WORLD TRADE
ORGANIZATIONWT/GC/W/509
31 July 2003
(03-4069)
FIFTH DEDICATED DISCUSSION ON ELECTRONIC COMMERCE
UNDER THE AUSPICES OF THE
GENERAL COUNCIL ON 16 MAY AND 11 JULY 2003
Summary by the Secretariat of the Issues Raised1
At the Fourth Session of the Ministerial Confer ence in Doha, Ministers agreed to continue the
Work Programme on Electronic Commerce, and instructed the General Council to consider the most
appropriate institutional arrangements for handling the Work Programme and to report on further
progress to the Fifth Session of the Ministerial Conference.
With regard to future work on e-commerce, at its meeting on 15 October 2002 the General
Council agreed to maintain, for the duration of the work until the Fifth Ministerial Conference, the
current institutional arrangements for handling the Work Programme on Electronic Commerce,
namely, that the Councils for Trade in Services, Trade in Goods and TRIPS, and the Committee on
Trade and Development would examine and report on aspects of electronic commerce relevant to
their respective areas of competence, and that the General Council would play a central role in theentire process, would keep the Work Programm e under continuous review and would consider any
trade-related issue of a cross-cutting nature.  The General Council also decided on a notional schedule
of future dedicated discussions on cross-cutting issues under the auspices of the General Council.
The fifth dedicated discussion on cross-cutting issues took place on 16 May 2003 under the
auspices of the General Council and was chaired by Deputy Director-General Mr. R. Yerxa, with the
aim of building on the examination of the issues undertaken at the fourth dedicated discussion on thismatter on 27 February 2003 (WT/GC/W/492).
Participants considered three items at this meeting:  (i) Classification of the content of certain
electronic transmissions, (ii) General objectives to be applied to the consideration of e-commerce, and
(iii) Report to be submitted to the 24-25 July meeting of the General Council.  Members had beforethem written contributions submitted by the United States
2 and the European Communities,3 as well a
draft report prepared by the Secretariat.4
It was agreed that the Secretariat would continue its practice of preparing a factual report on
the discussion under its own responsibility, and that Deputy Director-General Mr. Yerxa would makean oral report on the discussion to the General C ouncil at its meeting in July 2003.  The main views
expressed by delegations in the course of the discussion are summarized below.
                                                     
1 This document has been prepared under the Secret ariat's own responsibility and is without prejudice
to the positions of Members or to their rights or obligations under the WTO.
2 WT/GC/W/493.
3 WT/GC/W/497.
4 JOB(03)/129.WT/GC/W/509
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1. Classification of the content of certain electronic transmissions
• The delegation which had made the submission in WT/GC/W/497 said the purpose of the
paper was to recall the state of the discussion on classification, which was that a number
of Members had stated clearly that, regarding the question of how to treat certain digitised
products, most of the things delivered electronically involved the provision of services.
However, questions had been raised on a number of so-called digitised products,regarding how they would fall under WTO rules.  A number of delegations, including
itself, had expressed clearly that only services were involved in electronic deliveries, but
others had refrained thus far from stating their position.  It wished to recall what it
considered to be a few key arguments th at explained why only one position had been
expressed in detail thus far.  First, it was impossible for the GATT to treat so-called
electronic deliveries.  The Harmonized System upon which GATT concessions and the
GATT itself was built, provided only a nomenclature for products which had physicalidentifications or characteristics.  Thus, there was no tariff line in the classification of
goods under the GATT that could accommodate electronic products;  the GATT did not,
and could not, cover electronic products.  Second was that Members had thus far been
trying to talk about so-called digitised products.  However, this notion was misleading, as
there was no definition of what constituted such products, but merely the idea of images,sounds or instructions that could be digitised and then either stored and transmitted or
directly transmitted electronically.  This notion was also vague and covered many
different things, such as architectural designs, health check reports and fashion designs.
Very few Members, if any, had disputed that  a health check report, for example, was part
of the supply of the service of checking the health of the client.
• It was not clear what the notion of digitised products actually covered, if not almost
everything that could be digitised, which represented a vast part of many Members'
economies.  Some had been tempted to approach this issue more narrowly by saying that
digitised products were things that had a physical equivalent, and not simply that they
could be digitised.  However, each of the examples given above had a physicalequivalent.  It was true that for some time, such products had been transmitted on a
physical support.  In this case, the GATT applied to the physical support that was
crossing the border.  Participants had to come to terms with the new situation, which was
that there was now no need to use the physical support, and that the content was directly
delivered to the customer.  This meant that instead of applying the GATS to thedistribution transaction and the GATT to the physical thing crossing the border, Members
could now only apply – because there was no good involved anymore – the GATS to the
transaction.
• The debate thus far had been based on a vague notion that very different activities that
had physical outcomes, because they might have physical equivalents, could be broughtunder the GATT, which would wreak havoc on the architecture of the WTO.  The third
issue to recall was that the GATS already applied to the electronic delivery of services,including so-called digitised products.  Participants had had a number of exchanges on
this.  Regarding  customized software, when a company was asked to prepare software at
the specific request of a client, it would conceive, try, debug and then implement the
software.  This clearly meant that the same GATS commitment on the supply of the
service also covered the conception and implementation of the software, in terms ofmarket access and national treatment.  This clearly covered the download of such
software.  Otherwise, the commitments themselves would make no sense, because the
ultimate objective of that service was clearly to transfer to the client the software that hadWT/GC/W/509
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been designed, tried and debugged by the software company.  Clearly those digitised
products, when delivered, were part of a transaction that was covered by the GATS.
• A key point in the debate so far was that it had been oriented towards discussions for
which it was not designed.  The question to be answered was whether there was a
problem identifying what the things transm itted electronically were, and determining
where they were classified.  Participants had not been mandated to negotiate market
access for those products, or to compare possible market access situations for those
products, but rather to see whether there was a problem of interpretation of the existing
agreements in terms of such elements as identifying what was at issue.  Were digitised
products part of the transaction covered by the GATS or by the GATT, or covered by the
TRIPS Agreement?  The debate could not be manipulated to pre-empt the market access
negotiations.  The classification debate was about deciding where a thing might standlegally.  It was not for this group to decide on market access.
• However, there might be cases involving possible inconsistencies.  Two particular
situations were highlighted in the submission.  One was the situation in which a Memberhad full commitments for architectural services but at the same time imposed customs
duties on the physical architectural design.  This problem was becoming acute becausethe same architectural design could be downloaded.  In such a case, Members needed to
identify the problem and to tell the negotiators on market access that they had a problem
to solve.  Another example was software th at could either be downloaded or delivered
after an order was placed, and delivered on a disk across the border by post.  The two
transactions might be exactly the same, and it was simply the choice of the customer as towhich way the software would be supplied.  Here there might be questions of
inconsistencies between the commitments under the GATS and those under the GATT
when the thing was delivered physically.  In this case it was not only the GATT that
applied, but both the GATT and the GATS, because the GATS would apply to the
distribution transaction and the GATT to th e physical product.  In this case Members
might have to take into account what had already been discussed under the GATT for that
particular product, as the commitments might have been negotiated with certain
objectives in mind which might not square with the commitments under the GATS.
• In conclusion, this delegation reiterated that the GATT could not cover electronic
deliveries, because this was legally not possible and because the GATT had not been
designed to, and could not, do so.  The question was not to negotiate market access for
such products, but to see if there was a problem in identifying them or resulting from past
negotiations and the legacy of the commitments made on them.  These were the only
things that needed to be examined and iden tified so that Members could later refer to
them in the negotiations for resolution.
• Several delegations asked how consistency problems would be resolved on a case-by-case
basis.  One said that the consistency issue was perhaps a systemic concern which it might
not be appropriate to handle on a case-by-case basis, and another asked how such
problems would be approached, in particular from the market-access perspective, taking
into account relative disciplines, including for subsidies and domestic regulation.
• One delegation said the submission clearly elucidated the arguments on why digitised
products or products which could be delivered electronically and which had a physical
equivalent should be regarded as covered by the GATS.  It could go along with many of
the arguments made in the submission and also with the conclusion on classification.  For
this delegation, the tangibility of the thing crossing the border was an importantWT/GC/W/509
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consideration for goods.  Electricity was the exception rather than the norm, as indicated
in the submission.  It wished to emphasize that the physical equivalents of electronically
deliverable products were treated as goods by virtue of the physical form of their carriers,
and not their content.  Thus, a video tape and a DVD were regarded as different things.  A
music CD and cassette tape were regarded as different things, and also an audio book oncassette and the same book on paper were regarded as different things, even though they
might contain the same musical or other content.  On the other hand, a video tape was a
video tape regardless of the content it contained.  In that sense there seemed to be a
distinction drawn between the physical form and the content of the products themselves.
Another point on which this delegation agreed with the submission was the need to
separate the discussion on classification – which was a technical one and would be best
based on consistent logic and principles – from issues relating to market access andnational treatment.  In this delegation's view, the GATS covered all forms of supply, in
comparison with the GATT which covered only cross-border supply.  Also, the
disciplines under the GATS on issues such as domestic regulations would be more
conducive to the development and liberalization of the trade of such electronically
deliverable products as a service.  In particular, this delegation envisaged that regulatorybarriers could be a significant hurdle for the trade of electronically deliverable products
such as e-commerce and in effect would cover all modes of supply including Mode 3,
which was not covered by the GATT.  The scope for addressing domestic regulations
under the GATS to ensure that they would not become a barrier to trade was therefore an
advantage of having such trade be treated under the GATS rather than under the GATT.
• Another delegation said that while the discussion was not about market access but about
how certain digitised products could be framed under the current WTO agreements, it had
questions regarding the concept of tangibility in paragraphs 17, 18 and 21 of
WT/GC/W/497.  Paragraph 17 indicated that when something was physically delivered,
the GATT applied to the import of the physical support when it crossed the border.  Inother words, the stress was laid on the fact that for a good, one looked specifically at
tangibility and physicality.  The inference was that in the case of services, the opposite
would apply, i.e. intangibility.  Paragraph 21 indicated that any thing which physically
crossed the border had to be treated under the GATT.  Thus, in the case of a service such
as legal consulting, this was dealt with in the services classification and could be providedby electronic means.  However, it could  also be put on paper and sent by post, in which
case it became a good.  No one would dispute, however, that it was also a service with its
own classification.  Another example that was even more difficult and complex was
transport.  No one could question that in international transport service, something
material crossed a border, but no one would question either that it was a service.
Specifically, in the current scheduling guidelin es for the services negotiations, transport
services were considered as services under Mode 1, even though something crossed aborder physically and therefore involved tangibility.  This delegation was flagging these
questions in order to better understand the points made in the submission.
• In this delegation's view, there were at least two positions on the classification of digitised
products.  E-commerce had not stopped developing, and while there was a problem
regarding classification, it should not be overestimated, nor should Members feel that ifthey could not solve it they would not be able to make progress.  While the dedicated
discussions might not have been able to solve this problem, they had nonetheless been
very useful in providing greater clarity and information on the various positions on these
topics.  This delegation wondered whether participants should not in future concentrate
their work on the basic concept contained in paragraph 34 of the Doha Declaration, thatthe General Council should report on progress in the Work Programme to the FifthWT/GC/W/509
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Ministerial Session.  Members should perhaps be discussing the dedicated discussions'
input to the General Council's report to Ministers in Cancún.
• Another delegation said that while many felt electronically delivered products should be
treated as a service, it had been pointed out that treating digitised products as a service
might involve consistency problems.  It wished to know how this problem could besolved without posing systematic problems in future.
• In another delegation's view, the treatment of digitised products was a critical element in
the debate on e-commerce, and its views on this had been clearly articulated in its non-paper of April 2001 (JOB(01)/55).  This paper argued that the GATS approach was the
most appropriate to treat digitised products.  Treating them as services appeared to be
contractually sound and to provide greater legal certainty.  The thrust of that paper
corresponded with many of the points in the submission under discussion.  The work onclassification was very important.  It would be useful if Members could build on the work
done on this issue in the last two years in order to reach an outcome.  Classification was
but one aspect of e-commerce.  This delegation's overriding approach was that
impediments to e-commerce should be either reduced or eliminated.  To this end it had
always advocated making the moratorium on customs duties permanent.  It had alsoadvocated that commitments in services should be increased and tariffs on intellectual
technical products be reduced or eliminated.  This would be complementary to facilitating
the growth of e-commerce.  Another delegation said it shared many of the views
contained in WT/GC/W/497.
• Another delegation said its experts in the capital were evaluating the submission, and it
would like to comment in detail on it at a later date.  The submission essentially arguedthat digitised products as an electronic delivery were services.  It also said in paragraph
21 that the legacy of trade agreements meant that anything physically crossing a border
had to be treated under the GATT.  This included the outcome of services, such as
architectural or industrial designs.  The paper further indicated that in cases whereMembers had to apply both the GATS for the supply of services, and the GATT for the
physical outcome, it was important to ensure consistency between national treatment
commitments made under the GATS and the possible tariffs collected on the good
delivered.  The submission seemed to suggest that the issue was not only one of
classification, but also related to the differential treatment that might be given toelectronically delivered products vis-à-vis the treatment of their physical counterparts.
Participants were still are trying grapple with this issue and had not reached a stage where
definitive conclusions could be drawn.  It was still evaluating the issues raised during the
debate on classification and their possible implications, and at present did not have a
definitive position.  However, it was important to look at the legal aspects and
predictability with respect to classification issues.
• Another delegation said it approached the broad issue of e-commerce with a view to
removing barriers and encouraging the development of e-commerce, which it saw as anenabler of commercial activity rather than as a product in itself.  Against this background,
it felt that specific goods or services that were delivered electronically were likely to be
covered by the GATT or the GATS on the principle of technological neutrality.
However, it appreciated the submission in WT/GC/W/497 and agreed with the pointsabout the difficulties that arose with the concept of digital products.  The issue of clarity
was very important and was at the heart of the classification discussion.  It asked whether
the author of the submission was thinking about the next steps in terms of providing aWT/GC/W/509
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greater measure of clarity, both for the negotiations and also having in mind that an
arrangement would be needed that worked and could be administered.
• Another delegation shared the conclusion drawn in the submission that digitised products
were not covered by the GATT.  Much had been said about what could and should be
done at the border regarding the goods aspect and the services aspect.  There was noproblem when disciplines did not exist for many of the goods in question, but now there
were disciplines.  In its view, it was theoretically clear what a service was.  However,
commitments on services should be applied in a technologically neutral way.  Where
there was a Mode 1 commitment for national treatment, a Member could not at the border
submit services contained in a physical product to rules that differed from those it applied
to its own service providers.  This was certainly the case for a tariff, because it would
then breach national treatment rules.  For exam ple, if an architect was not subjected to a
tariff when he delivered his product in the form of plans, a Member could not, if it had a
national treatment commitment, subject a foreign service provider to a tariff.  One could
go very far in treating services just like goods.  For example, in the area of export
controls, the technology for nuclear or chemical weapons started out as a good and then
went on to become something very close to a service.  The next step was to cover
technologies contained in a person's brain.
• Another delegation said paragraph 18 of the submission stated in the second sentence that
consumption was not determinative for the scope of application of the GATT.  In thisdelegation's view, three criteria distinguished goods from services:  first, production and
consumption were generally simultaneous in the case of services but not goods;  second,unlike goods, services could not be stored;  and third, services were intangible, whereas
goods were usually in a tangible form.  It appeared that no one criteria was determinative.
In this regard, one could usefully reference work on the provisional Central Products
Classification which had been developed by the UN Statistics Division, which indicated
that “several criteria are used in different circumstances, for example, tangible versusintangible, storable versus non-storable or transportable versus non-transportable”.  Most
of these criteria held in the majority of cases, but there were always exceptions or
borderline cases which could not be simply resolved based on the variety of criteria used
and the diverse experience around the world.  It appeared that no single criterion provided
a valid, practical and unambiguous basis for distinguishing between goods and services inall cases.
• Another delegation said it was still analyzing the submission but had some preliminary
comments and questions concerning the approach of classifying all electronicallysupplied products as services.  While it agreed that many services were critical to
electronic commerce and that full liberalization in these sectors was essential, it did not
support the notion that electronically supplied products became a service merely by virtue
of the fact that they were delivered via a service.  In its view, this approach wasfundamentally flawed, particularly as an increasing number of products that were
typically considered goods by the common person, such as books, movies, software, CDs,
DVDs and videos, could now be digitised and delivered via an electronic network.
Nowhere did the GATT say that it only applied to physical products, thus there was no
reason a priori  that these electronically delivered products could not fall under the GATT.
The submission in WT/GC/W/497 indicated that Members would have to address
possible consistency problems raised by market access negotiated in the past for digitised
products and their physical counterparts.  However, Members should not take decisions
that rolled back existing levels of market access these products currently received, and
should instead resolve inconsistencies in the most liberalized fashion.  It was not thisWT/GC/W/509
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delegation's desire to create a vague classification for these products.  There had already
been numerous studies, papers and discussions since 1998 on this topic which most
agreed involved a small group of products, as well as studies examining how these
products were currently enjoying growth and movement.  The present exercise on
classification should not in any way diminish the nature and conditions within whichthose products evolved.  What was in fact at issue was the way these products were
transmitted.  Several questions could be asked for the sake of adding to the intellectual
debate:  Could electronically supplied products exist as a separate entity?  In this
delegation's view the answer was yes.  Were e-books, software, movies and music
downloadable separable from the producer?  Its response was yes.  Could they be
produced, stored, transmitted and sold at different times?  Its response was yes.  Did these
products require a relationship between the producer and the consumer?  Its response wasno.  And finally, did the consumer change as a result of downloading these products?  Its
response was no.
• Regarding the example put forward by another delegation concerning legal services, this
delegation would add another scenario regarding legal consulting.  The main thrust of the
position in WT/GC/W/497 seemed to be based on the distinction between tangibility and
intangibility.  Where a lawyer providing consulting services by Mode 4 physically
boarded an airplane which delivered him to a destination where he provided a service,
there was a lot of physical activity and characteristics associated with the delivery of that
service.  Could it really be argued that since the Harmonized System lacked a specific line
item for digitised products, the services classification regime was sufficient?  The CPC,which was one classification system employed by many Members in services, contained a
category 842 which was identified as software implementation services.  It was this
delegation's understanding that typically CPC-842 on software implementation services
covered all services involving consultancy and development and implementation of
software.  Nowhere did it define software itself as a service.  There had been manydiscussions on this issue, and the same argument was again being made concerning
comparisons between the HS and the classification system for services, albeit with a
different approach, in WT/GC/W/497.  It had been noted that electricity was an
exception.  It had an HS line notwithstanding the fact that its particular content was
intangible.  How did it come about that there was an HS line for electricity?  Thisdelegation's position was not so much on how to classify these products, but on the need
to update and improve the thinking on how to handle this issue.  No more time should be
spent splitting hairs.  Members had before them an opportunity to represent the work in
the WTO and on e-commerce in a way that was consistent with the overall principles of
the organization.  This was a cross-cutting approach to e-commerce that would establish
for those who were active in this field a liberal and non-discriminatory environment to
conduct their business.
• Another delegation accepted that digitised products might not have physical equivalents,
and gave the example of a doctor in one country performing an operation based on advice
given electronically by a doctor in another country.  However, some digitised products
did have physical equivalents, as indicated in the submission in WT/GC/W/497.  In the
case of a DVD, for example, that was delivered physically to another country and subjectto a tariff, would that same DVD delivered electronically be subject to the same tariff?
Architectural designs, at the point where they had to be authenticated by a local architect,
were subject to a tax regardless of how they were delivered.
• Another delegation asked what participants hoped to achieve in a debate on classification,
as numerous examples could be cited which s upported one approach or the other.  TheWT/GC/W/509
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mandate in paragraph 34 of the Doha Declaration was for the General Council to report to
Ministers at Cancún on progress under the Work Programme on E-Commerce, and this
delegation wondered whether there had been any.  E-commerce was continuing despite
the absence of any conclusions on classification.  Participants could not continue to
discuss these questions without aiming at some outcome.
• The delegation which had made the submission replied that the group's mandate was to
understand how the WTO rules applied, and not to discuss the pros and cons regarding
classification in terms of market access.  Its interpretation of existing rules and
commitments was set out in the submission.  With  regard to some of the questions raised,
everything classified under the GATT was tangible.  It was about goods which had
physical characteristics that were tangible.  The GATS said nothing about tangibility or
intangibility, precisely because many services had physical outcomes, some of which hadlines in the HS, and this was where there might be a consistency problem.  It had
suggested a case-by-case approach to identifying where consistency might be a problem,
in order to report this to Ministers.  In this context, it had identified the case of
architectural designs for Members who had made commitments for architectural services.
The GATS provided many things that the GATT did not, and the GATT provided thingsthe GATS did not, but participants were not supposed to be discussing the pros and cons
of either.  The classification issue had to be looked at from a purely logical and legal
point of view, and market access would be negotiated subsequently.  Regarding the
question of how not to roll back existing commitments, no Member could roll back
commitments in any negotiation except under various specific procedures.
• Another delegation said that no legal certainty would result from trying to split hairs on
the classification question.  While classifying all electronic transmissions as services
might be a quick and easy way to provide legal certainty, the stakeholders following the
present discussion did not think the easiest way was the appropriate way.  When one
talked about legal certainty, one was ultimately talking about market access.  This waswhat the WTO was fundamentally about.  The questions it had posed were aimed at
clarifying expressions such as "physical support", "tangibility" and "intangibility", and
had nothing to do with rolling back commitments.  It had asked if electronically supplied
products could exist as a separate entity;  whether e-books, software, movies and music
were downloadable separate from the producer;  whether they could be produced, stored,transmitted and sold at different times;  whether these products required a relationship
between the producer and consumer;  and whether the consumer changed as a result of
downloading these products.  This delegation agreed it was important to identify exactly
where the cases of inconsistency were, and the example of architectural designs and
services was useful, as to date the focus had been mainly on books, videos, DVDs and
software.  While software was already covered as a good by virtue of the physical
medium by which it was delivered, there was nothing precise on software itself in theCPC, which was the system used by many Members to classify services.  In the example
of architectural designs and services, there was a line item for these products in both
places.  However, simply talking about the different classification systems did not solve
the problem.  What participants were talking about was a way to deal with this one aspect
in a manner that did not provide for discrimination and was consistent with thefundamental notions of the WTO on liberalization.  It was premature to take any decision
on classification on electronically-supplied products, particularly if doing so could roll
back existing levels of market access for products that currently enjoyed this legal
certainty.WT/GC/W/509
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• Several questions were posed on the submission:  If a product in physical form went
across a border in that form, the GATT would apply, including the principle of nationaltreatment;  however, if this product was digitised and was a service, it would fall under
the GATS commitments, and if a Member's schedule of services commitments limited
national treatment on the same product, would inconsistency arise?  Theoretically, what
would happen in a situation in which a Member had full commitments in Mode 1 onmarket access and national treatment in all 12 sectors of its schedules?  what would
Members then be negotiating under e-commerce?
• In response, one delegation clarified that it had not said software was a service, but part of
the transaction and part of the supply of the computer-related service of software design.
Where it had highlighted possible inconsistency problems was where a Member already
had commitments, including full national treatment, for the corresponding services, and
no such commitments under the GATT.  The national treatment provision of the GATShad no limit in its scope.  It applied to any measure that applied to the supply of a service.
• The Chairman said there appeared to be a clear gap in perceptions about exactly how the
classification issue could be resolved, in the context of forwarding recommendations toMinisters in Cancún as part of the Work Programme on E-Commerce.  It seemed that
when the classification discussion had begun, there had been questions about the potentialevasion of customs duties through the digitised delivery of products.  The present
discussion seemed to be raising the opposite questions.
At the resumed meeting of the dedicated discussion on 11 July, the following comments were
made on this issue:
• One delegation said that while it did not disagree with the importance of the technical
aspects of the classification issue as set out in the submission, Members should be
reminded of paragraph 34 of the Doha Declaration, which said “we recognize the
importance of creating and maintaining an envi ronment which is favourable to the future
development of electronic commerce.”  In this respect, as correctly pointed out inparagraphs 14 and 22 of the submission, it was important that trade conducted
electronically was given the same level of treatment as trade conducted physically, and
that Members should discuss how to achieve such an objective.  Also, while Paragraph 10
of the submission insisted that the concept of digitized product was misleading, some
Members had already been developing this concept within the legal framework ofbilateral treaties and domestic laws.  Thus, it might be useful to consider such
developments in future dedicated discussions.
• The delegation which had made the submission reiterated its view, as set out in the
submission, that the solution to the classification issue was purely technical, but that one
also had to deal with the legacy of past commitments, which was why it had suggestedworking on a number of concrete cases where such problems arose.  It welcomed any
proposal to work on concrete cases in this respect, in the light of the understanding that
when something was delivered electronically it was a service.
2. General objectives to be applied to the consideration of e-commerce
• The author of the submission in WT/GC/W/ 493 said the focus of its position was on non-
discrimination and ensuring increasing prot ection of market access in the area of e-
commerce.  This delegation's intention in the dedicated sessions was not to negotiateWT/GC/W/509
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market access.  The 1988 Declaration on E-Commerce had two major components:  a
work programme and a moratorium.  The two had been connected at birth, and it was
important at the present stage and leading into Cancún to set the tone for a statement on
progress.  The submission highlighted some elements of what e-commerce was to
represent for Members in the WTO, and aimed at the type of e-commerce activity ortreatment in relevant activities going on at present.  First, it had suggested that perhaps an
objective for the overall Doha Development Ag enda would be to adhere to a liberal and
open trade environment through the application of existing WTO agreements to e-
commerce in order to expand growth and opportunities for all WTO Members.  Members
had already discussed the current confusion about which WTO agreements applied in a
given instance to a very narrow set of products.  Therefore, Members should commit to
greater market access and national treatment across the board over a broad range ofrelevant goods and services sectors that would promote trade in products and services
using electronic networks.  It was clear that conducting electronic commerce required
several component parts.  In the case of goods, it involved the hardware used to facilitate
electronic commerce, and in the case of services, telecommunications.  In order to further
address some of the grey areas or nuances Members had been discussing, this delegationproposed that Members recognize that where legitimate policy objectives required
domestic regulations that affected trade in products and services using electronic
networks, such regulations should be transparent and non-discriminatory, and should not
serve as a restriction on trade.  This concept was not new to the WTO.  This delegation,
along with others, had proposed this concept in the context of proceeding in a transparent,light-touch manner on electronic commerce, and not to take actions that served as
restrictions on trade.
• Another concept was to accept as permanent on an MFN-basis the moratorium on
imposing customs duties on electronic transmissions, as a way to support the continued
expansion of global electronic commerce.  Lastly, recognizing that technical assistanceand capacity-building projects relating to electronic commerce had a role to play in the
deeper integration of developing countries and economies in transition into the
framework of trade rules, the WTO should coordinate closely with other international
institutions in helping to develop the needed infrastructure and other requirements of
electronic commerce.  The Committee on Trade and Development had produced a wealthof thinking, analyses and fact-finding in this area.  Rather than becoming bogged down in
the discussion on classification, participants should recognize some basic elements to
foster the activity currently going on in the area of electronic commerce.  This was the
real environment and there were real stakeholders.  Because e-commerce benefited all
Members, things should be done in a comprehensive and cross-cutting way in order to
provide reassurance.
• While one delegation felt the dedicated discussions were not mandated to discuss the
present item, others said this forum was perhaps the best one for discussing the kinds ofissues raised in the submission, which were by definition cross-cutting in nature.  Another
delegation said that while the submission started off with the objectives of the Doha
Development Agenda, it contained practically nothing regarding development and did not
mention developing countries per se  as a group.  It was argued by another delegation said
that at the present stage of the technical debate, it was too soon to reach any decision on
general objectives regarding e-commerce, particularly when such trade was almost non-
existent for many developing countries due to their lack of access to technology,
infrastructure, etc.  In May 2001 this Member had indicated it had been affected by
restrictive measures on access to the technology it needed to implement its national plansto develop e-commerce, and had pointed out the need to eliminate all commercial andWT/GC/W/509
Page 11
technological restrictions.  This was a vital condition for any decision within the WTO in
favour of unlimited e-commerce.
• One delegation said that the Ministerial Conference in Cancún was an occasion to
reaffirm and demonstrate the relevancy of the WTO to e-commerce, and it welcomed the
contribution and initiative of this submission.  It was useful to confirm that WTO ruleswere applicable to e-commerce, in order to provide a predictable and stable basis for this
trade.  It fully understood the necessity of technical assistance and capacity building in
the field of e-commerce, and wished to place special emphasis on improvement of the
technology specific to e-commerce and the introduction of an adequate legal system in
order for developing countries to be able to enjoy the fruits of e-commerce.  It had
implemented various projects in this field, as explained in WT/L/451.  In addition to the
five objectives set out in the submission in WT/GC/W/493, it was important to discussother elements such as protection of intellectual property under the TRIPS Agreement.
• While one delegation said it seemed that the first three principles related to classification,
and that until there was movement on classification it would be difficult to look at theseprinciples, another said that while classification was an important issue, participants
should not miss the forest for the trees.  There were other important aspects of e-commerce that should be given due importance, and in this regard the submission in
WT/GC/W/493 was timely.  This delegation's overriding approach was that the
development of e-commerce should be facilitated, and in this connection it found the
objectives highlighted in paragraph 3 interesting.
• A number of delegations welcomed the welcomed the opportunity to step back to
consider objectives and principles that might aid the development of e-commerce andthus welcomed the submission in WT/GC/W/493.  One said that in considering any
objectives regarding domestic regulations, Members should have regard to what was
already being dealt with under existing provisions of WTO agreements.  This delegation
asked what was new that needed to be addressed as a cross-cutting issue by way ofobjectives or principles.  If anything was new it was the ongoing negotiations on
disciplines for domestic regulations in the context of Article 6.4 of the GATS.  This
would have significant relevance to e-commerce because domestic regulations could
potentially pose significant barriers to e-commerce, particularly in the electronic delivery
of services.  Another said it had some differ ent ideas regarding the main thrust of some of
the proposals in the submission.  For example, with respect to domestic regulations,
Members' domestic regulatory regimes had to be taken appropriately into account.
However, shared interests could be identified on, inter alia , the application of WTO
agreements to e-commerce, the fostering of market access, the extension of the
moratorium, ITA-related objectives and the taking into account of the considerable pro-
development aspects of e-commerce.  Regarding development issues and capacity
building, there was no simple recipe for bringing about the benefits of e-commerce todeveloping countries.  Rather, what was important was to consider that e-commerce had
the important capacity to sustain economic development in every country and in every
development situation.  A third delegation said it had two caveats regarding the
submission:  one related to the terminology used in the discussion on classification,  the
second concerned the reference to the APEC statement on policies on trade and the digitaleconomy.  This Member had not signed onto that statement, nor had Canada, Chile, China
or Russia.  Nevertheless, it endorsed the emphasis given to a liberal trading environment
for e-commerce.  One delegation was pleased to see that technical assistance and capacity
building were included, as these were essential to address gaps in infrastructure among
Members.  Without this, even resolving th e classification issue would not contribute toWT/GC/W/509
Page 12
the development of e-commerce.  It was also pleased with the reference in paragraph 6 to
a well-developed telecommunications network, as many services sectors, including
computer and related services, consulting services, distribution, advising and so forth,
included intellectual property rights as well as tariff issues.  One delegation said there was
a need to examine further some of the sugges tions for achieving a liberalized environment
and trade promotion, particularly the scope and level of liberalization stressed in the
submission.
• Another delegation said in light of all that had been discussed, the approach in
WT/GC/W/497 seemed to be the best solution, although not the most comprehensive one,
regarding classification.  With respect to the submission in WT/GC/W/493 this delegation
noted with interest the suggestions regarding market access for sectors of interest to e-
commerce, and would take them up in the relevant fora.  Another said that e-commercewas an integral part of its development agenda.  However, regarding the opening up of
services sectors to foster the development of e-commerce, many countries had limitations,
and such liberalization would not necessarily mean an increase in the use of e-commerce.
It was necessary to look at technical assistance and capacity building, particularly in the
regulatory areas, network access and access to top technology, bearing in mind the cost ofsuch technology in developing countries.
• Another delegation said it was studying the concepts and issues raised in the submission,
and made preliminary observations on the thrust of this paper.  Regarding market access,each Member was participating in the market access negotiations with complete
knowledge and information about its competitiveness in the various areas, and eachwould be making, or seeking, suitable commitments in that context.  As the submission
noted, the main advantage of an electronic medium, including the Internet, was its
capacity to simplify trade transactions.  Members recognized this and were adopting
suitable regulations and measures needed to foster it.  Other global fora were considering
issues related to e-commerce.  At the present stage it was not clear what the impact andimplications of such an endorsement of broad objectives in the WTO system would be.
Paragraph 26 said that global e-commerce had expanded despite the lack of agreement on
how to classify certain products.  If this was the case, perhaps it would be useful to
understand the problems better before considering any further steps.  Clarification was
needed as to the application of WTO agreements to e-commerce.  It, along with others,felt that more clarity was also needed on the issues raised in WT/GC/W/493 and the
possible implications, bearing in mind that these might have an impact not only on the
work in dedicated discussions but also in other WTO bodies, including negotiating
bodies.
• Regarding the moratorium on the imposition of customs duties on electronic
transmissions, several delegations felt this involved a political decision by Ministers, and
the dedicated discussions might not be competent to discuss and decide on making themoratorium permanent.  It should be left to higher bodies to decide on what would be
done in future on the moratorium.  Several delegations said they had no problem making
the moratorium permanent, but one said there were other ways to help support the
continued expansion of e-commerce, such as the ITA or liberalization in certain service
sectors, and it had made a submission in the Services Council in relation to the particularservices sectors it considered vital for e-commerce.  Another delegation wished to
continue to pursue the possibility of extending the moratorium at the Fifth Session.  Still
another said the moratorium on customs duties on e-commerce should be made
permanent, and fully associated with the reference to services liberalization and
liberalization of various information technology products in paragraph 6.WT/GC/W/509
Page 13
• The Chairman suggested that the present dedicated discussion be suspended and that it
reconvene in early July in order to complete the discussion of this item and to consider
the group's input to the July General Council.  One possible suggestion for the latter –
given that the examination of the cross-cutt ing issues was far from complete and given
delegations' concerns about how to move forward on e-commerce issues – would besimply to recommend a roll-over of the Doha mandate, i.e. to continue the Work
Programme on E-Commerce, including the moratorium and the current institutional
arrangements for the Work Programme, until the Sixth Session of the Ministerial
Conference.
• The meeting was suspended and will reconvene on 9 July.
At the resumed meeting on 11July, the following comments were made:
• In response to a question concerning the difference between the original submission in
WT/GC/W/493 and the submission in WT/GC/W/493/Rev.1, the delegation which had
made the submission explained that the last bullet under paragraph 3 of the document
included “developing-country economies” as well as economies in transition, and said
that there had been no intention to leave these countries out, as both the 1998 Declarationon Electronic Commerce as well as the Doha Declaration referred to developing
countries.
• Another delegation said it wished to reiterate points it had made at the dedicated
discussion on 16 May, that the US submission was timely and that it could support the
objectives highlighted in that paper, particularly the objectives and principles set out inthe bullet points under paragraph 3.  This delegation’s underlying approach to e-
commerce in the WTO was that the WTO should be relevant to new technologies, and
that e-commerce could contribute to trade and development in line with the Doha
Development Agenda.  While classification was an important issue in itself, it should not
hold up other aspects of the e-commerce debate, and Members should not lose the forestfor the trees.  E-Commerce was an area where technology advanced much faster than
trade rules, and Members’ role was to work towards a clear and predictable legal
framework that would also lock in the current benign and free-trading environment for
the settlement of e-commerce disputes.  Singa pore also strongly supported the assertion in
the submission that the moratorium on customs duties on electronic transmissions shouldbe made permanent.
3. Report to be submitted to the 24-25 July meeting of the General Council (Job(03)/129)
• One delegation said it would have liked the report to provide a more detailed flavour of
the discussion, but could accept it as it was.  Regarding the question of maintaining the
moratorium on customs duties on electronic transmissions, this delegation had theimpression that Members would be agreeing multilaterally to this moratorium while
individually, at least one Member had introduced new tax regulations on e-commerce;  it
sought some clarification of this.  It queried the purpose of Ministers’ decision in 1998 to
implement the moratorium on customs duties on electronic transmissions;  did that
reasoning still exist?  Even given the differences between internal taxes and customs
duties, would the existence of internal taxes not offset to some extent the effect of the
moratorium?WT/GC/W/509
Page 14
• In response, the delegation in question said that, as already explained in the dedicated
discussions, it had previously applied a value-added or sales tax only to internaloperators, which effectively discriminated against these operators;  this tax would now be
levied on external operators as well, thus re moving the discriminatory element.  The tax
in question had nothing to do with customs duties, which were collected only on foreign-
based operators.  The latter was the type of discriminatory tax that would hinder thedevelopment of e-commerce, which was why this delegation felt the moratorium should
be maintained.  Another delegation asked if the measures in question would be notified to
the WTO.
• Several delegations had concerns about whether the dedicated discussion was the proper
forum to make recommendations on issues such as the moratorium, which were politicalin nature.  Several said that according to paragraph 34 of the Doha Declaration, the
General Council itself was the proper forum for this, which was why they would not becomfortable with any language that would convey the impression that there was
agreement on continuing the work or maintaining the moratorium.
• However, other delegations felt that the dedicated discussion, as it was under the auspices
of the General Council, could make recommendations, and that participants shouldendorse continuing the work and the moratorium.  They were joined by other delegations
who said the language in the draft merely referred to a possible option the GeneralCouncil might consider, and did not make any recommendation.  A large number of
delegations also supported the draft report, as well as its references to continuing this
work and maintaining the moratorium.
• Another delegation said that the draft report in Job(03)/129 would serve as a sufficient
basis for participants to continue their work.  As e-commerce continued to evolve,
Members needed to be careful about premature decisions on the issues involved.  Theyalso needed to recognize that commitments on greater market access and national
treatment across a broad range of products and services would be important.
• Several delegations encouraged participants to consider, after the Cancún Ministerial, a
longer-term, or even permanent, moratorium on customs duties on electronictransmissions.  One delegation encouraged Members to consider, post-Cancún, the
development of e-commerce principles, and looked forward to discussing these.
• One delegation said it supported the moratorium but did not want to make it permanent,
because African countries needed the capacity to be able to benefit from trade in e-commerce, and also needed technical assistance to be extended to them to this end.
Others said they could not at this stage agree to any longer-term extension of the
moratorium.
• The Chairman said that his understanding was that this was a dedicated discussion of the
General Council.  The latter had not set up a separate body for these discussions on cross-
cutting issues.  Thus, in the dedicated discussions Members were indicating what their
positions were in the General Council regarding particular issues.  What participants were
discussing was what the General Council was prepared to agree to regarding
recommendations to Ministers.  The draft report clearly had to reflect what was the
consensus of participants.  What he had heard from most participants at the presentmeeting was that they were prepared to support in the General Council a recommendation
on continuing the examination under the Work Programme on E-Commerce, including a
continuation of the current practice of not imposing customs duties on electronicWT/GC/W/509
Page 15
transmissions.  If some Members were not prepared to support that at the July General
Council, they should so indicate.
• One delegation said that the nature of the dedicated discussion was still not clear.
Paragraph 7 of the draft report contained a contradiction in that the General Councilwould be reporting to itself.  This delegation was not prepared to agree to paragraph 7 of
the draft report, because the latter did not reflect its position on continuing the work or onmaintaining the moratorium.  The elements in paragraph 7 should be discussed in the
General Council itself, and this delegation reserved its position on these issues until the
July meeting of the General Council.  Two other delegations said they would have to
await instructions from capital regarding the July General Council.
• The Chairman said that he would try to accommodate the concerns about paragraph 7 in
the draft report, and would circulate a re-draft of the draft report to delegations within theshortest time possible.
5  A number of delegations made drafting suggestions.
__________
                                                     
5 The revised draft report was circulated on 16 July as document Job(03)/129/Rev.1.  This document
was subsequently circulated as the report to the July General Council in document WT/GC/W/505.