INF/ECOM/4  
 
25 March  2019 
(19-1853) Page: 1/4 
 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 
 
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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 r apid 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 good s 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 nego tiations on trade 
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 seco nd 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 D IGITAL 
TRADE  
3.1.  This section  presents elements 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 w ide 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 -commerc e. As a matter of course, we are ready to actively engage in discussion on other 
                                                
* This document was originally circulated as JOB/GC/ 177 dated 12 April 2018.  
1 This communication is being circulated for transparency purpose.  INF/ECOM/4  
 
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  important elements. In particular, the development aspect of e -commerce is important since, for 
instance, the digital divide —typically due to inadequate telecommunications inf rastructure —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 Frameworks 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 t o e-commerce and 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 international 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 f or 
Enabling Global 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 h ave also emerged 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 
adapted 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 shoul d introduce domestic 
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 pa yment systems to 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 type s of data are being 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 al so 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 i ndustries and 
markets, 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, governments INF/ECOM/4  
 
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  should not impose mandatory requirements on the location of servers, as such requirements pose 
critical 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 
services 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.  INF/ECOM/4  
 
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  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 elements:  
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 l ocalization 
requirements, and regulation on cross -border data flow.  
3.19.   The Members would make the information available, so that it is accessible to all, through the 
WTO website.  
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