WORLD TRADE  
ORGANIZATION  RESTRICTED 
S/C/W/339 
20 September 2011  
 
(11-4530) 
Council for Trade in Services  Original:   English 
  
 
COMMUNICATION FROM THE UNITED STATES 
 
Work Program on Electronic Commerce: Ensuring that Trade Rules Support Innovative 
Advances in Computer Applications and pl atforms, such as Mobile Applications  
and the Provision of Cloud Computing Services 
 
  
The following communication, dated 19 Septem ber 2011, from the delegations of the United 
States, is being circulated to the Member s of the Council for Trade in Services. 
 
_______________ 
 
 
I. REINVIGORATING THE WORK PROGRAM ON ELECTRONIC COMMERCE 
1. Progress on the Work Program on Electronic Comm erce, since its establishment in 1998, has 
been slow.  Many issues remain at an impasse, including core classification questions related to 
confirming that electronic commerce fits within WTO commitments on trade in goods or services.  While there has been limited activity under the wo rk program, technological advances and widespread 
investments in broadband networks  have made electronic commerce an  integral part of our economy 
and global trading system.  If the WTO is to rema in relevant to the innovative technologies and 
business models that can support economic growth and opportunity for all Members, the work 
program must address these issues.  This was e xplicit in the 2005 Hong Kong Ministerial statement, 
subsequently reaffirmed in 2009, where WTO Memb ers agreed to reinvigorate the work program, 
including a focus on development-rela ted issues and the trade treatment, inter alia, of electronically-
delivered software.
1   
2. Electronically-delivered software was already,  in 2005, a key way users acquired programs, 
and the principle way software updates and other se rvices were delivered.  Today, the confluence of 
billions of Internet-connected devices and broadband  networks able to su pport robust downloads2 
have made on-line delivery of so ftware and related services a major, rapidly-growing segment of 
economic activity in many trading nations.  Two mark et developments deserve particular note.  First, 
the explosion of smartphone sales, mobile connectivity , and mobile software development, especially 
in the developing world, make it crucial to consider the mobile  subsector when exploring trade 
implications of electronically-delivered software.  Second, intense focus of governments and industry on cloud computing, with its ability to efficiently  deliver high-performance computer applications, 
storage services and processing over the Internet to  a broader marketplace, significantly expands 
                                                      
1 WT/MIN(05)/DEC . Ministerial Declaration of 18 Dece mber 2005 and WT/L/782. Ministerial 
Decision of 2 December 2009.  We note though, that e-co mmerce has benefits across numerous goods and 
services that should be addressed by the Work Program. 
2 Downloads could include many types of digital products; the focus of this paper is on electronically 
delivered software. S/C/W/339 
Page 2  
 
  traded services and their ability to enhance productiv ity for a range of suppliers, including SMEs, in 
both developed and developing markets.   
3. The emergence of mobile applications and cl oud computing provide important insights into 
how rapidly markets and technology can change and the merits of unrestricted trade as technology and 
network capabilities continue to develop.  The work  program should devote more attention to these 
and other market developments to ensure that WTO rules support future growth of trade in software 
products; computer and related ser vices, including cloud computing services; and other electronically-
delivered services.  The following discussion is aimed at beginning a more robust examination of market developments within the Wo rk Program on Electronic Commerce. 
II. THE MOBILE APPLICATION MARK ET: BACKGROUND AND TRADE 
IMPLICATIONS 
4. Today, one of the most familiar examples of electronically-delivered software is the 
burgeoning mobile application market.  There are now over 600,000 mobile applications, pieces of 
software that can be delivered electronically to m obile phones.  In 2011, there are expected to be over 
17 billion mobile application downloads, genera ting more than US$15 billion in revenue for 
application stores.  This represents a 190 per cent increase from 2010, accounting for about 10 per 
cent of software revenues as a whole.
3  These revenues are not only benefitting U.S. application 
stores; they are going to entrepreneurs and devel opers around the world.  For example, a Ukrainian 
application development company creates business-fo cused applications which currently serve over 
3.5 million users.  One of their mobile appli cations quickly became the highest ranked paid 
application for business in over 20 countries with  almost 300,000 downloads, representing US$2.1 
million in revenue over two years.   Overall, mobile application were found to be most popular in Asia 
(with 37 per cent of 2009 global downloads), while u sers in North America sp ent the most on mobile 
applications (representing over half  of global revenue in 2009).4   
5. Slow mobile access speeds and websites format ted solely for desktop computers initially 
posed obstacles to mobile web development, but th is is rapidly changing.  By 2013, analysts 
anticipate that mobile web traffic will eclipse wired web traffic.5  Smartphone shipments increased 
79 per cent globally in the first quart er of 2011, an increase led by shipments to the developing world.  
By 2015, smartphone users are expected to reach 2.8 billion worldwide.6 
6. Given the rapid increase in mobile connectivit y, marketers and software developers are 
targeting mobile web customers, further enrich ing the product offerings they can access.  Small 
businesses can now download applications that provi de the functionality they need to increase 
business efficiency at far lower costs.  Merchant s can advertise their goods and services in new ways 
and in previously inaccessible markets.  Individual users can access news, information, and services without wired Internet service.  In Africa, deve lopers are considering how to build smartphone 
applications that enable disease prevention, patient car e, treatment support, and health data collection.  
Today, there are over 17,000 mobile health applicati ons and it is estimated that by 2015, more than 
500 million people will be using them.   
7. In addition to the development benefits a nd market opening potential of the mobile 
application market, it offers significant employment opportunities.  Today, over 85 per cent of the top 500 best selling applications are created by sm all businesses, the majority of which are micro 
                                                      
3 Gartner 
4 GetJar Networks. App Economy Study, 2010. 
5 Morgan Stanley 
6 IDC  S/C/W/339 
 Page 3 
 
 
  enterprises with less than ten employees.7  One U.S. social networking site reports having over one 
million entrepreneurs and developers from 190 countries building with its platform.8  Kenya has a 
strong and growing mobile app lication development industry, which led several multinational 
companies to begin offering formal training programs  to local developers this year.  Cape Town 
University also launched a mobile Africa innovation la b in 2011.  With the low start-up costs to enter 
the application development business and huge growth  potential in the developing world, the mobile 
commerce market can help fuel both job and export growth.  
8. The creation of a positive ecosystem for mobile  software development and transmission will 
enhance commercial and employment opportuniti es, market access, and business efficiency in 
developing and developed countries alike.  The more  customers buy devices and subscribe to mobile 
services, the richer the ecosystem becomes.  For mobile subscribers and software developers from 
New Zealand to Namibia, the trade gains made po ssible by recent technological advances will depend 
on access to mobile applications, their underlying platforms, and cloud services regardless of where 
they are developed or from which country they are sold.   
9. WTO Members should consider the elements nece ssary to enable continued growth in this 
sector and global market access.  One important  component is sufficient telecommunications 
infrastructure and service provision.  Local infrast ructure must support Internet access at sufficient 
speeds to engage in mobile commerce.  Teleco mmunications market liberalization that allows 
competition between providers can help bring do wn Internet access costs and further mobile 
connectivity.  Payment mechanisms are another en abling element.  Payment services that are accepted 
around the world, whether credit-card based or  facilitated through online payment accounts, are 
necessary to make online purchases.  The ab ility to monetize free applications through 
advertisements, to collect and use re levant personal informa tion, and to distribute applications are also 
critical.  Compatible privacy and cyber security re gulations across countries can help enable these 
services.  Any barriers to trade in these areas should be eliminated or minimized.   
III. CLOUD COMPUTING: BACKGROUND AND TRADE IMPLICATIONS 
10. Another major commercial devel opment is cloud computing.  In the cloud computing model, 
businesses and consumers can reduce their need for local storage, processing and installation of 
applications.  This model can significantly help users, including SMEs, to grapple with the need to 
obtain highly reliable, innovative services quickly, even  in the face of resource constraints.  Service 
providers are expanding their available cloud offeri ngs to include the entire traditional suite of 
software and infrastructure offerings.   By leveraging shared infrastructure and economies of scale, 
organizations can pay for only the information technology resources they consume, increasing or 
decreasing their usage to most efficiently match their requirements.  Cloud computing often also 
enhances security since security updates can be made  for all clients at once, and as soon as necessary.  
By lowering costs and improving the quality of soft ware available, cloud computing offers significant 
benefits to small and medium-sized businesses. 
11. While cloud computing has gained a new focus given the growing access to reliable 
broadband networks, and represents a novel way to access software electronically over the Internet, it can also be viewed as a return to the early days  of computing, where users often accessed remotely-
managed mainframe computers for their computing needs.  Thus, the CPC categories from the 1990s cover similar functions.  One issue related to cloud computing that WTO Members have been 
struggling with is the overlap between computer and telecommunications services.  However, this 
issue is not as difficult as it may appear.  In a background note published in 2009, the WTO 
Secretariat noted that when determining under whic h category a certain activity is classified, “a key 
                                                      
7 Association for Competitive Technology 
8 www.facebook.com/press/info.php?statistics  S/C/W/339 
Page 4  
 
  distinction to bear in mind is that between use and suppl y, 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 examples of users of telecommunications networks and services.
9”  Thus, 
notwithstanding convergence, the category of comput er and related services remains the fundamental 
locus for cloud computing under the GATS.  
IV. GOING FORWARD 
12. To ensure that trade rules and commitments ar e appropriately tailored to market realities, 
WTO Members could explore market developments in key areas as part of the Work Program on Electronic Commerce.  This work could take pl ace in various committees with Members sharing 
views, perhaps using mobile applications and cloud computing as case studi es.  In addition, the 
Secretariat could host an event on these topics, wh ich could benefit from i ndustry participation.  
13. Looking ahead to the Ministerial, one thing is clear: the imposition of tariffs on software 
downloads specifically, and electronic transmissions generally would significantly disrupt this vibrant 
market in developed and developing countries alike.   While the WTO explores this market and works 
toward a larger framework fo r electronic commerce, the existing moratorium on electronic 
transmissions should be maintained. 
 
__________  
                                                      
9 S/C/W/299. Telecommunications Services: Background Note by the Secretariat.  Council for Trade in 
Services, June 2009