, Internet service provision, professional services and various areas of
industrial production.
Revenue implications of electronic commerce for developing countries
43. Products delivered physically, but "traded electronically" in the sense that they are advertised
and searched for or ordered and paid for electronically, create no taxation or revenue problems
different from those for other products.  Customs duties and internal taxes apply as usual.  By
contrast, electronically delivered products never cross borders physically and there may be no
connection between an Internet address and a physical location;  thus, conventional customs duties
would be difficult to apply and, in their absence, an incentive may be created to bypass taxed routesand move away from conventional trade towards elec tronic commerce;  this may lead not only to
economic distortions, but also to losses in government revenue.  However, recent research comes to
the conclusion that a "duty-free cyberspace" will not have serious fiscal implications for any country.
Only a limited number of countries have high tariffs on products that can be digitalized, and import
duties on such products only constitute a minor share of total government revenue even for thosecountries. 
16
44. When taxation issues are considered, however, potential losses in government revenue should
also be considered in the light of gains that may arise from sectoral growth stimulated by trade
encouraged by lower tariffs and other barriers.  Moreover, it is not impossible to tax electronic
transmissions, and different methods of doing so are being studied by governments. In this
connection, seven principles of tax treatment – equity, simplicity, certainty, effectiveness, avoidance
of economic distortions, flexibility in the face of technological development, and fairness in thedivision of tax revenue among countries – have been enunciated by the OECD. 
17
Legal issues
45. Trade and business communication through electronic means give rise to a number of
questions of a legal nature.  Among those are questions such as: what is the origin of electronically
traded products?  When is an electronically delivered product "domestic" and when is it "imported"?How do traders who use electronic means of communication deal with situations in which national
laws or international conventions applicable to international trade transactions require "written"
                                                     
16 Patrick Low, Aaditya Mattoo and Ludger Schuknecht, 1998, Trade Policies for Electronic
Commerce, draft mimeo.
17OECD Observer, No.206, 1997, quoted in WTO, Special Studies 2, page 40.WT/COMTD/W/51
Page 10
agreements, "original" documents or "manual" signatures?  How can the authenticity of a message be
secured?  Uncertainty over the enforcement and potential for redress of electronically concluded
contracts may create obstacles to the development of electronic commerce across borders.  The use of
electronic means of communicating, for instance in preparing and concluding a contract, and in
delivering products require not only technological solutions but an appropriate legal framework.18
46. A number of initiatives at international level have been taken to assist Governments to deal
with inadequacies in applicable laws.  For example, the United Nations Commission on International
Trade Law (UNCITRAL), the UN body responsible fo r promoting the harmonization and unification
of international trade law, has undertaken work which led to the adoption of a Model Law on
Electronic Commerce in 1996.  The Model Law provides  a set of rules which can be used by States in
enacting legislation to overcome legal obstacles and uncertainties arising from the use of electronic
commerce.
47. Some initiatives have also been taken by individual States, the European Communities and
international organizations to deal with the legal issues related to the use of electronic commerce by
commercial operators; for example through the use of contractual "interchange" or "trading partner"
agreements, which address issues related to the use of Electronic Data Interchange (EDI) between
trading partners.  Model interchange agreements to be used at the national or regional level have beenprepared by several national trade facilitation bodies as well as some regional and international
organizations.
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48. Every country that wishes to participate actively in electronic commerce needs to ensure that
domestic laws and regulations are conducive to the use of electronic means for trade-related
communication and delivery, or at least that domestic laws and regulations do not constituteunnecessary impediments to the use of modern information technology in trade.  However,
developing countries have so far made few legislative reforms in order to accommodate the
requirements of electronic commerce.
Controlling the content of the Internet
49. Almost all countries, developed and developing, are concerned about the content of the
Internet.  This is natural, as the Internet contains a wide range of more or less desired "information".
There are many differing views on what may constitute risks to public morals, security or other types
of offensive material.  To police all the content available on the Internet is next to impossible.
However, possibilities exist to prevent access to undesirable content, either through individual
filtering software installed on the personal computer or, on a broader level, by Internet Service
Providers (ISP).
                                                     
18 One survey of legal considerations involved in  electronic commerce is given in UNCTAD document
UNCTAD/STDE/BFB/1, "Electronic Commerce: Legal Considerations", 15 May 1998.
19 Model interchange agreements have for example been prepared by the EDI bodies or other
associations in Australia, Canada, France, New Zealand, Norway, the United Kingdom and the United States.
An example of an initiative at the international level was the design of the Uniform Rules of Conduct for
Interchange of Trade Data by Teletransmission (UNCID) in 1987 in which several international organizationsparticipated (the International Chamber of Commer ce (ICC), United Nations Commission on International
Trade Law (UNCITRAL), United Nations Conference on Trade and Development (UNCTAD), the United
Nations Economic Commission for Europe (ECE), the In ternational Organization for Standardization (ISO), the
Customs Co-operation council (now the World Customs Organization), the Commission of the European
Communities, the Organization for Data Exchange by Tele Transmission in Europe (ODETTE) and the
European Insurance Committee).WT/COMTD/W/51
Page 11
Final remarks
50. The range of products with the potential to be transmitted electronically is vast and includes
financial and insurance services, various audiovisual products (e.g. films, games and music), travel
(e.g. airline tickets and hotel reservations) professional services (e.g. medical, legal and architectural
services) news and information services (e.g. wire services online and databank retrievals),telecommunications services and services related to other information technology and software.  This
list is not exhaustive and it is likely that other products will be found suitable for electronic trade in
the future.  Today, computer software ranks first among the products sold via the Internet.
20
51. Some developing countries already count as significant suppliers on world markets of these
products; for example, computer software and services are now India's largest export earner, and
Barbados and Mauritius are but two small economies that are significant exporters of financial
services.  However, the use of electronic commerce in its broadest sense, may, as noted above,facilitate trade in other products of actual or potential interest to developing countries.
52. For consumers in developing countries, where the small size of the domestic market and
distance from other markets may imply that international trade in some products is relatively
uneconomic, electronic commerce may lead to  an increased choice of products, lower priced products,
products of better quality and faster delivery of products that can be transmitted electronically.Producers, in turn, can benefit by using electronic commerce for at least some aspects of their
commercial activities (such as marketing, sales, etc.), even if their principal exports, primary
commodities for example, can be traded only by traditional methods.  In addition, electronic methods
applied to customs and port services have already shown their worth through Electronic Data
Interchange or use of specialized systems such as ASYCUDA.
21
53. These considerations imply that building capacity to use the opportunities presented by
electronic commerce, as a means of conducting and facilitating trade, should be one of the priorities in
developing countries' trade policies.  The difficulties should not be underestimated.  As shown,
effective use of electronic commerce requires a degree of investment in both physical and human
infrastructures, including specialized education and training as well as an appropriate legal frameworkfor conducting commerce electronically.  Nevertheless, the benefits in terms of reduction of trading
"distance", information on markets and reduction in transaction costs appear considerable.
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20 WTO, Special Studies 2, p. 29.
21 Automated System for Customs Data developed by UNCTAD.