WORLD TRADE
ORGANIZATIONWT/GC/W/493/Rev.1
8 July 2003
(03-3627)
Original:  English
WORK PROGRAMME ON ELECTRONIC COMMERCE
Submission from the United States
Revision
The following submission, dated 4 July 2003, has been received from the Permanent Mission
of the United States with the request that it be circulated to Members.
_______________
The United States is providing this submission for the Work Programme’s further dedicated
discussions to help develop our report to Ministers as we look ahead to the Fifth MinisterialConference in Cancún.
I. INTRODUCTION
1. As WTO Members work together to realize the objectives of the Doha Development Agenda,
the potential for e-commerce to be a driver of economic growth should not be ignored.  A recent
report on e-commerce and developing countries concluded that these countries should encourage e-
commerce development in order to realize fully their economic potential.
1  E-commerce allows
enterprises to generate efficiency gains at all stages of their production and distribution process.2  In
fact, market innovations and efficiencies gained through e-commerce have the greatest effect in
countries where coordination and transaction costs are highest.  E-commerce can be the key to
overcoming traditional impediments, such as time and physical distance, in business-to-business as
well as business-to-consumer transactions.  For example, e-commerce can enable new entrants to themarket (from all economies) to create services export opportunities that would not have been possible
without the Internet.
2. But these benefits do not occur without positive and active participation by countries in
committing to reform and open trade.  Thus, WTO Members that seek to stimulate e-commerce will
realize these gains by reforming policies in the telecommunications, financial services, distributionand delivery sectors, resulting in across-the-boa rd improvement in the business and investment
environment.  In addition, trade formalities should be transparent, fully-notified, and should not be
used as a disguised restriction on trade.
                                                     
1 E-Commerce and Development Report, 2002.  Part One.  United Nations Conference on Trade and
Development.
2 E-Commerce and Development Report, 2002.  Part One.  United Nations Conference on Trade and
Development.WT/GC/W/493/Rev.1
Page 2
3. The Doha negotiations afford an excellent opportunity for all countries interested in
harnessing the development potential of e-commer ce to implement such reform policies.  Not only
will they directly benefit in terms of spurring domestic economic growth and development, but by
reforming together with trading partners they can realize export benefits as well.  The current WTO
Work Programme on Electronic Commerce affords a venue for pursuing these objectives.  Because e-commerce is a multifaceted topic that involves many areas of existing WTO agreements, the Work
Programme should turn to the task of identifying how  the relevant on-going negotiations can spur the
advancement of e-commerce.  Collectively, our effort should be aimed at the following objectives
through the Doha Development Agenda:
• Adhering to a liberal and open trade environment through the application of existing
WTO agreements to e-commerce is an important way to expand growth andopportunities for all WTO Members;
• Committing to greater market access and national treatment across a broad range of
relevant goods and services sectors that will promote trade in products and servicesusing electronic networks;
• Recognizing that where legitimate policy objectives require domestic regulations that
affect trade in products and services using electronic networks, such regulations
should be transparent, and non-discriminatory, and their purpose should not serve as arestriction on trade;
• Accepting as permanent on an MFN-basis the moratorium on imposing customs
duties on electronic transmission as a way to support the continued expansion ofglobal e-commerce; and,
• Recognizing that technical assistance and capacity building projects related to e-
commerce have a role to play in the deeper integration of developing countries andeconomies in transition into the framework of the WTO rules, the WTO should
coordinate closely with other international institutions in helping to develop the
needed infrastructure and other requirements for e-commerce to be accessible.
4. Since e-commerce encompasses many areas covered by existing WTO agreements, it requires
a comprehensive approach.  Other international fora are already examining e-commerce in such a
manner.  For example, in October 2002, an overwhelming majority of Leaders of the Asia-Pacific
Economic Cooperation (APEC) agreed to adopt a seri es of trade policies for the Digital Economy, and
highlighted key general objectives in this area, similar to the ones set forth above.
3  In order for the
WTO to keep apace with constantly evolving technologies and international developments, WTO
Members should endorse general objectives on e-commerce that are applicable to all negotiating
groups.
                                                     
3 See APEC Economic Leaders’ Declaration, Los Cabos, Mexico, October 27, 2002, specifically,
Leaders ’ Statement to Implement APEC Policies on Trade and the Digital Economy.  The APEC economies
supporting the Statement include, Brunei Darussalam, Hong Kong China, Indonesia, Japan, Korea, Malaysia,Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Singapore, Chinese Taipei, Thailand, the
United States, and Vietnam.WT/GC/W/493/Rev.1
Page 3
II. OBJECTIVES
A. LIBERAL AND OPEN TRADE ENVIRONMENT
5. In a global economic environment increasingly connected via the development of electronic
networks, making commitments and concessions in the multilateral trade forum in areas critical to
digital trade provides for stability and predictability necessary to realize economic growth.  Takingadvantage of the Doha Development Agenda negotiations will allow WTO Members to actively
participate in creating a trade environment for e-commerce that rewards all WTO Members.  It
rewards those making commitments and concessions by signalling to the rest of the Membership that
they support e-commerce, and are open to its continued development both locally and globally.  And
those making commitments and concessions realize the benefits of others making similar market
opening action, because by increasing trade efficiencies, economies grow, and development expands.
In the area of e-commerce, these benefits include, among others, technology diffusion, distancelearning, and participation in a world- wide platform for trade and innovation.
6. Increasingly, businesses around the world develop products and services that rely on networks
for their production and delivery.  Undoubtedly, a well-developed telecommunications network is
essential for those businesses, as are other important service sectors, including computer and related
services, management consulting, distribution, express delivery, advertising, and certain financialservices.
4  Therefore, the United States supports increasing market access commitments and fully
liberalizing these areas, with minimal limitations.  But strong services commitments are not enough.
Lowering tariffs on key information technology products (the hardware for network development) is
also important, as are strong protections of intellectual property rights for Internet-delivered products.
Such liberalization will benefit all WTO Members.  Indeed, the “multiplier effect” of building a trulyglobal network creates a win-win situation – the more people electronically linked and the more
people utilize these networks, the more valuable these networks become, and the more robust trade in
the digital era can be.  This will create opportunities for both small and large businesses in economies
at all levels of development.
7. Some questions remain, however, with respect to a category of products that can be digitized
and electronically delivered and how to treat such products for trade purposes. Software has been
identified as a good example of where the intersec tion between the category of goods and services has
become increasingly blurred.  In the past, these types of products merely crossed physical borders
embodied on a carrier medium, and while new mean s of delivery have developed, the underlying
characteristic of the product has not.  Today, these products can flow seamlessly across global
networks and can be permanently retained on an end-user’s computer, and still retain the underlying
function as if they were sent in physical form.  Thus, the means of delivery of such products maychange but the downloadable products’ functional characteristics do not change merely by a
difference in delivery.
5  Trade rules or commitments should not prejudice which business model is
optimal for developing or delivering these products.  Thus, the focus should not be on how to classify
these products, but rather how to  treat  them for trade purposes with the goal being the most liberal
treatment irrespective of how such products are classified.
                                                     
4 See e.g., Market Access in Telecommunications and  Complementary Services:  The WTO’s Role in
Accelerating the Development of a Globally Networked Economy.  Proposal by the United States, December
2000. S/CSS/W/30.
5 Venezuela made a similar observation in its July 2001 submission to the Work Program. JOB
(01)(120),July 2001.WT/GC/W/493/Rev.1
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8. The most recent paper submitted on this issue was Canada’s non-paper on software delivered
electronically,6 as well as a Background Note by the Secretariat.7  These papers are useful summaries
of the challenges WTO Members face with the classification issue.  Canada accurately portrays some
of the key considerations that producers of certain digital products (software) have:  (1) ensuring the
most efficient method of delivering products;  (2) ensuring electronically delivered products aretreated in a manner no more restrictive than the same products delivered in a physical medium; (3)
maintaining the current liberal trading environmen t;  and (4) ensuring that trade liberalization,
expansion of e-commerce, transparency and predictability are available irrespective of the means of
delivery.
8
9. With business models rapidly evolving, it is important that WTO Members avoid instituting
barriers to the development of e-commerce.  Given the inherently flexible nature of trade in the digital
world, the multilateral trade rules should continue to  ensure free and open trade in this area.  Indeed,
the development of software provides a good example of why adherence to these disciplines is
essential.  Software can be created in one country, produced, published, stored and then transmitted
via any location, thereby making a meaningful rule of origin for market access purposes difficult to
conceive.  This is particularly acute when a software product is developed simultaneously in multiple
countries, with developers in different software labs working on different modules of codes, ordevelopment, testing and debugging of programmes is conducted in different countries.  Market
access barriers in the form of trade discrimination or other protectionist measures at any point in the
development of these products, including downloading the actual product, will prevent producers and
users of these products from realizing the efficiency and productivity gains that e-commerce provides,
both in terms of overcoming time and geography limits.
10. In addition, consumers and businesses will be denied the benefits that such products may
offer for personal consumption but also as an important input to other services.  For example,
software that may help forecast weather pattern s more precisely could benefit farmers or help
fisherman better plan for the operations of their core businesses.  Therefore, it is essential to ensure
that all delivery methods by any technological means are available, thereby allowing all marketparticipants to determine the most efficient delivery mechanism and use of products – not prejudiced
by one set of trade rules over another.
11. In sum, if WTO Members are committed to developing e-commerce, then a crucial step will
be to adhere to a liberal and open trade environment that will allow e-commerce to flourish – free of
trade impediments to the economic development that results from such trade.
B. T
RADE PROMOTION
12. Most of the current Work Programme on Electronic Commerce discussion centers around the
classification debate alluded to above, i.e., how electronically downloaded products should be
classified - as a good subject to General Agreement on Tariffs and Trade (GATT), or as a service
subject to the General Agreement on Trade in Services (GATS), or possibly something else.  There is
no agreement on this issue.  Yet, despite no consensus, and maybe because premature conclusions
have not been made by most WTO Members, e- commerce continues to evolve and grow throughout
the world.  Certainly robust market access and natio nal treatment across a broad range of sectors will
help develop the key infrastructure to transmit products and services using electronic networks.
                                                     
6 See Discussion Paper entitled, “The Classifica tion of Software Delivered Electronically,” submitted
by Canada for the Second Dedicated Discussion on Cross-cutting Issues. May 6, 2002. (Canada Paper).
7 See E-commerce Work Programme: The Classification Issue,  Background Note by the WTO
Secretariat,  JOB (02)/37 (2002). (Background Note).
8 See Canada Paper,  paragraph 33.WT/GC/W/493/Rev.1
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Commitments and concessions in the relevant negotiations, as well as a commitment not to
discriminate or enact trade barriers on electronically delivered products, will lead to greater
predictability and stability for the electronic transmission of these products - irrespective of the
particular category in which one wants to place it.  For example, WTO Members should avoid
instituting barriers to e-commerce in the form of quantitative restrictions (assuming they can be
established in the digital world), trade distorting subsidies, and, as discussed further below, duties on
electronic transmissions should be avoided and eliminated on technology products and services.  It is
important, therefore, to recognize the applicability of existing WTO disciplines that could have a trade
liberalizing impact on e-commerce, as well as how the on-going negotiations could have a similar
liberalizing effect.
13. The Secretariat’s Background Note highlights the fact that e-commerce has thus far been
conducted successfully within and across borders by businesses from many WTO Member countries,and that currently digital products in their physical form and on-line equivalents have for a number of
years been traded under circumstances in which they may be subject to either the GATT and the
GATS.  And, importantly, no specific problems or trade disputes have arisen within the WTO in this
regard, which counsels against prematurely establishing new trade rules for e-commerce.
9  Thus,
despite the lack of agreement on how to classify these products, trade in this area continues to expand.WTO Members have an opportunity to enshrine this current level of openness in an expanding area of
trade.  WTO Members should not miss this opportunity.
14. The Secretariat’s Note is useful in outlining how the GATT and GATS could be applied in a
trade liberalizing manner to achieve the highest level of market openness for digital trade.  Under the
GATT, quantitative restrictions are prohibited, subsidies are disciplined, and in a fully liberalizedworld, tariffs are non-existent.  Likewise, in a fully liberalized services market under the GATS,
quantitative restrictions would not exist except in limited circumstances, subsidies, if applied, would
be non-discriminatory, and tariffs are not applied.  Therefore, if we apply the most trade liberalizing
aspects of these key market access provisions in the WTO to e-commerce, the WTO rules support an
aspect of trade from which all WTO Members gain, and WTO Members will avoid spending yearsworking to reduce market access barriers.
15. WTO Members should recognize that trade liberalizing aspects of the WTO agreements
brings potential e-commerce benefits to a country both as an importer and exporter.  First, a country
can bring the benefits of lower prices and greater choices of products and services both to businesses
and consumers by avoiding barriers to trade over electronic networks.  For example, local businesses
can become more efficient and better able to compete in global markets by taking advantage of
electronically delivered products and services as inputs to their own production processes.  Second, bypursuing liberalization of digital trade among trading partners, WTO Members can expand export
opportunities for their own businesses that might not otherwise be able to reach those markets.
Therefore, in tandem with existing WTO rules, the on-going negotiations provides a good opportunity
to expand trade via electronic means.
16. In sum, those WTO Members interested in expanding e-commerce in their market should
support the notion that an essential catalyst for the development of e-commerce is greater openness
across a broad range of relevant sectors in the negotiations.  And, applying the most liberalizing
aspects of the existing agreements to products being traded electronically creates benefits for all WTO
Members.  Thus, by recognizing this objective, and actively participating in the negotiations, WTO
Members can realize these benefits and promote increasing trade using electronic networks.
                                                     
9 See Background Note,  paragraph 11.WT/GC/W/493/Rev.1
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C. DOMESTIC REGULATION
17. Questions have arisen about whether or how one should regulate e-commerce.  The United
States believes that each Member has the right to regulate.  Some of these regulations undoubtedly
affect electronic commerce.  Regulations should not, however, act as a barrier to trade, i.e., they
should not be used as a protectionist measure to favor domestic commercial interests.  In addition,where domestic regulations are designed to meet legitimate policy objectives they should be
transparent, non-discriminatory, and should follow existing WTO agreements for such measures.
Transparent domestic regulations are essential for creating more efficient markets and an attractive
investment environment.  This becomes even more  acute in the electronic world where firms need to
evaluate their ability to access and operate in foreign markets.  Opaque or non-transparent domestic
regulations can result in trade barriers and thus undermine the value of a liberal trade regime.  Indeed,
developing a transparent regulatory process is the first step in helping to better understand domesticpolicy objectives, which in turn could lead to even greater confidence in government and the rationale
for trade liberalization.
18. A number of WTO Agreements set forth criteria in establishing certain measures related to
domestic regulations.  For example, with respect to measures taken consistent with GATS Article
XIV or GATT Article XX, they should not const itute a means of arbitrary or unjustifiable
discrimination between countries or serve as a disguised restriction on trade.  And under the
Agreement on Technical Barriers to Trade in the standards area, technical regulations shall not be
prepared or applied with a view to or with the effect of creating an unnecessary obstacle to
international trade.  For that purpose, technical regulations should not be more trade-restrictive than
necessary to fulfill a legitimate objective.
10  Applying a similar approach to regulations that might
impact e-commerce would serve all WTO Members’ objective of enhancing the development of e-
commerce.  Using this approach, as well as focusing first on the effectiveness of transparency for
domestic regulations, will help foster a more robust e-commerce environment.  This applies not only
to developing a vibrant services market, but also assists in trade facilitation with respect to border
formalities, as well as in the area of government procurement, where transparent and non-discriminatory procedures would benefit suppliers.
19. Thus, WTO Members endorsing the idea that e-commerce is an important avenue for
economic growth will support the notion that where legitimate policy requires domestic regulations
that affect e-commerce, such regulations should be consistent with disciplines contained in existing
WTO Agreements, including being transparent and non-discriminatory.
D. C
USTOMS DUTY MORATORIUM
20. There has also been substantial debate on the moratorium on imposing customs duties on
electronic transmission.  This moratorium was established in conjunction with the Work Programme
in 1998 to help spur the growth of e-commerce.  It  is a moratorium that ought to be made permanent
and binding for a variety of reasons.  Currently, based in large part on WTO Members’ forward-
thinking adherence to the moratorium, no such duties exist.  While some might argue that by not
imposing duties on electronically transmitted products, these products are receiving better treatmentthan a corresponding product delivered in physical form.  Yet if equalizing the treatment between
physically delivered and electronically delivered products is the goal, instead of trying to impose a
duty on the electronically delivered product, a more liberalizing course of action would be to lower a
duty, if any, applied on the physically delivered product.
                                                     
10 Agreement on Technical Barriers to Trade, Article 2.2.WT/GC/W/493/Rev.1
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21. In addition, attempts to impose duties on such products will be counter-productive to
promoting the development of e-commerce – balancing the minimal tariff revenue derived from such
products versus creating overall economic efficiencies and increased economic activity that results
from using these products weighs in favor of embracing the latter.  In fact, the chairperson of the CTD
Seminar on “Revenue Implications of E-commerce” held in April 2002, recognized that the directeffects on government revenue through tariff losses seem to be very small whereas the effects on the
efficiency of an economy can be large.
11  Indeed, it is not likely that businesses and consumers seek
an electronically delivered product over a physically delivered product in order to avoid such minimal
duties in the first place.  Instead, they may seek to download products for a variety of other reasons,
including efficiency, convenience, and speed of delivery.12  Again, trade creating policies ought to be
one’s objective in examining this issue – does the imposition of duties on a currently non-dutiable
product, or the threat thereof, create trade or hinder trade?
22. Finally, it would be counter-intuitive that an organization committed to trade liberalization
such as the WTO would contemplate endorsing the imposition of tariffs in an area of trade that has
emerged, in large part, because trade barriers have been minimal.  Thus, as most WTO Members have
supported the notion that e-commerce is something th ey would like to develop further, both locally
and multilaterally, one of the most positive actions the WTO could make to this end would be to makethe moratorium on imposing customs duties on electronic transmissions permanent.  A decision at
Cancun would send an important signal of continuing interest in expanding trade in this important
area.
E. T
ECHNICAL ASSISTANCE /CAPACITY BUILDING
23. The benefits of e-commerce will not be realized by all countries immediately.  Adapting
policies, business processes and technology to the new environment of e-commerce takes time and
money.  Capacity building is essential to meeting this challenge, but it must be done in partnership -
looking at needs, domestic reform, and the most efficient means of delivering assistance.  Experience
to date has shown that businesses around the globe with established e-commerce strategies and
business models are working with developing countries, and ones in transition, as those countriesmove toward trade liberalization.  Capacity building is only successful if it goes hand-in-hand with
domestic policies that encourage competition in telecommunications, computer-related services,
financial services, distribution and delivery services; they must work in tandem.  Indeed, the United
States government, working with businesses, has instituted many capacity-building measures that will
positively impact developing e-commerce around the globe.
13  For example, in the Americas region,
some projects include:
Brazilian Global Technology Network:  The USAID Global Technology Network is an
interactive web-based programme, that enables participating companies to post their needs for
goods and services through a trade-lead network, thereby facilitating trade and investment.
El Salvador Telecommunications Regulatory Framework:  The U.S. Trade and
Development Agency provided SIGET (the El Salvador regulator) with a grant to fundtechnical assistance focusing on interconnection, anticompetitive practices, transparency, and
                                                     
11. See Oral Report by the Chairperson of the seminar, H.E. Mrs. Mary Whalen, Seminar on Revenue
Implications of E-commerce, made at the 40th Session of the CTD on 25 April 2002.
12 In fact, without adequate telecommunications and computer infrastructure, speed of delivery could
be a deterrent to electronically delivered products.
13 For more information on the full range of trade-related capacity-building programs in the United
States, visit USTR’s website at www.USTR.gov.WT/GC/W/493/Rev.1
Page 8
consumer protection.  Similar projects were done in Venezuela and with many of the
Carribean countries.
Guatemala - Electronic Business Development Centers:  Four EBDCs were opened in
remote areas and are designed to help small businesses tap into the potential of the Internetand computer technology to improve their business outlets for new products and services.
Jamaica - Small and Medium-sized Enterprise Development:  USAID helped train
employees of SMEs on effective use of computer-based management software solutions and
information technology.  These firms acquire skills in automated financial and accounting
systems, business management techniques, and e-commerce marketing.
24. These programmes are not limited to U.S. initiatives for Latin America, and the United States
has similar programmes around the world.  Most developed countries, including the European
Communities, Canada, and Japan have trade capacity building programmes that will help promote and
develop e-commerce on a global scale.
14  These programmes reflect that all countries have an
important stake in enhancing everyone’s participation in global electronic commerce.
F. CONCLUSION
25. The objectives set forth in this paper are design ed to stimulate a forward-thinking approach to
e-commerce, and better understand how multilateral trade rules are critical to its development.  By the
Cancun Ministerial, the United States encourages WTO Members to support recognition of these
objectives as a way to examine e-commerce-related issues as we move forward.  The WorkProgramme can continue in a manner consistent with these objectives, and can examine e-commerce-
related issues, including classification, as the negotiations proceed.
26. An important point to bear in mind is that, despite a lack of agreement on how to classify
certain products, e-commerce has expanded globally.  In fact, the intrinsic value of the Internet as a
means of increasing trade has been embraced and has resulted in tremendous gains for all WTOMembers.  This development is significant and needs to be nurtured further.  Therefore, the United
States encourages WTO Members to view e-commerce as a means to expand market opportunities,
trade, and economic growth for all WTO Members.  Likewise, the United States urges WTO
Members to avoid erecting barriers to these opportunities that would block the current level of
openness to trade, and result in slowing the potential economic growth e-commerce can provide.  One
way to avoid trade disputes tomorrow is to embrace and bind the current level of openness today.  All
WTO Members should work toward that end with the endorsement of the key objectives outlinedabove.
__________
                                                     
14 See e.g., WT/L/451 (May 2002), Japan submission on its International Cooperation on Information
Technology.