WORLD TRADE
ORGANIZATIONS/L/74
27 July 1999
(99-3194)
Trade in Services
WORK PROGRAMME ON ELECTRONIC COMMERCE
Progress Report to the General Council
Adopted by the Council for Trade in Services on 19 July 1999
1. The Council for Trade in Services submitted an Interim Report on its discussions under the
work programme on electronic commerce (S/C/8) to the General Council on 31 March 1999.  The
Report identified issues on which discussions had progressed closer towards a common understanding
and others requiring substantial further examinati on.  Following the Interim Report, the Council for
Trade in Services has continued to discuss the work programme at its meetings of 26 April, 18 May
and 22-24 June 1999. At those meetings the discussions focused on the ten issues identified in
paragraph 5 of the Interim Report as requiring considerable further examination as well as the twelve
issues contained in paragraph 2.1 of the Work Programme adopted by the General Council
(WT/L/274).  Reports on those  meetings are contained in documents S/C/M/35, 36 and 37.
2. Since the Interim Report, a communication on the work programme on electronic commerce
by Australia (S/C/W/108) and an informal paper from the European Community (Job No. 3636) have
been submitted.
3. This report is structured according to the individual items contained in paragraph 2.1 of the
work programme and provides information on progress made on each of the items.  Points of common
understanding are reflected under each item, as well as issues which require further clarification and
issues on which there are different views. It should be noted that it does not constitute acomprehensive record of the issues raised by individual delegations.
Scope of the GATS with respect to the electronic delivery of services
4. It was the general view that the electronic delivery of services falls within the scope of the
GATS, since the Agreement applies to all services regardless of the means by which they are
delivered, and that electronic delivery can take place under any of the four modes of supply.Measures affecting the electronic delivery of services are measures affecting trade in services in the
sense of Article I of the GATS and are therefore covered by GATS obligations.  It was also the
general view that the GATS is technologically neutral in the sense that it does not contain any
provisions that distinguish between the different technological means through which a service may be
supplied.  Some delegations expressed a view that these issues were complex and needed furtherexamination.
5. It was recognized that services could be supplied electronically under any of the four modes
of supply.  However, there was particular difficulty in making a distinction between supply under
modes 1 and 2 in the case of electronic commerce, but no conclusion was reached as to how to clarify
the matter, and it was agreed that further work is necessary.S/L/74
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6. Several delegations expressed the view that all products delivered electronically are services
and that in the context of the work programme it would be useful to make clear that the GATS applies
to all products delivered electronically.  Other delegations said that it was not clear to them that all
electronically delivered products are services and that if there were some which would not be
considered services, rules other than those of the GATS would apply to them.  It was suggested thatfurther work on this issue was necessary.
MFN (Article II)
7. It was the general view that all general GATS provisions, including the MFN obligation, are
applicable to the supply of services through electronic means.
8. Members noted that the issue of likeness is central to the application of MFN and that the
main question to be addressed in this regard is whether electronically delivered services and those
delivered by other methods should be considered “like services”.  Members also noted that the issueof likeness is one of the most complex legal issues, not only in the GATS, but also in the GATT and
that there is considerable GATT jurisprudence which establishes that the determination of likeness
can only be made on a case-by-case basis.  Some Members suggested that within the limits of
individual sectors and modes of supply, it should be possible to agree that likeness would not depend
on whether a service was delivered electronically or otherwise.
Transparency (Article III)
9. The general understanding was that the obligations of Article III on transparency apply to all
laws and regulations affecting the supply of a service through electronic means.
Increasing participation of developing countries (Article IV)
10. The common understanding was that the participation of developing countries in electronic
commerce should be enhanced inter alia  by the implementation of Article IV of the GATS through
the liberalization of market access in areas of export interest to them and through better access to
technology, including technology relating to encrypti on and security of transactions and to efficient
telecommunication services.  In this regard, some Members highlighted the impact on widespread
uses in electronic commerce of existing restrictions on export of state-of-the-art encryptiontechnology by some Members.  It was also noted by some delegations that prohibitions on the export
of encryption technology would be viewed in light of Article XIVbis of the GATS.  Reference was
also made to the importance of developing human resources and physical infrastructure.  Some
delegations stressed that it is important to take account of the revenue and other fiscal implications of
electronic commerce for developing countries and suggested that  advantage should be taken of the
work done in UNCTAD and the Committee on Trade and Development in regard to developing
country interests in the matter.  It was also su ggested that efforts to ensure the development of
electronic commerce and internet infrastructure should also be addressed in development assistance
programmes.
Domestic regulation, standards, and recognition (Articles VI and VII)
11. It was the general view that the provisions concerning domestic regulations in Article VI of
the GATS apply to the supply of services through electronic means.  It was the general view that inthe area of domestic regulation it is crucial to maintain a balance between the right of Members to
regulate and the need to ensure that domestic regulatory measures do not constitute unnecessary
barriers to trade.  Members also recognized the importance of the distinction between the disciplines
of Article XIV (General Exceptions) and any possible disciplines to be developed under Article VI:4
of the GATS.  Some delegations suggested the development of disciplines under Article VI:4 of theS/L/74
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GATS in relation to electronic commerce.  Some delegations said that electronic commerce is an area
where rapid economic growth has been fostered by th e existence of very little regulation and that the
emphasis in the field of domestic regulation should be on keeping regulation to a minimum in order to
favour further growth.  It was also suggested that consideration should be given to the constraints
facing developing countries in fulfilling legitimate regulatory objectives in this field and to dealingeffectively with technical barriers to trade encountered by developing countries.
Competition (Articles V III and IX)
12. The general view was that the expansion of electronic commerce could help reduce the extent
of restrictive business practices, inter alia , by facilitating market entry for smaller service suppliers.
13. It was noted that monopolies and restrictive business practices might pose obstacles to
electronic commerce and that this issue needed further examination.  Some Members were of the view
that there might be a need to further clarify the applicability of the principles relating to competitivesafeguards (including interconnection) and allocation of scarce resources in the telecommunications
Reference Paper to major suppliers of telecommunication services in relation to electronic commerce.
It was noted that the competition safeguards in the Reference Paper apply to major suppliers of basic
telecommunications and that in some countries the In ternet access provider is also a major supplier of
basic telecommunications.  A suggestion was also made that improvement of access to distributionchannels and information networks, including the internet, needed further examination.
Protection of privacy and public morals and the prevention of fraud (Article XIV)
14. It was noted that Article XIV of the GATS (General Exceptions) applies, inter alia , to the
protection of privacy and public morals and the prevention of fraud, and there was agreement that
measures taken by Members must not be more trade restrictive than necessary to fulfill suchobjectives.  They also must not constitute a means of arbitrary or unjustifiable discrimination, or a
disguised restriction on trade in services.  It was also noted that, as Article XIV constitutes an
exception provision, it should be interpreted narrowly, and its scope cannot be expanded to cover
other regulatory objectives than those listed therein.
Market-access commitments on electronic supply of services (Article XVI)
15. Without prejudice to questions concerning likeness of services, it was the general view that
the means of delivery does not alter specific commitments;  they permit the electronic supply of the
scheduled service unless otherwise specified.  It was pointed out that it would be possible to define
the coverage of a commitment, in the sector/sub-sector column of the schedule, as excluding supply
through certain technological means.
16. Some delegations argued that it should not be assumed that a country which has made
commitments in basic telecommunications has au tomatically committed Internet access services,
particularly given the fact that some Members had explicitly scheduled these services.  Other
delegations argued that the issue of commitments on Internet access services and networks needed to
be further clarified, in the light of the fact that many delegations regarded their commitments on basic
or value-added telecommunications services as covering Internet access.
National treatment (Article XVII)
17. There was a general understanding that national treatment commitments cover the supply of
services through electronic means unless otherwise specified.
18. Members expressed the same views on the issue of likeness as for MFN.S/L/74
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Access to and use of public telecommunications transport networks and services  (Annex on
Telecommunications)
19. The general view was that the Annex on Telecommunications applies to access to and use of
the Internet network when it is defined in a Member’s regulatory system as a public
telecommunications transport service and/ or network in terms of that Annex.
20. It was noted that the Annex guarantees access to and use of public telecommunication
networks for Internet access providers, but it was not clear whether it also guarantees service suppliers
access to and use of Internet  networks and services.  Since it might be important for service suppliers
to have the right of access to Internet  networks and services, it was agreed that it would be desirable
to further examine this matter.
21. It was noted that a key question in the determination of the applicability of the
Telecommunications Annex is whether some Internet related services can be considered “publictelecommunications transport networks”, as the In ternet is a network of networks, which includes
public and private networks.
Customs duties
22. Some delegations said that customs duties on electronic transmissions could affect electronic
commerce and the electronic supply of services.  Other delegations argued that the concept of customsduties is alien to the GATS and would become a relevant issue only if it were accepted that a category
of electronically delivered goods exists.  Other delegations maintained  that customs duties could be
applied to services, but saw a need to clarify the implications of applying customs duties to electronic
transactions.  It appeared from the discussions on this item that Members might wish to address at
least the two following questions: (i) how custom s duties could apply to services; and (ii) how
customs duties could apply to electronic transmissions.
23. Some delegations supported making the current standstill on customs duties permanent and
binding. Some said that unless the classification issu e was resolved they would not be able to consider
extension of the standstill.  Others said that they could support a permanent and binding standstill, but
without prejudice to their position on the classification issue.  Other delegations said that they couldonly envisage extension of the standstill on the current basis, possibly until the end of the forthcoming
negotiations, while some were not convinced of the case for extension. The point was made that a
decision to extend the standstill would be a political one, which could only be taken by the General
Council, while the debate in the Services Counc il should focus on the technical and legal issues
involved.It was also noted that, when reporting to the Third Ministerial Session, the General Council
will review the May 1998 Declaration on Global Electronic Commerce, the extension of which will
be decided by consensus, taking into account the progress of the work programme.  Some delegationssaid that the concept of technological neutrality could be undermined by assuming that customs duties
could be applied to services electronically transmitted and not to services delivered by other means.
Some delegations suggested the need to examine the impact of domestic taxation on electronic
commerce.  Others said that matters related to domestic taxation were outside the ambit of the work
programme and should not be discussed.S/L/74
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Classification issues
24. Delegations endorsed the view that all services, whether supplied electronically or otherwise,
are covered by the GATS, and that the GATS makes no distinction between services provided
electronically or by any other means.  It was also observed that the vast majority of all products
delivered electronically are services.
25. Some delegations were of the view that all electronic deliveries are services and could not see
any non-services products, which could be delivere d electronically.  Other delegations suggested that
it still remained to be clarified whether there were a number of electronically delivered products
which should be classified as goods and therefore subject to the GATT rather than the GATS.  The
question was also raised as to whether such products, even if classified as services, should be subject
to full MFN andnational treatment obligations and to general prohibition of quantitative restrictions. It
was also suggested that there might be categories other than goods and services for classifying certainelectronically delivered products;  in some cases a downloaded product might be regarded as neither a
good nor a service.  However, it was pointed out that no suggestion was made to the effect  that there
was any product that would fall outside the scope of WTO agreements.  It was agreed that further
consideration, including the consideration of concrete examples, should be given to this question.
26. In discussion of the issue of possible new services, it was the general view that electronic
delivery had given rise to very few new services, if any, but that further work is needed to identify any
such services and decide how they should be classified.  Some delegations argued that the
identification of new services should be done keeping in mind the existing classification structure
based on the Services Sectoral Classifica tion List (MTN.GNS/W/120) and the UN CPC.
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