RESTRICTED  
  
JOB/GC/177  
 
12 April 2018  
(18-2237) Page: 1/5 
General Council  Original: English  
 
JOINT STATEMENT ON E LECTRONIC COMMERCE I NITIATIVE  
PROPOSAL FOR THE EXP LORATORY WORK BY JAP AN 
The following communication, dated 12 April 2018, is being circulated at the requ est of the 
delegation of Japan.1 
 
_______________  
 
1  BACKGROUND  
1.1.  The widespread nature of the Internet has enabled MSMEs to directly gain access to foreign 
markets in a faster and easier manner than in previous decades. Cross -border trade in services is 
also rapidly expanding and we have been witnessing the remarkably rapid growth of a number of 
MSMEs and start -ups in developing countries. In order not to deter MSMEs and developing 
countries from taking advantage of this new opportunity for growth, we should promote trade in 
goods and services, encourage cross -border flows, and improve  market access conditions.  
1.2.  The current WTO framework and schedules were developed before the technological 
evolution of the Internet and they may not take fully into account the implications of the latest 
technologies such as the Internet of Things (IoT). In addition to information obtained from 
websites, a wide variety of data are being transmitted back and forth across national boundaries 
24/7. It is therefore necessary to update the WTO obligations, disciplines and commitments in 
order to best respond to  the realities of today’s economy.  
2  VIEWPOINTS ON THE EX PLORATORY WORK  
2.1.  As a number of Members stated during the first meeting, the main objective of this 
Exploratory Work is to bridge knowledge gaps in order to prepare for the future WTO negotiations 
on tra de related aspects of e -commerce. In this regard, we propose two fundamental vantage 
points for conducting the Exploratory Work. The first is to make WTO obligations, disciplines and 
commitments more relevant to the digital economy. The second is that the future WTO 
negotiations in this field should enhance participation of MSMEs and developing countries in global 
value chains, and promote inclusive growth.  
3  PROPOSED ELEMENTS OF  FUTURE AGREEMENT ON E-COMMERCE AND/OR DIGI TAL 
TRADE  
3.1.  This section presents eleme nts and ideas that Japan considers important for facilitating e -
commerce and/or digital trade. The existence of varied and fragmented domestic rules and 
regulations potentially hinders consumers and businesses from enjoying the fruits of a wide range 
of cross-border e -commerce or digital trade. To avoid such fragmentation, it is necessary to build 
general and overarching international principles through discussion at the WTO and to take 
account of rules that already exist in the WTO and that have been i ntroduced in the existing FTAs.  
3.2.  We would like to mention that the elements and ideas provided below reflect only our 
primary interests and are not necessarily intended to show the whole universe of possible 
international trade rules on e -commerce. As a matter of course, we are ready to actively engage in 
discussion on other important elements. In particular, the development aspect of e -commerce is 
                                                
1 This communication is being circulated for transparency purpose.  JOB/GC/177  
 
- 2 - 
 
  important since, for instance, the digital divide —typically due to inadequate telecommunications 
infrastructure —is surely an obstacle in unleashing developing countries’ potential in digital trade 
and/or e -commerce. We are looking forward to seeing effective proposals from both developed and 
developing Members and having active discussion in this area.  
A. Regulatory Fr ameworks Facilitating E -Commerce/ Digital Trade  
(a) Promoting  Harmonization and Interoperability of Regulations  
3.3.  In order to create an enabling environment for e -commerce and digital trade, a range of 
domestic regulatory frameworks related to e -commerce an d digital trade need to be put in place. 
However, variations of such frameworks across countries could pose obstacles for cross -border 
businesses operators. The WTO has a role to play in promoting intergovernmental activities at the 
regional and internatio nal levels to achieve harmonization and complementarity among different 
frameworks, which is e ssential for facilitating cross -border e -commerce and/or digital trade.  
(b) Access to Online Payment Solutions and Domestic Regulatory Frameworks for 
Enabling Glo bal E -payments Environment  
3.4.  Promotion of cross -border e -commerce and/or digital trade has been largely supported by e -
payment systems such as credit cards, on -line payment facilities, and mobile wallets. New financial 
transaction mechanisms have also emerge d alongside the expansion of e -commerce. Ensuring 
accessibility to various online payment solutions is necessary to further promote e -commerce 
and/or digital trade. However, risks for both consumers and businesses exist where regulations are 
not well adapt ed to new payment methods and oblige them to refrain from using online payment 
systems.  
3.5.  With a view to effectively addressing the security risks of online payment solutions and 
improving the e -commerce business environment, government should introduce dom estic 
regulations which ensure the reliability of online payment systems including regulations on online 
payment service providers. In doing so, it is important for regulators to provide clarity, yet allow 
for flexibility, so as to permit payment systems t o adjust to the rapid advancement of technology 
and business models in this field.  
B. Open and Fair Trading Environment  
(a) Cross -border Transfer of Information by Electronic Means  
3.6.  As business operations become more globalized, various types of data are b eing transferred 
across borders of both developing and developed countries.  For instance, in the case of online 
services which provide remote maintenance and support services for infrastructure and machinery, 
data on operations and technical functions are transferred across borders.  
3.7.  Therefore, limiting the international transfer of data through government policies would 
encumber cross -border business operations and hinder the sound development of digital 
businesses. Such limitations would also make it more  difficult for MSMEs from both developing and 
developed countries to participate in global value chains. In order to ensure the predictability of 
the cross -border business environment, as well as to facilitate healthy growth of new digital 
industries and m arkets, the WTO should consider reaching agreement among Members on 
principles to ensure free flow of data. Any such agreement should allow the least trade restrictive 
measures that would fulfil legitimate public policy objectives, including personal data protection.  
(b) Prohibition of Data Localization such as Using or Locating Computing Facilities  
3.8.  As cross -border data transfer becomes an essential part of business practices. Companies 
take strategic decisions on the locations of computing facilities, taking into account the cost and 
efficiency of operations, while at the same time hedging various ri sks. In such contexts, 
mandatory requirements by a government to locate servers within its territory would discourage 
companies from entering into its market due to the increased cost and risk associated with such 
requirements. Therefore, it would be worth  considering reaching an agreement among Members in 
the WTO in which, with the exception of cases to achieve a legitimate public policy objective, JOB/GC/177  
 
- 3 - 
 
  governments should not impose mandatory requirements on the location of servers, as such 
requirements pose cr itical barriers to entry into the market by foreign businesses.  
(c) Open Networks/ A Free and Open Internet  
3.9.  For the online business environment to be fair and competitive, access to services on the 
Internet by consumers and provision of services on the Inte rnet by suppliers —both domestically 
and cross -border —should be ensured. Unilateral and arbitrary interference by a government to 
certain websites and internet services would result in serious losses for and burdens being 
imposed on both consumers and servi ce suppliers in the country concerned. Where relevant GATS 
commitments exist, such measures may already contravene market access and national treatment 
undertakings. However, given the nature of positive list approach under GATS which covers only 
sectors ( and subsectors) in each Member 's schedule, governments should agree, in general, not to 
impose unjustifiable restrictions on access to any particular websites or services and supply of any 
particular servi ces both domestically and cross -border, with few re asonable exceptions. This 
fundamental principle should form part of any international framework on e -commerce negotiated 
in the WTO.  
(d) Due Process in Government Access to Privacy/Industry data  
3.10.   Unpredictable and unclear due process of government intervent ion in cyberspace poses 
costs and obstacles for business operators. It is reported that several companies refrain from 
expanding their businesses into foreign markets due to uncertainty and unpredictability of the 
requirements by governments on the disclos ure of the information which they consider  critically 
important to protecting customer data and trade secrets. This implies that such requirements 
would restrict the range of options for services that consumers could potentially harness. 
Therefore, unclear  due process of government intervention is damaging not only to business 
interest but also to consumer benefits. In order to ensure predictability of the online business 
environment, Members should agree in the WTO to set clear administrative due processes  for 
government intervention. These processes should include, but not be limited to, publication of 
relevant laws and regulations and introduction of procedures for motions of objection.  
(e) Utilization of Public Data (Open Data)  
3.11.   With the aim of contributi ng to further promotion of e -commerce or digital trade, data 
gathered by governments, such as statistical information, data on public transport and data on 
disaster prevention can be open and accessible to the public. By making such data available to 
both domestic and foreign companies, the governments could enhance opportunities for promoting 
innovation. In the case that access to such data is only allowed to domestic companies, this would 
effectively take the form of a national treatment barrier for forei gn companies to enter into the 
concerned market. Therefore, the data which are gathered by governments should be open and 
widely accessible on a non -discriminatory basis. It would be worth considering reaching such an 
agreement in the WTO.  
(f) Liberalizati on Commitments /Improving Market Access Commitments in E -commerce 
or Digital Trade Related Services  
3.12.   Improving market access and national treatment commitments in ICT -service industries 
that serve as the infrastructure of the digital economy (e.g. telecommun ications, computer 
services) is fundamental for the development of digital trade. Such commitments can boost 
domestic and foreign investment in those industries and encourage competition resulting in a 
business environment that is more predictable and favo rable to electronic commerce. The 
commitments will also help address the challenges of the digital divide and provide enhanced 
opportunities for other enabling digital infrastructure services (e.g. online retail, relevant financial 
services, delivery and l ogistics services) as well as digitally enabled services (e.g. professional 
services, all business services, education services). Commitments on these latter services may 
also provide added benefits for enhancing the digital trade of economies who undertak e bindings. 
Such efforts would modernize WTO schedules so as to bring them more in line with commitments 
achieved in RTAs in recent years.  JOB/GC/177  
 
- 4 - 
 
  C. Protection of Intellectual Property  
(a) Prohibition of Disclosure of Important Information such as Trade Secrets  including 
Source Codes and Proprietary Algorithms  
3.13.   Software programs are embedded in all kinds of products ranging from IT products to 
manufacturing products, including automobiles. These are a source of competitiveness of 
companies in the modern economy. However, the disclosure of the source codes and algorithms 
used in such programs is required in some countries at the time of import of goods or services 
concerned, and the establishment of facilities. Risk of leakage of trade secrets by such disclosure is  
a critical concern for companies and discourages and even blocks companies from exporting their 
products to such countries who impose these requirements. As such, the requirement on 
disclosure of source codes and algorithms is effectively a trade barrier,  and therefore should not be 
imposed by governments, with the exception of cases to achieve legitimate public policy 
objectives. Such disclosure should not be a condition for the import, distribution, sale, or use of 
related products including digitally en coded products in a Member's territory. This should be 
discussed and agreed in the WTO.  
(b) Prohibition of Use of Particular Technology including Encryption Technology  
3.14.   In the field of e -commerce or digital trade, new technologies and services are develope d 
progressively and rapidly. Against such a background, the mandatory introduction of particular 
technologies including encryption technology by a government would impede development of new 
technologies and business opportunities and also hamper market ent ry of foreign companies after 
forced application of particular technologies effectively acts as a technical barrier. Additionally, in 
the case that businesses are obliged to use particular encryption technologies, potential 
deterioration of the level of se curity is a legitimate concern. Therefore, governments should not 
impose any mandatory requirement on the use of particular technologies including encryption, 
with the exception of cases to achieve legitimate public policy objectives. This principle should  also 
be agreed in the WTO.  
(c) Prohibition of Improper Access to Trade Secrets by Governments  
3.15.   In order to ensure protection of Intellectual Property Rights and trade secrets in cyberspace, 
a government should make an international commitment to adhere to due process when accessing 
intellectual property or trade secrets of private entities, both within and outside its own territory.  
D. Enhanced Transparency  
(a) Obligation to Report Regulations Related to E -commerce or Digital Trade  
3.16.   One of the major challen ges for MSMEs in expanding their operations to foreign markets is 
the lack of accessibility to foreign countries’ information on domestic regulations, procedural due 
process, decree and official interpretation associated with e -commerce and/or digital trad e. 
Especially under the current circumstance where such domestic regulations and procedural due 
process have developed rapidly due to the rapid development of new technology such as VPN, it is 
difficult for MSMEs to obtain up -to-date information.  
3.17.   To addres s this situation, the WTO Members should report the laws and regulations, and 
also procedural due process if possible, in force as well as their amendments related to e -
commerce.  
3.18.   The scope of this reporting includes, but is not lim ited to, the following el ements:  
a. Laws and regulations on e -commerce and/or digital trade including electronic signatures 
and authentications, electronic contracts, consumer protection, and e -payments.  
b. Laws and regulations related to data including privacy data protection, data localization 
requirements, and regulation on cross -border data flow.  JOB/GC/177  
 
- 5 - 
 
  3.19.   The Members would make the information available, so that it is accessible to all, through 
the WTO website.  
 
__________