JOB/GC/129, JOB/CTG/8  
JOB/SERV/265, JOB/IP/25  
JOB/DEV/46  
30 June 2017 
(17-3538) Page: 1/5 
General Council  
Council for Trade in Goods  
Council for Trade in Services  
Council for Trade -Related Aspects of  
Intellectual Property Rights  
Committee on Trade and Development  Original: English  
 
WORK PROGRAMME ON EL ECTRONIC COMMERCE  
REFLECTING ON THE IN FORMATION INSUFFICIE NCY IN E -COMMERCE  
Non-Paper from the Separate Customs Territory of  Taiwan, Penghu, Kinmen and Matsu  
The following non -paper, dated 30 June 2017, is being circulated at the reque st of the delegation 
of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu.  
 
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1  INTRODUCTION  
1.1.  In our previous non -paper ( JOB/GC/ 128; JOB/CTG/7; JOB/SERV/264; JOB/IP/24; 
JOB/DEV/45 ), we discussed the paradigm shift of digital t rade. We introduced the idea of using the 
deductive approach to analyse the qualitative  changes of e -commerce brought about by 
technological advancement, and to identify the fundamental differences between e -commerce and 
traditional trade. In our view, thi s exercise will help Members to narrow the scope and sharpen the 
focus of our digital trade discussions, which will allow us to speed up progress towards establishing 
a fair competitive environment for digital trade. Of equal importan ce is our hope of help ing to 
facilitat e the in-depth discussion of many inherent issues of e -commerce in future occasions, of 
course including the 11th Ministerial Conference.  
1.2.  We also highlighted the two Negroponte Transformations. These help to shed light on the 
various ways i n which digital trade is undergoing a fundamental transformation from atoms to bits 
in the digital world. In this non -paper, the deductive approach will be used to analyse cyberspace 
trade barriers (CTBs).  
2  CYBERSPACE  TRADE BARRIERS – CROSS -BORDER TRANSMISS ION OF INFORMATION 
BY ELECTRONIC MEANS  
2.1.  E-commerce or digital trade goes beyond the border. Traditional trade may encounter certain 
issues such as customs procedures as it crosses the border, whereas digital trade has no such 
borders to cross. This is the f undamental difference between traditional trade and e -commerce. 
When there is a trade dispute, with advances in informational technologies and changes in the 
patterns of digital trade, Members may find it difficult to apply the existing WTO regulations und er 
the GATT or the GATS to digital trade. As the Internet becomes more profitable and its boundaries 
continue to expand, WTO Members will have various reasons for imposing domestic Internet 
regulations. The most frequently -cited reasons include:  
 to protec t privacy, intellectual property, public morals or national security, or  
 to achieve other legitimate policy objectives.  JOB/GC/129 • JOB/CTG/8 • JOB/SERV/265 • JOB/IP/25 • JOB/DEV/46  
 
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  2.2.  Despite the fact that some of the above rationales for regulation are legitimate, the impact of 
blocking or restricting the cross -borde r transmission of information by electronic means has more 
serious consequences than is usually imagined.  
2.3.   Before discussing CTBs, we invite Members to look at traditional international trade.  As can 
be seen from the flowchart below, traditional internati onal trade can be divided into a series of 
different stages. The first stage is that of a potential buyer (either a trading company [B2B] or a 
consumer [B2C]) acknowledging the existence of a commodity; the second step is that this 
potential buyer compares  the target commodity with other competitive ones; the third step is the 
placement of orders; the fourth step is the shipment of the commodity; the fifth step is the 
customs check and taxation; the sixth step is domestic marketing; and finally, in the seve nth step, 
the buyer gets the commodity. Traditional trade barriers are most often engaged in stages 4 to 6. 
They are either in the form of high customs taxes, non -tariff barriers, or others. The barriers to the 
Internet, however, are different.  
2.4.  First, it s hould be noted that most CTBs are engaged in the first three stages, 1 to 3. In fact, 
certain restrictions applied to website data flows by some Members even prevent the foreign 
commodity from being noticed at all by potential buyers in their country. If, in the first stage, the 
necessary data (information) is not transmitted efficiently, then any commodity (product) 
comparison, or order, shipment, customs check, etc., cannot happen. Thus, an Internet 
(cyberspace) barrier will often completely wipe away all  trade opportunities at stage 1, which is 
especially serious for small - and medium -sized enterprises ( SMEs ), and particularly  those in 
developing  countries,  who would probably have no other channels of access to potential foreign 
buyers.  
Conceptual Trade Stages  
(1) Acknowledging  
 
  
(2) Comparing  
 
  
 Cyberspace  trade barriers : (1) – (3) 
(3) Placing Order  
 
  
(4) Shipping  
 
  
(5) Custom Border  
 
  
 Traditional trade barriers: (4) – (6)  
(6) Local Marketing  
 
  
(7) Consumption   
 
2.5.  Secondly, when trad itional trade barriers are applied, the commodity (or product) usually 
ends up with a higher price, but may still be sold into the market and purchased by the customer if 
the quality is good enough. By contrast, when certain forms of cyberspace (or Interne t) trade 
barriers are applied, potential consumers are denied from the start the chance of acknowledging 
the commodity's existence, therefore the trade, even of a high quality commodity (product), 
cannot proceed. Thus, cyberspace (or Internet) barriers to trade can have a stronger influence 
than traditional ones. Thirdly, in the case described above, because potential consumers are never 
made aware of the blocked trading opportunities, no complaints are likely to be raised, no dispute 
cases are established,  and no amendments ever made. Thus, trade barriers formed by a restriction 
of the free flow of data or information are often much more significant than traditional barriers, are 
more difficult to recognize, and harder to remedy.  
2.6.  Moreover, developing count ry Members, and Least -Developed Countries (LDCs) especially, 
already face many traditional trade barriers in the form of non -tariff measures, customs JOB/GC/129 • JOB/CTG/8 • J OB/SERV/265 • JOB/IP/25 • JOB/DEV/46  
 
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  procedures, TBTs, SPSs, etc. Now, with CTBs, they face an even more difficult trading environment 
as they attempt to engage in e -commerce, which was supposed to bring them more trade 
opportunities. This makes the current “digital divide” problem even worse. We urge WTO Members 
to give this problem more serious attention.  
2.7.  We therefore suggest that Members shoul d be extremely cautious of the serious risk and 
impact that can be caused by such regulatory measures applied to digital trade. Government 
intervention in the cross -border transfer of information by electronic means can significantly 
reduce the potential f or international trade via the Internet, especially for SMEs.  
2.8.  From an economic perspective, if consumers are unable to access or communicate with a 
proportion of the world's foreign suppliers because of restrictions on the free flow of data, then the 
suppliers in the domestic market represent merely a subset of all the potential suppliers of the 
same goods and services. Foreign supply potential will be suppressed, and the prices of all 
subsequent value -added products will be distorted.  
2.9.  In any discussion o n the subject of a fair competitive market, it is particularly important to 
distinguish between the potentia l demand/supply versus the realized  demand/supply. Typically, 
the textbook definition is that, "other things being equal, given any price of the com modity in 
question, the quantity demanded  is the amount of commodity a consumer can afford and is willing 
to buy." If we specify a certain set of prices (P 1,P2, …,P n), we can generate a corresponding set of 
quantities demanded (Q 1,Q2, …, Q n) by posing a se t of hypothetical questions to any consumer: 
e.g., how many units would you like to buy if the price is P i, i=1,…,n? The answer so generated (in 
terms of quantity demanded) is denoted as Qi. Connecting the price/quantity -demanded dots, we 
get the demand cu rve shown in Figure 1 below. The important thing to note is that although any 
consumer at any particular point in time faces only one price and demands only one quantity, the 
demand curve derived is based on a set of hypothetical scenarios: if you face thi s or that price, 
how many units would you buy? For the definition of "quantity supplied" and "supply curve", the 
same logic applies. Thus, to calculate the true market equilibrium price, all potential 
demanders and suppliers (including foreign ones) should  be included a priori . 
 JOB/GC/129 • JOB/CTG/8 • JOB/SERV/265 • JOB/IP/25 • JOB/DEV/46  
 
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  2.10.   The final stage in the formation of the aggregate demand and aggregate supply is to sum 
up the individual demand and supply. In Figure 2 below, if there are three consumers (A, B and C) 
with their respective demand curves, the aggr egate demand would be the correspondence 
between each price and the total quantity demanded, shown in the right -hand panel of Figure 2.  
2.11.   With restrictions on the free flow of information on the Internet, however, a supplier is not 
aware of the existence of  some potential buyers, so the latter’s potential demand cannot be 
revealed to the supplier. Similarly, on the supplier side, with restrictions on the free flow of 
information on the Internet, a demander is not aware of the existence of thousands of potent ial 
suppliers. We must therefore conclude that restrictions on the free flows of information on 
the Internet distort the range of the summation of aggregate demand and supply, thus 
rendering the equilibrium prices in these markets unreliable as references . 
2.12.   Our conclusion is that with restrictions on the free flows of data on the Internet that 
systematically eliminate foreign demanders and suppliers, the fair competition mechanism is 
distorted and fair competition ceases to exist. Even if the remaining playe rs still have their demand 
and supply curves, and the market still clears such demand and supply, the equilibrium results are 
not at all the same as they would be in a free and fair market.  
 
2.13.   We would also like to point out that widespread restrictions on the transfer of information by 
electronic means obviously constitutes a CTB for products with heterogeneous qualities. This 
illustrates the point that CTBs are price -insensitive, whereas physical space barriers may often be 
characterized by a price mark -up, in the form of either a specific tax or an ad valorem  tax. 
3  CYBERSPACE TRADE BAR RIERS: DESERVING MOR E DISCUSSION  
3.1.  Digital trade benefits all Members. As technology continually evolves, however, the 
emergence and use of CTBs will probably increase, and may cause greater market distortion. 
Additionally, a solid regulatory environment for digital trade is crucial if the real and exciting 
opportunities for international trade are to be grasped, and the benefits shared fairly. In our view, 
more focused discussio n will help us to gain a better understanding of this issue, and to find an 
effective way to approach it.  We encourage Members to consider:  
 Using relevant WTO bodies as well as the Trade Policy Review mechanism to discuss and to 
exchange their policies an d best practice experiences with open and fair markets for e -
commerce.  JOB/GC/129 • JOB/CTG/8 • J OB/SERV/265 • JOB/IP/25 • JOB/DEV/46  
 
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   Reporting/presenting the cyberspace trade barriers they may encounter, and the impact s 
they may have.  Developing country Members, and LDCs especially, may ask for the WTO 
Secretariat’s assistance in this matter.  
 Reviewing their trade policies with a view to accommodating the evolving development of e -
commerce, in particular ensuring the efficient transformation of cross -border data flows.  
 Sharing capacity -building experiences and/or poli cies with a focus on what Members have 
done to help other Members, as well as SMEs, to participate in digital trade.  
3.2.  As a fair and open e -commerce environment is an essential part of market access, we would 
encourage governments engaged in the process of a cceding to WTO membership to present 
factual information on their e -commerce -related policies in their Working Party Reports.  
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