RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/W/100
17 March 1999
(99-1079)
Council for Trade in Services
- D R A F T –
Interim Report on Electronic Commerce
1. The Council for Trade in Services has discussed the work programme remitted to it by the
General Council on the subject of electronic commerce at its meetings of 23 November, 14-
15 December 1998, 9 February and 22-23 March 1999.  The discussions have taken place both in
formal and informal mode, but it was agreed at the outset that in principle substantive discussions
would take place in informal mode, in order to fa cilitate a free exchange of views, and that the
Chairman would present a summary of the discussi ons for Members' approval at the end of each
meeting.  These summaries and records of the formal discussions are contained in the notes of the
relevant meetings.  It was also agreed that the Secretariat should prepare a note dealing with each of
the elements contained in the Council's work programme;  this note was circulated as S/C/W/68 on
16 November 1998.
2. A communication from the United  States dealing with the work programme as a whole and
submitted to all of the bodies engaged in it (S/C/7) was presented to the Services Council at its
meeting of 22-23 March.  Communications from the European Community on scope and
classification issues and on domestic regulation (S/C/W/87 and 98) were presented at the November
and March meetings respectively.
3. Discussions took place on the basis of the twelve subjects to be examined by the Council for
Trade in Services as listed in the work programme.
Scope
4. The European Communities submitted a communication (S/C/W/87) on issues relating to
scope and classification.  This was presented at the meeting of 23-24 November.  In discussing the
scope of the GATS as it related to electronic commerce, Members agreed that the GATS applied to all
services regardless of the technological means by which they were delivered;  as in all other areas of
WTO law, the GATS did not contain different rules for different techniques of delivery.  It was notedthat the principle of technological neutrality m eant that scheduled commitments covered all means of
delivery unless the schedule specified otherwise.  Members also agreed that services can be supplied
electronically under any of the four modes of supply listed in Article I, including modes 3 and 4.  The
point was made that the development of electronic commerce could in some sectors affect the relative
importance of the modes, by facilitating cross-border supply (modes 1 and 2).  In discussion of thedifficulty of applying to electronic commerce the usual definition of modes 1 and 2 according to the
geographical location of the transaction, interest was expressed in the suggestion in the Secretariat's
paper (S/C/W/68) that the essential purpose of the modes is to classify the commitments of Members
and measures taken under them:  the distinction between modes 1 and 2 would be made according to
whether the measure in question restricted the ability of foreign suppliers to supply the service or thatof domestic consumers to buy it.S/C/W/100
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Classification
5. Members agreed that all services delivered electronically, like services delivered in any other
way, were covered by the GATS.  It was noted that further discussion was needed on the classification
of certain products delivered electronically which if delivered by non-electronic means, on a physical
carrier, would not be considered services.  One suggestion was that electronic delivery might involvetwo categories of products, services and intangible goods, and that electricity was an example of a
product considered as an intangible good in the WTO system.  It was also argued that some physical
goods, such as magazines, incorporated many services;  it was not evident that if the magazine was
supplied on-line, incorporating the same services but not the physical supports, it should not itself be
considered a service.  It was also said that there were three different kinds of transmission involved in
electronic commerce: (1) electronic transmissions consisting solely of telecommunications, such as
electronic mail; (2) electronic transmissions used to order goods over the internet, which weresubsequently delivered physically; and (3) electronic transmissions in which services are ordered and
delivered electronically. All of these transactions fell within the scope of the GATS, due to the
technologically neutral nature of the Agreement;  and internet access services were covered by
existing commitments in telecommunications and by the GATS Annex on telecommunications.  It
was suggested that the classification and scheduling of internet access services, and of new serviceslikely to emerge in the area, would need further study.
Transparency
6. It was agreed that the obligations in Article III of the GATS relating to the transparency of
laws, regulations and international agreements applied to electronic commerce as to other forms of
trade in services.
MFN (Article II)
7. It was noted that the issue of "likeness" was central to the application of the MFN obligation.
The question was asked whether services delivered electronically and those delivered by more
traditional methods should be considered "like se rvices".  In reply it was argued that likeness
depended on the attributes of the services or goods in question, not on the means of their delivery.  Itwas also suggested that consideration should be given to the question whether there were differences
between the concepts of likeness under GATT and GATS.
Increasing Participation of Developing Countries
8. Members agreed that their work on this subject should take into account the paper on the
development implications of electronic commerce presented by the Secretariat to the Committee on
Trade and Development (COMTD/W/51).  It was pointed out that in addition to Article IV,
Article XXV, on technical co-operation, was relevant to the promotion of increased participation bydeveloping countries in electronic commerce.  Interest was expressed in the convening of a seminar
on the subject, with the participation of appropriate non-governmental and private sector
organizations.  Such a seminar was subsequently held under the auspices of the Committee on Trade
and Development.
Domestic Regulation
9. The European Communities submitted a communication on the applicability of Article VI of
the GATS to services provided electronically (S/C/W/98) of 23 February 1999.  This was presented at
the Council's meeting of 22-23 March.S/C/W/100
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10. Members agreed that the provisions concerning domestic regulations in Article VI of the
GATS applied to electronic commerce transactions in services and that the function of this Article, as
in other contexts, was to ensure that regulations in this area did not constitute unnecessarily barriers to
trade.  It was noted that electronic commerce was an area where rapid economic growth had been
fostered by the existence of very little regulation under the emphasis in the field of domesticregulation should be on keeping regulation to a minimum, in order to favour further growth.  The
view was expressed that Article VI as it stands was adequate for this purpose.  It was also suggested
that consideration should be given to the constraints facing developing countries in fulfilling
legitimate regulatory objectives in this field an d to ensuring that technical barriers to trade
encountered by developing countries were also effectively dealt with.  The Reference Paper on
regulatory principles in basic telecommunications was cited as a possible model for the development
of rules on domestic regulation in electronic commerce.   It was also pointed out that the development
of Article VI disciplines and their effective application was important in order to ensure that existing
specific commitments relevant to electronic commerce were not nullified or impaired by measures of
domestic regulation.
11. The point was made that in transactions involving the electronic delivery of services,
Article VI covered regulations affecting both the transport function and the content of the transaction,as well as the regulations affecting distribution services provided electronically.  Three issues required
consideration in the area of domestic regulation:  (i) whether it would be desirable to agree under
Article VI a group of regulatory policy objectives justifying the imposition of regulatory restrictions
in electronic commerce, with a view to minimising unnecessary barriers to trade;  (ii) whether it
would be advantageous to distinguish between regulations applying to content and regulations
applying to transport;  and (iii) whether it would be desirable to request an Internet service provider to
make inaccessible to consumers a web site which does not comply with domestic regulation.
12. It was also suggested that it was important to be informed about the relevant work of other
international organizations in this field, for example that of UNICITRAL on a proposal for an
international convention on electronic transactions which covered important aspect of domesticregulation.
Market Access
13. Members generally agreed that the principle of technological neutrality applied to GATS
commitments, meaning that market-access commitments  cover the supply of the committed service by
all technological means, including electronic means.   It was however suggested that there were a
number of services highly relevant to electronic commerce in which there were very few specific
commitments, and that the Council might conduct an examination of the implications of this
phenomenon.  A number of Members expressed agreemen t with the categorization in the Secretariat's
Note (S/C/W/68) of electronic commerce in services under three types of transaction – (a) Internet
access services;  (b) electronic delivery of services;  and (c) use of the Internet as a medium for
distribution services – the sale of goods and services subsequently delivered in non-electronic form.
14. It was pointed out that while a number of Members had included a specific entry on "Internet
access services" in their telecommunications commitments many others had not, even though the
commitments were intended to cover these services:  consideration should be given to the need for a
specific entry in all cases.  The point was also ma de that the GATS fully applied to all transport and
content aspects of electronic commerce.  Though only a few Members had specific commitments in
access services, the obligations of the Annex on Telecommunications on access and use would applyto all other Members in sectors where they had specific commitments.  Commitments on
telecommunications would apply to the use of Internet as a means to provide telecommunications
services such as voice telephony and e-mail, and commitments on distribution services would apply toS/C/W/100
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the on-line ordering and delivery of products.  Regarding content services, the relevant sectoral
commitments would apply on the basis of technological neutrality.
15. There was general agreement that the GATS applied to all traditional services supplied
electronically and to electronic transport services, including the transport of digitalized information
which, if supplied in a non-electronic form, might not constitute a service.  However, the suggestionwas made that the digitalized information content, as opposed to the supply of the content, might in
some cases be regarded as a product subject to the application of GATT principles, such as MFN,
national treatment and the prohibition of quantitative restrictions – though whether it would be
desirable so to regard them needed further reflection.  Another suggestion was that such products
might be considered as "intangible goods";  even so their transmission clearly represented a service,
though the content might not.  However it was said in reply that it was not possible to apply the
principle of technological neutrality to the provision of some services but not to others.
National Treatment
16. It was the general view that the principle of technological neutrality applied to all specific
commitments, including all market access and national treatment aspects.  It was pointed out that on
the basis of technological neutrality services provided both electronically and non-electronically were
like services under the GATS, and thus su bject to the national treatment rule.
Access to and use of Public Telecommunications Transport Networks and Services
17. It was noted that the Annex on Telecommunications applied to access to and use of the
Internet network.  The point was also made that paragraph 5 of the Annex, which required access to
and use of public telecommunications transport networks and services for the supply of a service
included in the schedule, also prohibited technical restrictions.  However, it was pointed out that theAnnex only applied to sectors where specific commitments had been undertaken and that in a number
of sectors or modes of supply crucial to electronic commerce there were few commitments.
Moreover, the Annex on Telecommunications might not adequately deal with to certain issues such as
points of interconnection and numbering, which were important for electronic commerce.
18. It was noted that the Annex guaranteed access and use of public telecommunication networks
for Internet access providers, but it was not clear whether it also guaranteed service suppliers access to
and use of Internet providers' services.  Since it might be important for service suppliers to have the
right of access to Internet providers' services, there was a need to further clarify this matter.
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[Sections on competition, protection of privacy and public morals and the prevention of fraud and
customs duties to be drafted following the Council meeting of 22 March 1999.]
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