S/C/W/359  
 
17 December 2014  
(14-7309)  Page: 1/5  
Council for Trade in Services  Original: English  
 
 COMMUNICATION BY THE UNITED STATES* 
WORK PROGRAMME ON ELECTRONIC COMMERCE 
 
The following communication, dated 27 November 2014, from the delegation of the United States, 
is being circulated to the Members of the Council for Trade in Services.  
_______________ 
1  INTRODUCTION 1.1.  Following the Ministers’ Decision at the 9th Ministerial Conference to reinvigorate the Work 
Programme on Electronic Commerce, and building on the work done to date, the United States 
seeks to enhance the development of electronic  commerce (e-commerce) by examining possible 
ways in which trade rules can be used to expand e-commerce. This submission focuses on a few issues that have been presented in previous subm issions, and that were discussed, in part, at the 
workshop held under the auspices of the Council for Trade in Services (CTS) in June 2013.  
1.2.  This submission focuses on two princi ples from the Information and Communications 
Technology (ICT) principles document presented by the European Union and the United States 
in 2011, as well as one principle from the proposal by Australia in 2012 on online personal data 
protection and a contribution from Chinese Taipei in 2013 on the same subject. These 
contributions provide a solid basis for discussion in the Work Programme on how to strike an appropriate balance between policy objectives related to cross-border information flows and local 
infrastructure and the rules related to privacy and data protection.  
1.3.  Additionally, given the growth of and deve lopment-enhancing role ICT services play for all 
economies, the United States believes that WTO Members should ensure that existing 
commitments to Computer and Related Services are robust and clear in terms of coverage, 
particularly for cloud computing. Such services are the building blocks of information-intensive commerce, and provide important means by which small and medium sized enterprises (SMEs) 
across the globe are able to enter the world of inte rnational trade. Thus, by providing greater legal 
certainty on the scope and coverage of cloud computing services, the WTO can help ensure that SMEs, and other businesses, gain from world trade activity. 
2  RECENT ACTIVITY ON ELECTRONIC COMMERCE IN THE COUNCIL FOR TRADE IN 
SERVICES 
2.1.  In July 2011, the United States and Europe an Union submitted a contribution to the Work 
Programme in the Council for Trade in Services.
1 That document set out trade-related principles 
designed to support the expansion of ITC networks and enhance the development of e-commerce. 
In September 2012, Australia proposed to include three additional principles related to online consumer protection, online personal data protection, and unsolicited commercial electronic 
messages (spam).
2 In March 2013, Chinese Taipei submitted a JOB Document to the Work 
                                               
* This document was previously circulated as JOB/SERV/196, dated 27 November 2014. 
1 See Communication from the European Union and the United States, Contribution to the Work 
Programme on Electronic Commerce, S/C/W/338, 13 July 2011. (US-EU ICT Principles). 
2 See Communications from Australia, Suggestions on ICT prin ciples, Contribution to the Work 
Programme on Electronic Commerce, S/C/W/349, 26 September 2012. (Australia additional ICT Principles). S/C/W/359 
 
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  Programme on the protection of personal information and the development of electronic 
commerce.3 Prior to those last two submissions, Switzerland added a submission on the activities 
of small and medium-sized enterprises in relation to electronic commerce.4  
2.2.  In addition, the United States contribute d another document in September 2011 to the Work 
Programme that sought to ensure that trade rules support innovative advances in computer 
applications and platforms, such as mobile applications and the provision of cloud computing services, including electronically delivered software hosted by such services.
5 These submissions 
led to the development of a comprehensive work shop in June 2013 under the auspices of the 
CTS.6 T h e  C h a i r m a n  o f  t h a t  w o r k s h o p  i s s u e d  a n  i n f o r m a l  n o t e  s u m m a r i z i n g ,  u n d e r  h i s  o w n  
responsibility, issues highlighted in that event.7 
3  ISSUES HIGHLIGHTE D BY THE WORKSHOP 
3.1.  The Chairman’s informal note highlighted the following issues that merit further examination:  
 Trade agreements were not credited with having found, as yet, durable means to ensuring 
clear and predictable rules for e-commerce; 
 Balancing economic policy interests with competing policy objectives such as privacy and 
consumer protection is challenging in the e-commerce environment; 
 Emerging policies to govern cloud computing services. 
3.2.  The Chairman noted in his concluding personal remarks that trade policy had a role to play in 
helping spur e-commerce. Of course, trade policy is only one aspect of overall policies to facilitate e-commerce. He concluded that the magnitude and implications of getting policy solutions wrong was higher when it came to e-commerce. New topics, such as privacy and security, which "went to 
the heart of the challenge of ensuring that polic ies creating an enabling environment, on the one 
hand, and policies pursuing other objectives, on the other, were mutually supportive." Thus, the 
United States seeks to build upon this discussion  to develop a better understanding of the impact 
that these issues can have on trade. 
4  CROSS-BORDER INFORMATION FLOWS, LOCALIZATION REQUIREMENTS, AND 
PRIVACY PROTECTION 
4.1.  The related principles from the Trade Principles for Information and Communications 
Technology Services relate to the policy objective of ensuring the freedom of cross-border data flow: 
Cross-Border Information Flows: Governments should not prevent service suppliers of other 
countries, or customers of those suppliers, from electronically transferring information 
internally or across borders, accessing publicly  available information, or accessing their own 
information stored in other countries. 
 
Local Infrastructure: Governments should not require ICT service suppliers to use local 
infrastructure, or establish a local presence, as a condition of supplying services. In addition, 
                                               
3 See Communication from the Separate Customs Te rritory of Taiwan, Penghu, Kinmen and Matsu, 
Protection of Personal Information and the Development of Electronic Commerce, JOB/SERV/140, 11 March 2013. 
4 See, Communication from Switzerland, The Services  Sector, Small and Medium-sized Enterprises and 
their activities related to Electronic Commerce: The Case of Switzerland. S/C/W/345, March 2012. 
5 See, Communications from the United States, Wo rk Programme on Electron ic Commerce: Ensuring 
Trade Rules Support Innovative Advances  in Computer Applications and platfo rms, such as Mobile Applications 
and the Provision of Cloud Computing Services, S/C/W/339, 20 September 2011. 
6 The Committee on Trade and Development also held a useful two day workshop on e-commerce with a 
focused on SMEs. See WT/COMTD/M/90, 8 May 2014. 
7 See, Workshop on Electronic Commerce, 17-18 June 2013, Summing-up by the Chairman of the 
Workshop, Ambassador Joakim Reiter of Sweden, JOB/SERV/155, 28 June 2013. S/C/W/359 
 
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  governments should not give priority or prefer ential treatment to national suppliers of ICT 
services in the use of local infrastructure, national spectrum, or orbital resources.8  
 4.2.  Australia suggested adding a principle to address the policy objective of online personal data 
protection: 
Online Personal Data Protection: Members should adopt or maintain a domestic legal 
framework which ensures the protection of the personal data of the users of electronic 
commerce. Governments should share information on their experiences in protecting the 
data of the users of electronic commerce.9  
 
4.3.  It would be useful for WTO Members to exchange views and experiences on how they balance 
the two policy objectives presented. Such an exchange would aim to create a common 
understanding on the most appropriate way to achieve both objectives (data flows and privacy protections) in the least trade restrictive manner. 
4.1  Information Flow and Localization Requirements 
4.4.  Localization requirements, including those motivated by protecting personal data, restrict 
cross-border data flows. Countries that adopt measures that require consumer’s personal data to 
be processed and stored within their borders may be well-intentioned, but these measures have 
the potential to impede economic activity and do  not necessarily provide the data security that 
they ostensibly seek to achieve. Indeed, data security may be enhanced through external storage, where economies of scale in specialized security practiced by best-in-class data processors may 
surpass what is available in storage facilities within one particular jurisdiction.  
4.5.  Therefore, policies in this context need to  be examined with consideration of both economic 
interests and public interest objectives. This bala nce can be enhanced by better understanding the 
rapidly changing technologies, and developing strategies that embrace those technologies to 
achieve policy objectives rather than rejecting them.  
4.6.  Thus, Members would benefit from sharing information on policies related to forced 
localization, and develop a better understanding of why such policies are potentially detrimental to 
innovation, trade and development, and indeed may not achieve their intention of protecting privacy and data. 
4.2  Privacy and Personal Data Protection  
4.7.  All Members share an interest in the protec tion of privacy and the security of data. Indeed, 
WTO rules provide scope for Members seeking to take necessary measures to ensure the security and confidentiality of messages. Nonetheless, Members must ensure that, in the spirit of 
promoting trade, such measures are subject to a ppropriate discipline. In the view of the United 
States, there is little evidence to support the need  for restricting data from being exported to a 
particular country’s territory solely because the destination country does not share a formal 
privacy or data security regime with the source country. Despite differences in formal regimes, 
decades of experience have shown that privacy and data protection requirements in one country can be maintained in another country through contract law, mutual recognition agreements, and other international arrangements. This is furthe r supported by the 2013 OECD update to its 
Privacy Guidelines, which state: 
17. A [OECD] Member country should refrain from restricting transborder flows of 
personal data between itself and another country where (a) the other country 
substantially observes these Guidelines or (b) sufficient safeguards exist, including 
effective enforcement mechanisms and appropriate measures put in place by the data controller, to ensure a continuing level of protection consistent with these Guidelines. 
 
                                               
8 See US-EU ICT Principles, p. 2. It should be noted that the headnote to  those principles explicitly notes 
that the principles are without prejudice to the policy objectives and legislation of the European Union and the 
United States in areas such as protection of privacy an d of the confidentiality of personal and commercial data, 
and are also not intended to apply to financial services. 
9 See Australia additional  ICT principles, p. 1. S/C/W/359 
 
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  18. Any restrictions to transborder flows of personal data should be proportionate to 
the risks presented, taking into account the sensitivity of the data, and the purpose and context of the processing.
10  
 
4.8.  Accordingly, Members must take great care that any measures that prevent data exports or 
that mandate local storage must not constitute an unjustified barrier to trade, unduly discriminating against the foreign supply of any information-intensive service, including but not 
limited to data processing. 
4.9.  Further exploration of the kind of arrangem ents noted above that allow one country’s privacy 
and data protection requirements to be maintained in another, and the trade-facilitating role they 
play, would be a worthy subject of further discussion. 
5  COVERAGE OF CLOUD COMPUTING UNDER COMPUTER AND RELATED SERVICES 
(CPC 84) 
5.1.  In its last submission to the Work Prog ramme, the United States highlighted the growing 
importance of cloud computing for businesses everywhere, particularly for SMEs. Cloud computing 
is a critical component for any e-commerce environment and it is essential that trade commitments reflect a high degree of openness for this service.
11  
5.2.  Indeed, many WTO Members have strong commitments in the computer and related services 
sector; it is one of the bright spots in many GATS schedules. However, some countries create confusion about the proper classification of clou d computing by characterizing the functions that 
constitute cloud computing as telecommunication services in their domestic regulatory scheme.  
5.3.  Members would benefit from further clarity on the coverage of these services to help them 
avoid potential negative consequences for one of the fastest growing and important infrastructure 
services for the expansion of e-commerce.  
5.1  Classification of Cloud Computing 
5.4.  Recent literature has described cloud computing as a way of providing information technology 
functions such as data storage, processing power, and certain software applications as services 
over the Internet.
12 The Provisional Central Product Classification (CPC) (1991) – used in 
conjunction with the W/120 classification list13 – classifies these functions of cloud computing (data 
storage, data hosting, data processing), and data base services as "Computer and Related Services" (CPC 84). 
5.5.  The "Understanding on the Scope and Coverage of CPC 84 – Computer and Related 
Services"
14 further notes that Computer and Related Services include all the services that provide 
numerous computer functions, alone or in combinat ion with each other, regardless of whether they 
are delivered via a network such as the Internet . These functions include data processing, data 
storage, data hosting, and database services. 
5.6.  In addition, the WTO Secretariat prod uced a useful background note in 2009 on 
telecommunications services and addressed the proper classification of such services. When 
seeking to classify an activity or function in telecommunications services: 
                                               
10 See para 17, 
http://www.oecd.org/internet /ieconomy/oecdguidelinesontheprotectiono fprivacyandtransborderflowsofpersonal
data.htm  
11 For a detailed study on the benefits of cloud co mputing for developing countries, see Unlocking the 
Benefits of Cloud Computing for Emer ging Economies – A Policy Overview. Peter Cowhey and Michael Kleeman, 
UC San Diego, 2011. 
12 See No Transfer, No Trade – the Importance of Cr oss-Border Data Transfers for Companies based in 
Sweden, Kommerskollegium, National Board of Trade, January 2014, p. 10. 
13 See http://www.wto.org/english/tratop_e/serv_e/mtn_gns_w_120_e.doc  
14 See Communication from Albania; Australia; Ca nada; Chile; Colombia; Croatia; the European 
Communities; Hong Kong, China; Japan; Mexico; Norway; Peru; the Separate Customs Territory of Taiwan, 
Penghu, Kinmen and Matsu; Turkey and the United States, TN/S/W/60, S/CSC/W/51, 26 January 2007. 
Subsequently, additional Members a dded their name to the communicatio n: Costa Rica, New Zealand, and 
Singapore. S/C/W/359 
 
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  [A] key distinction to bear in mind is that between use and supply, wherein 
telecommunications may be used as a "means  of delivery" for many other services. 
Suppliers of such services as computer services, audiovisual services and other communications-enabled services, classified elsewhere in the GATS list, are common 
example of users of telecommunications networks and services.
15  
 
5.7.  Indeed, the WTO Annex on Telecommunication s ensures that service suppliers that do not 
own or operate transmission services themselves can supply their services through the 
telecommunications network without being classified as telecommunications service suppliers.  
5.8.  Cloud computing, in essence, is a Computer and Related Service that is delivered to 
customers using a telecommunications network. This model actually dates back to the dawn of 
commercial data processing. In the early 1960’s, specialized computing companies offered their 
customers access to mainframe computers over public telecommunications networks, exploiting, as now, the economies of scale inherent to large-scale and risky investment in general-purpose 
computing facilities. As the cost of computing power declined, so too did the competitive 
advantage of remote computing, particularly given persistent high cost and technical limitations (e.g., of data speeds) of telecommunications, which until recently, in almost all markets, was a 
monopoly-supplied service.
16  
5.9.  The revolution in data communications and the expansion of the Internet made cloud 
computing attractive again. Customers are returning to use remotely-supplied services because competition and technological innovation created the incentives to outsource data processing 
capability. This development proves especially important to SMEs because the capacity and 
savings offered by cloud computing place them closer to equal technological footing with their large corporate competitors: without a large capital outlay, SMEs can access and leverage 
technological capabilities once reserved to larger companies, and focus their resources on areas 
where they may have unique advantages, and yet still be able to reach a global customer base. Given the importance of cloud computing to SMEs, restricting its supply to only 
telecommunications suppliers would be a grave mistake. 
5.10.  However, because cloud computing service suppliers rely on telecommunications networks 
to supply their service, one cannot underestimate the importance of a robust telecommunications 
infrastructure, particularly the expansion of broadband networks. These networks have created the 
economic and technological foundation that fostered cloud computing, and thus open and 
competitive market for those services must remain a priority. 
5.11.  The United States encourages further discu ssion and examination of the benefits that an 
open market for cloud computing services can br ing to SMEs and development more generally. 
6  CONCLUSION 6.1.  As outlined above, the United States believes that these issues warrant further discussion 
and exchange of views in the Work Programme on E-commerce, and looks forward to further 
engagement with Members on these issues. 
__________  
                                               
15 See Telecommunications Services, Background Note by the Secretariat. Council for Trade in Services. 
S/C/W/299, June 2009. 
16 The historical constraint of costly telecommunic a t i o n s  o n  t h e  a d o p t i o n  o f  r e m o t e  c o m p u t i n g  h e l p s  
explain why there is a service scheduled in the communications sector of W/120 identified as "online information and/or data processing." At the time the W/120 was being developed (referencing the even older 
CPC), data processing compan ies were struggling to remain competitiv e in an era of cheaper computing power 
but persistently high telecommunications costs. These economic trends created incentives for companies to develop in-house computing capabili ty, at the expense of third-party supplied remote computing. Data 
processing companies responded by buil ding their own data networks to link to remote computing sites, which 
they could offer to their customers directly. This arrangement bypassed the then-monopoly 
telecommunications providers, who typically had little interest in developing data networks (given their focus on the then-lucrative market for voic e). Thus, the original data processors ’ offering of both transmission and 
data processing, as a package, justified including this combination of services in the W/120. While the advent 
competitive telecommunications services and the prevalen ce of the Internet has lessened the need for such 
packages, such commercial offerings remain relevant.