INET-2001 The Internet: Challenges for the WTO
Proposal ID- # G39
Dr. PRADHUMNA DUTT KAUSHIK, Fellow, Rajiv Gandhi Foundation, India kaushik@rgfindia.com The Internet: Challenges for the WTO
Dr. P. D. KAUSHIK, Fellow, Rajiv Gandhi Foundation, India The advent of Internet has transformed the global business environment in the 21st century. Serious estimates on electronic commerce forecast almost business worth US$ 1 trillion, inclusive of B2C, B2B and B2G, roughly accounting for about 25 per cent of global trade by 2005. On the other side, the World Trade Organisation (WTO) has emerged as a single most influential multilateral organisation in the new millennium that impacts ways of doing international business. The WTO essentially charts rules of international business for trade in goods and services. Nevertheless, all efforts were focussed at keeping technological neutrality in the multilateral trading rules. In other words, the transacting medium has no influence on the rules. In fact, trading rules for goods and services are essentially based on conventional cross-border business transactions. Currently, the WTO is carrying out a comprehensive work programme on trade related issues emerging from electronic (Internet) commerce. The newly gained power of computer networks (the Internet) in terms of delivery of products and services have challenged the existing trading rules under the WTO. Besides, the concept of file sharing has further challenged the validity of traditional rules covering one-to-one commercial transaction. Thus, the exiting WTO framework is considerably influenced by the advent of Internet commerce. The World Trade Organisation The WTO is a multilateral trade body, which oversees harmonisation of international trading rules and elimination of trade barriers to facilitate global trade. The WTO framework is based on legally enforceable trading rules (the Agreements), dispute settlement, trade policy review mechanism and an international platform for future negotiations. The agreements, covering goods, services and intellectual property, form a major constituent of the framework. The multilateral trading framework spells out rules of trading based on principles of liberalisation and permitted exceptions. Its framework comprises of the General Agreement on Tariff and Trade (GATT) for trade in goods, General Agreement on Trade in Services (GATS) for trade in services, Trade Related Aspects of Intellectual Property Rights (TRIPS) for protection of intellectual property, and few plurilateral agreements. The GATT agreement is an exhaustive agreement with 12 associated agreements, which could be categorised as procedural rules, safety nets, and product-specific agreements. The basic objective of the WTO is to create a liberal and open trading system under which business enterprises from member countries can trade with one another under condition of fair competition. It attempts fair competition by strictly adhering to the principles of non-discrimination, i.e. National Treatment and Most Favoured Nation Treatment. However, it is also pertinent to mention that the multilateral agreements differ with each other in terms of scope and characteristics. The GATT allows exceptions to the general principles under specific provisions. But the scope of GATT is applicable to the entire WTO membership. On the other hand, the GATS agreement is an open-ended multilateral agreement, which allows the members with a choice for liberalisation of trade in services sectors. Under this agreement, a member is allowed to make a commitment for opening a particular service sector for trade. The scope of commitment can have restrictions under any of the four modes of supply. Thus, GATS is a multilateral agreement but its scope and characteristics resemble a lot with a plurilateral agreement. No multilateral trading rules encompass enforcement of provisions within its scope except the TRIPS agreement. Thus, the TRIPS agreement broadens its scope with the inclusion of enforcement within its framework. The WTO aims to provide open markets for producers, quality goods at competitive prices for consumer welfare and sustainable development. Existing rules make the global business environment more transparent and predictable. But far reaching impact of the WTO provisions is on the government policies and concomitantly on the domestic market forces. Such changes significantly influence consumption pattern of the consumers too. Thus, the WTO has considerable influence on national policies, markets and also on the ways of conducting business. The WTO & Electronic (Internet) Commerce In early 1998, the US made a proposal at the WTO to declare the electronic medium as a tariff-free medium. The proposal was based on two observations, firstly no country levies custom duties on electronic transmissions and secondly, the electronic transmissions are not classified in the Harmonised Commodity Description (HS) Code. Never in the history of GATT or the WTO, a subject such as this was introduced in the agenda for the Ministerial Conference (highest decision making body at the WTO) at such a short notice. In mid-1998, the Ministerial Conference declared to carry out a comprehensive work programme in view of the challenges emerging from Internet commerce. The work programme focussed on the existing trading rules under the WTO within a specified time frame. Renato Ruggiero, erstwhile Director General, World Trade Organization, expressed his views on the objectives of the comprehensive work programme, namely-
The Geneva Ministerial Declaration required that the General Council establish a comprehensive work program to examine all trade-related issues relating to global electronic commerce. The respective Councils and Commitees identified specific issues that require to be closely studied before finalising the report for the General Council. Council for Trade in Goods Market access for and access to products related to electronic commerce. Application of the Agreement on Implementation of Article VII of GATT 1994. Agreement on Import Licensing Procedures. Article II of GATT 1994. Standards Rules of origin issue Classification issue Council for Trade in Services Scope & mode of supply, MFN treatment, Transparency, Increasing participation of developing countries, Domestic regulations, standards and recognition, Competition, Protection of privacy, public morals and prevention of frauds, Market access commitments on electronic supply of services, National treatment, Access to and use of public telecommunications transport networks & services, Customs duties, and Classification issues Council for TRIPs Protection and enforcement of copyright and related rights, Protection and enforcement of trademarks, and New technologies and access to technology. The Councils essentially narrowed their focus on the existing agreements. But the Committee on Trade and Development (CTD) focussed on bridging the digital divide. The CTD identified issues such as effects of electronic commerce on trade and economic prospects of developing countries, challenges and ways of enhancing the participation of developing countries in electronic commerce and role of improved access to infrastructure and transfer of technology. Use of IT in the integration of developing countries in the multilateral trading system, implications of the possible impact of electronic commerce on the traditional means of distribution of physical goods and financial implications of electronic commerce for developing countries were also taken up for bridging the digital divide. Amidst scores of gaps, the Councils and Committee recommended to further carry out the work programme in the interim submission to the General Council. However, loopholes in the existing framework required further work in specific areas because of the complexities of electronic delivery. Thus, the duration of the work programme was extended beyond the Seattle Conference. Uniquely, the Internet blurs national boundaries thus circumvents all the related complexities of cross border trade in products and services. Commerce on the Internet is synonymous to electronic commerce, which is defined as the production, advertising, sale and distribution of products via telecommunication networks. Thus, the scope of electronic commerce essentially extends beyond Internet commerce. The electronic transaction carried on the Internet can be broadly divided into three broad categories for the purpose of policy discussion:
These stages essentially comprise of first, the pre-purchase stage including advertising and information seeking; second, the purchase-stage, including finalisation of purchase and payment conditions; and third, the delivery and final payment stage. In principle, all types of products and services can be advertised and purchased over electronic networks. Final payment stage involving flow of foreign exchange is a restrictive matter depending on the national policies. But the potential for electronic delivery, however, is more limited in terms of products than services. In other words, a final product can be presented as digitised information and transmitted electronically, typically over the Internet, like few information and entertainment products. Nevertheless, most services can be delivered as digitised information, including financial transactions or legal advice. Thus, there is huge potential of delivery of services and splintered-off content via electronic medium, which may considerably impinge on existing multilateral trading framework. Although in the three stages of commerce, namely advertising, customisation and delivery, it may have certain trade policy implications. But in the interest of the World Trade Organisation (WTO), the challenge is primarily from the electronic supply of final products (both goods and services), or in other words, on the third stage. Considering that Internet commerce will play an important role in transforming large shares of the economy, it will probably have a major impact on two types of products. First, a number of products that traditionally have been delivered as "goods" can now be sent across networks in digital form. Goods like cars, wheat, etc., can be advertised and purchased on the Internet but such goods will still be delivered by conventional means. But certain categories of goods, like software and music, which were earlier delivered via conventional medium, can now be delivered in a digitised form has direct implication on the multilateral trading framework. Since the WTO provisions primarily chalk out rules on cross border trade, thus electronic delivery of such goods impinge on the existing provisions of trade in goods. Second, Internet commerce is significantly affecting the rules for trade in services. Most services are intangibles and can be electronically delivered. The General Agreement on Trade in Services (GATS), unlike the GATT, does not advocate across the board liberalisation. Members exercise their option of liberalisation on a sectoral basis. But the electronic delivery of services circumvents cross border restrictions in regard to trade in services, which adversely affects the individual member’s sectoral commitments under GATS. Besides, the exception to MFN principle within the GATS framework is also affected in view of the inability to check electronic delivery of services. Thus, commerce on the Internet has a definite influence on the GATS provisions. Unlike the influence on GATT and GATS, protection of IPRs in the digital medium within the TRIPs framework is a major challenge. Most market leaders in electronic commerce are experiencing variety of discrepancies in the existing IPR regime. Initially, problems were pertaining to protection of copyrights and related rights. Later, it was cyber-squatting. Recently, it is file sharing, the NAPSTER issue. Another related issue is bridging the great digital divide. In fact, all such issues enforces the belief to look beyond the traditional boundaries and justifies inclusion of Internet management structure within the multilateral trading regime in order to eliminate operational and control limitations within networking protocols. A sound Internet management structure within the WTO’s framework is an after thought that can provide a level playing field for all, irrespective of any advantages or disadvantages of North or South. Lately, contradictory views are emerging at the WTO with few trading partners advocating a separate understanding on rules on electronic commerce as against views that essentially seeks changes within the existing rules for the reasons of adhering to the concept of technological neutrality of rules. The choice is difficult to make at this juncture as convergent technologies are further unfolding mysteries of cyberspace especially in transacting business. But challenges thrown before the WTO call for immediate attention with the explosive growth of business conducted on electronic networks. Challenges before the WTO The major challenge before the WTO is to establish a definition and scope for electronic transmissions in order to determine its linkage with the relevant WTO agreements. In fact, the definition will establish which rules are applicable on cross border transactions. If the content is treated as goods, the relevant agreement is the GATT. In case the definition of electronic transmissions treats the content as services, it is the GATS agreement that will need to be closely looked into. But music or published literature is essentially treated as goods under the current HS classification because of its carrier medium, i.e. magnetic tape, CD, books, etc. Splintering of content from the carrier medium needs classification of the content as either goods or services or something else. This classification is essential because the definition of content determines what rule of WTO is applicable for cross border business transactions in the digitised mode. For trade in goods, especially music or printed matter, it is the GATT Agreement along with its 12 associated agreements. However, few contents such as software are currently classified as services. But software on a CD is treated as goods for cross border trade purposes. Thus, the GATS Agreement is in question when it comes to purely content in few cases, which stipulates rules on trade in services. So far major negotiating group led by the US has tried to push this issue on the back burner. The US Proposal: Internet tariff free medium The US proposal of declaring the electronic medium as a tariff-free zone is not a challenge because most members find it difficult to monitor cross border trading in cyber space. Besides, revenue loss for the governments in terms of custom duties is almost negligible (see Table). Total Imports of Selected Digitisable Products, 1996
Source: COMTRADE The table establishes that proportion of total revenues collected by governments in the form import duties range between 0.1 per cent to 2.6 per cent. In the light of rapid technological changes, there is likelihood that these figures may experience an increase. But with the introduction of Information Technology Agreement (ITA) under the GATT framework, tariffs on IT products will be further experiencing reduction that may allow the balancing act in the long run. However, the challenge before the members is to adhere to the principles of national treatment and MFN vis-à-vis like products and conventional supply. Music imported on a CD is subjected to customs duties under the present framework. But music downloaded from the web is not subject to customs duties under the US proposal. The concept of like products for equal treatment is challenged. On the other side, local supplier of software is subjected domestic taxation and jurisprudence under the present framework. Whereas, the foreign suppliers are exempted from such domestic obligations by default, thus putting the domestic supplier at a disadvantage. Besides, quoting the Egyptian Ambassador at the WTO, waiver of tariff in the electronic medium is a subsidy to the rich, which no government from the developing or least developed country can afford. Another issue is treating goods and services alike in terms of electronic transmissions. The trading rules under the WTO differ considerably from goods to services. Work Programme on Electronic (Internet) Commerce Another looming challenge confronting the WTO is the work programme on electronic commerce itself, which has highlighted variety of contrarieties with the existing provisions in terms of electronic delivery of goods and services. Trade in Goods (GATT) The work programme on electronic commerce directed the Council for Trade in Goods (CTG) to "examine and report on aspects of electronic commerce relevant to the provisions of GATT 1994, the multilateral trade agreements covered under Annex 1A of the WTO Agreement, and the approved work programme." The following considerations of the relationship between WTO provision and the subjects listed for discussion seek to be as factual as possible, while suggesting issues with possible WTO relevance. A CD is manufactured in Taiwan. The company pays domestic taxes on production and selling of CD. It is exported to the US. It is an example of trade in goods. The US levies customs duty on the CD consignment. Blank CD is classified under the HS Code. Thereafter, music is recorded on the CD by Billboard. The recorded CD is exported to India. India levies customs duties on the recorded CD. The customs is levied on the basis of classification of the recorded CD under the HS Code as recorded medium. The retailers in India levy sales tax on the CD at the point of sale to the consumer. Billboard puts the same music on its website. The charge of downloading the music is US$ 2. An Indian consumer makes the payment by a credit card and downloads the music on his computer. With the help of MP3 software, the Indian consumer listens to the music. In the former transaction, the GATT has specified rules, which all members have to comply. But the latter transaction challenges the basic rules of GATT. The latter example impinges on the basic rules of GATT, the following discussion attempts to identify the gaps in the existing framework on trade in goods with respect to electronic delivery. Classification
Issues The classification of goods for international trade purposes generally follows the Harmonized Commodity Description and Coding System (HS), created under the auspices of the World Customs Organization (WCO). The HS provides a common nomenclature for the identification of products, to assist the collection of customs duties, and the collection and comparison of trade statistics. However, the HS falls short in its ability to classify electronically tradeable digitized information if certain forms of such data were to be characterized as goods. While the
HS distinguishes between empty carrier media and carrier media with content,
it does not have a classification for the content itself. For example,
the HS does not have a classification for software because software is
not a physical entity. Rather, software is classified under the type of
carrier media it is contained on. The software could be contained on laser
discs, magnetic tapes, or magnetic discs, and therefore it could be classified
under three different HS codes. Summarily, the currently existing classification
system for goods is not adequate to be used for the purpose of classification
of tradeable non-physical data over the Internet. Market access
for goods under the WTO are a subject of GATT 1994. As part of GATT 1994,
the Agreement on Trade in Information Technology Products (ITA) foresees
duty-free market access for information technology products in certain
markets. Electronic commerce cannot be conducted without access to the
essential infrastructure components. The necessary hardware and software
must be in place to allow information to flow. Acknowledging the importance
of technology products to the development of information industries and
the dynamic expansion of the world economy, the Singapore Declaration's
intention was to achieve maximum freedom of world trade in information
technology products and to encourage continued technological development
on a world-wide basis. The ITA seeks to eliminate, by certain deadlines,
tariffs on a range of information technology products essential to the
infrastructure for electronic commerce. The ITA covers not only IT products
but variety of telecom and other critically important infrastructural
products for providing connectivity to networks. But ITA is a plurilateral
agreement under GATT, which covers only signatories and not the entire
membership. Goods passing
physically through traditional customs borders were therefore subject
to the customs duties provisions of the above articles. However, for "goods"
transferred over the Internet, there is no physical border with customs
officials to assign and collect duties. If it were decided that the customs
duties provision of Article II was to apply to certain electronic transmissions,
then the duties collected should not exceed those outlined in the schedule
of the WTO Member. The same would apply for other duties and charges,
whereby the duties collected should not exceed those recorded in the Schedules
of concessions. If, on the other hand, electronic transmissions were not
to be considered goods, and were to be accorded duty-free treatment, an
incentive would exist for electronic delivery of certain products as opposed
to physical delivery on a carrier medium. It also violates the basic issue
of technology neutrality. The scope of this incentive would, therefore
depend on case by case for the respective tariff rates applied to the
physical delivery of the goods. The only
reference to electronic commerce is found in the Decision on the Valuation
of Carrier Media Bearing Software for Data Processing Equipment in customs
valuation. 2. Given
the unique situation with regard to data or instructions (software) recorded
on carrier media for data processing equipment, and that some Parties
have sought a different approach, it would also be consistent with the
Agreement for those Parties which wish to do so to adopt the following
practice" In determining
the customs value of imported carrier media bearing data or instructions,
only the cost or value of the carrier medium itself shall be taken into
account. The customs value shall not, therefore, include the cost or value
of the data or instructions, provided that this is distinguished from
the cost or the value of the carrier medium. For the purpose of this Decision,
the expression "carrier medium" shall not be taken to include integrated
circuits, semiconductors and similar devices or articles incorporating
such circuits or devices; the expression "data or instructions" shall
not be taken to include sound, cinematic or video recordings. Members
are applying the above Decision for customs valuation. Thus, the present
practice is that in determining the customs value of imported carrier
media bearing data or instructions, only the cost of value of the carrier
medium itself shall be taken into account. The customs value shall not,
therefore include the cost or value of the data or instructions, provided
that this is distinguished from the cost or the value of the carrier medium. However, such adhoc measures limit the credibility of the agreement by leaving lot of discretionary powers with the administration thus damaging the basic thesis of predictablity of the business environment.
Currently, no Member is taking the value of the data into account when determining the origin of products stored on or used for the production of a physical good. The issue has not yet been discussed in the context of the harmonization work programme on non-preferential rules of origin. But a greater threat to the agreement is on the Regional Trading Arrangements, which extends preferential tariff to products within trading partners.
The Agreement
on Import Licensing Procedures contains provisions relating to automatic
and non-automatic licensing applicable to importation of goods. If and
as far as electronically transmitted information could be characterized
as trade in goods, the disciplines of the Licensing Agreement would apply,
with the consequence that "importers" of such electronically transmitted
information could be required to obtain prior approval in the form of
import licenses from Members' authorities. As electronically transmitted
products do not cross physical borders in the traditional sense, a range
of control and compliance issues may arise as a challenge before the WTO.
In the standardizing
community, attention has been drawn to the benefits of selling standards
over the Internet, as compared to sending copies to consumers by mail.
The former allows for cost savings to be made, and for greater convenience
in the periodic updating of standards. Trade in Services The trade in services accounts for over 20 per cent of world trade. The GATS agreement consists of- a framework of rules and liberalisation commitments specific to service sectors and sub sectors as committed by members in their schedule. The framework rules require countries to apply MFN treatment by not discriminating between service products and service providers of different countries. However, a transition period of 10 years is possible for measures that are not consistent with the MFN principle, if member so decides. The national treatment principle visualises that members should not treat foreign services and service providers less favourably than their own service products and service providers. While it is not a binding obligation, it requires members to indicate in their respective schedules of concessions on sectors. The agreement ensures transparency in regulations and aim at increasing participation of developing countries in trade in services. It covers 12 sectors and around 155 sub-sectors. The Council for Trade in Services submitted their Interim Report to the General Council on the Work Programme in March-1999 followed by a series of meetings in April, May and June, 1999. Internet commerce in Services
These transactions have a considerable impact on the GATS agreement, especially in terms of sectoral commitments of members in their respective schedule. For example, India has made no binding commitments under financial services. In other words, the commercial presence of a foreign insurance company in conventional terms is not allowed. But its web presence allows accessibility by the service consumers in India, which violates the basic premise of national commitments and horizontal restraints for trade in services. A patient in India is suffering from congenital heart disease. His condition is getting critical which requires expert opinion. A heart specialist in the US has treated similar type of cases in the US. The Indian hospital refers the case to the doctor at US. The patient requests for traveller’s visa from the US embassy in India. He flies off to the US, consults the doctor. An operation is performed. He pays his charges. Returns back to India. Alternatively, the same patient contacts the doctor at the US by e-mail. Send his tests reports in an electronic format to the US. The doctor contacts the Indian counterpart on telephone and fixes the date of operation. On the day of the operation, the Indian doctor performs the operation on the direction of the US doctor through video-conferencing. After the successful operation, the patient’s family transmits the consultancy and operation charges to the US doctor through their bank. All services are covered under GATS. In the latter case, the GATS obligations are seriously violated. The number of service providers is far too many, each service provider and user is under GATS obligations. The discussion is primarily focussing on the GATS provisions and national commitments keeping in mind the latter possibility. Scope
(including modes of supply) (Article I)
The question of the mode under which a transaction takes place only becomes important if there is disagreement about the legitimacy of a measure taken by a Member affecting the transaction, in which case the measure would be judged against the Member's commitments. Seen from this viewpoint, the distinction between modes 1 and 2 becomes clearer, and is operationally effective.
Transparency
(Article III)
Similar work is undertaken by the CTD. Hence, transparency issue is a much larger issue in terms of bridging the digital divide. The challenge before the WTO is to ascertain increased participation of developing and least developed countries in electronic commerce. Domestic
regulation (Article VI)
Recognition will definitely influence the pattern of trade in services, but it can also act as an entry condition for the supplier. In view of the service supplied over the Internet, the recognition issue violates basic principles in terms of likeness of service supply. Cross border supply of services via Internet circumvents the recognition requirements, at the same time similar services cannot be supplied via mode-4 (movement of natural persons) in the absence of MRA. Competition-related
Provisions Although the GATS provisions have adequately subscribed to free and fair competition, but its scope is limited in terms of infrastructural services providing connectivity. A larger issue of free and fair competition in cyberspace is out its purview, especially when it relates to supply of services.
The telecom sector is the focus of two additional sets of rules: the generally applicable Annex on Telecommunications, and the Reference Paper on regulatory principles in basic telecommunications which has been incorporated into their schedules of commitments by around 60 WTO Members. Business
Practices (Article IX)
Electronic commerce reduces the scope for trade-restrictive business practices by increasing both the contestability of markets and the mobility of consumers. However, some suppliers may still acquire a degree of market power. If such suppliers resort to anti-competitive practices then governments can only take advantage of Article IX which provides for consultation and information exchange between the concerned Members.
Measures to curb obscenity or to prohibit Internet gambling might well be justified under the existing provision. Since both forms of electronic commerce – the supply of services online and the electronic retailing and wholesaling of goods and services – depend to some extent on the security and privacy of communications, it is worth noting that Article XIV(c) permits Members to take any necessary measures to protect the privacy of the personal data of individuals and the confidentiality of individual records and accounts, and to prevent deceptive and fraudulent practices. Like other such exceptions provisions, Article XIV is subject to a safeguard against abuse in that measures taken under it may be challenged by other Members on the ground that they are not necessary, or are more restrictive than necessary, to achieve the stated objective. The market-access commitments on electronic supply of services (including commitments on basic and value added telecommunications services and on distribution services). (Article XVI) issues in electronic commerce cover variety areas in terms of national commitments- connectivity, supply of services, etc. The commercial provision of Internet access must be distinguished from the supply of other services through the medium of the Internet. Few points of concern are-
Connectivity Scheduled commitments in terms of-
In general, the status of IAPs in relation to GATS rights and obligations appear to merit further examination. As with all services, the absence of commitments does not of course mean that market access for IAPs is impossible. It may indeed be the case that provision of the service is not permitted, but it may equally mean only that there is no guarantee of continued access. Electronic Supply of Services
National
treatment (Article XVII) Customs
duties
Classification
issues
The most
important consideration of members, however, was the criteria that would
distinguish products from other products delivered electronically. It
is worth noting that the multilateral trading legal regime through the
WTO system (whether they are governed by the GATS, the GATT or a sectoral
agreement such as those on Agriculture or Textiles) is determined by the
nature of the products being traded, not by the means of their delivery.
Members also felt that any move to suggest "electronic transmissions"
to be regarded as outside the scope of the GATS would fundamentally damage
the entire Agreement and undermine a wide range of existing commitments,
since the vast majority of cross-border trade in many sectors is done
electronically. In a related
argument it is pointed out that electronically transmitted books and other
digitalized information can be "downloaded" and copied, thus creating
a tangible good – and that digital technology permits large-scale copying
of high quality. It should be clear that the issue before the Services
Council is the classification of the electronic transaction – the transmission
and receipt of the text or other digitalized information over the Internet.
What is done with the information after downloading is another matter.
If hard copies are produced, whether legally or not, this is a manufacturing
process resulting in the production of goods, into which the electronic
transmission could be seen as a services input: as we know, virtually
all manufactured goods involve services inputs of various kinds. If such
copying is done without authority, and particularly if it is done on a
commercial scale, there would be a problem of copyright piracy which should
be dealt with under the law of the country concerned. This is not a new
problem – copyright piracy of printed and broadcast material has been
going on for generations – but the high quality of digitalized copying
may give it a new dimension. However, this is a matter for the TRIPS Council.
Intellectual Property (TRIPs) It is observed that trade conducted electronically generally has a relatively high intellectual property content. Creation of a secure and predictable legal environment for protection of intellectual property rights would foster the development of electronic commerce. The interim report does not purport to be a full description of the Council's work on electronic commerce but the report did not mention enforcement issues exhaustively, given that the same issues arise in different areas of intellectual property. In addition, a brief reference is made to other areas of intellectual property. The view was also expressed that it could not be assumed that the benefits of electronic commerce would flow automatically to developing countries or that developments in this area would be equitable. Another issue was that the basic principles of intellectual property had survived rapid technological change and that the language used in the TRIPS Agreement was generally neutral in relation to technology. In this connection, it was suggested that, while the growth and technological development of electronic commerce posed some challenges for the protection and use of intellectual property rights, such challenges could be addressed essentially within the established international framework for intellectual property law. This view of the issue of technological neutrality was however challenged.
Billboard has put a hit song on its website. A consumer downloads the files. He sends this file to his friend by e-mail. Sharing of music files (NAPSTER) is a violation of copyright, is it? Or what if one person downloads the file and sells it to his neighbours. Or what if the person downloads the file and records it on CD and gives it free with every item he sells in his shop as a marketing ploy. In all cases, the case law is more based on conventional violation of copyright. Billboard faces another problem that ‘billboard.com’ domain has been taken by some other company. Music lovers visit this site frequently anticipating latest blockbusters. Billboard had to remain contented with ‘billboardusa.com’. Another user in China also downloads the music from the Billboard site and records it on a CD and exports it to India. Surely there is infringement of IPR, but who is responsible in terms of member and non-member country. There is ‘pdk.com’ and few other sites, which unauthorisedly puts up the same music for download from its site. What are the options before Billboard? The discussion focusses on violation of property rights in the digital medium. But the TRIPS Agreement was negotiated before the implications of global digital networks for the protection and enforcement of intellectual property rights had become another challenge for the WTO. Importance of multilaterally agreed approaches to intellectual property issues arising in connection with electronic commerce is critical, given the global nature of digital networks. The WTO is currently of the view that more work and experience was required to identify which intellectual property issues could be resolved by right holders themselves and which would require governmental action at the international level.
The background note described a number of issues arising out of electronic commerce in connection with copyright and related rights, in the light of the changes that digital networks have brought to the way that works and other protected materials are created, produced, distributed and used. These include the implications of electronic commerce for the definition of publication and the notion of country of origin; right of reproduction; right of communication; moral rights; right holder; protected subject matter; limitations; and collective management. In connection with the role that electronic networks could play in facilitating the collective management of rights, particular reference was made to the potential contribution they could make in respect of rights related to folklore and other forms of traditional expression.
Protection
of trademarks The issues identified in this connection include the use of trademarks on the Internet, in particular in the light of the territorial nature of trademark rights and their general specificity to particular products or services, the protection of well-known trademarks, and the relationship between trademarks and Internet domain names. In connection with the domain name issue, the Council informed in their interim report about the WIPO Internet Domain Name Process entitled "The Management of Internet Names and Addresses: Intellectual Property Issues" published by WIPO on 30 April 1999 (accessible on http://wipo2.wipo.int). The Council was also informed of other ongoing work in WIPO in the context of its Standing Committee on the Law of Trademarks, Industrial Designs and Geographical Indications on issues arising from the use of trademarks on the Internet as well as in connection with well-known marks. However,
there is considerable doubt on the basic premise of well-known marks vis-à-vis
domain name. Generic names vary from region to region, respective jurisprudence
does not allow registration of generic names as trademarks. However, the
latest case of the Arbitration Committee under WIPO regarding ‘madonna.com’
conflicts with the basic premise non-registration of generic names such
as Madonna. In view of such discrepancies, it will be difficult to establish
a harmonised system of registering domain names with equal protection
such as protection of trademarks. New technologies
and access to technology
Enforcement Other
areas
Bridging the Digital Divide The greatest challenge before the WTO is to bridge the digital divide between the North and south, especially to make international trade technology neutral in terms of medium of transacting business. The concept of technology neutrality equates all media alike, at the same level. In fact, such a concept can only be prophesized by those who have a technological advantage. How can Nepalese exports remain technology neutral to Indian exports in the world market? Or Indian exports can not be influenced by Japanese exports because of technological neutrality. Definitely, technology can not be termed as a neutral factor input in the production function. In other words, technology has a considerable influence on production, resulting in comparative advantage, which determines overall dominance in trade. This scenario is further extended with the medium of delivery. An efficient medium of delivery gives a competitive edge to firms that are in a position to use it for market access and delivery against those firms which cannot, if the other factor inputs remain same. In such a scenario, trade can never remain technologically neutral. What about the trading laws? Srichand Technosoft is an Indian software company. It is selling software packages in the US and EU markets. Its competitor is Waichung Softwares, Singapore. Waichung delivers its product online because of state-of-the-art infrastructure facilities. Srichand has to depend on conventional methods for delivery because of poor info-communication infrastructural facilities in India. Srichand realises its US and EU market is shrinking. Thus, the company decides to launch its online operation but hires a US based server. Another competitor based in Argentina has also hired a US based server for its online operations. Laws are regulations. The WTO’s trading rules specifies the rules of trade. If trade is not technology neutral, how can the rules of trading become technology neutral. If law per se is technology neutral, why we are required to think of cyberlaws. In both cases, it is technology that is influencing the conventional legislation and terming it obsolete. No country in world is pursuing the concept of technology neutrality in terms of domestic cyber legislation. Even the groups prophesying technology neutrality at the WTO are setting their domestic laws in order by way of a separate act or suitable amendments. It is also true that the conventional legislative framework is experiencing significant changes to accommodate legal framework for cyber laws. Thus, law per se is also not technology neutral. As far as the rules of trading are concerned, electronic commerce has challenged the veracity of technology neutrality. The CTD observed that electronic commerce may substitute or complement for traditional trade flows. In the event of natural shift, an increase in the value of electronic commerce will be offset by a decrease in the value of other competing activities or an increase in the value of international commercial transactions conducted via the Internet. For example, it may be interpreted as a decrease in the value of those conducted by mail, the movement of service suppliers or consumers across borders, or the physical shipment of goods. Electronic commerce may be of particular interest to developing countries, provided it can help their consumers and producers, particularly small and medium sized enterprises (SMEs), to overcome some of their traditional drawbacks in trade, such as distance to markets and lack of information about market opportunities and available supply. But it cannot solve all trade-related problems of developing countries, particularly not those related to domestic supply capacity. Some developing countries may already have the capacity to produce items that can be delivered electronically, while others might, in a first phase, only use the Internet as a tool for advertising, searching or purchase of products from abroad.
Potential benefits of electronic commerce:
The physical
infrastructure requirements for conducting electronic commerce depend
on the type of electronic commerce in question. Delivery of an item through
the Internet requires more advanced technology than ordering a product
by telephone which is later delivered physically. A well functioning,
modern telecommunication infrastructure and a satisfactory distribution
of electricity are two basic requirements for electronic transactions.
Access to computer hardware, software and servers are other requirements
for conducting electronic commerce through the Internet. Apart from the physical infrastructure requirements for conducting electronic commerce, human infrastructure needs differ from those for conducting other forms of trade. The more of the stages of a commercial exchange that are carried out electronically, the more specific skills are required. Basic computer knowledge and knowledge of the Internet is needed even if only the search for a product is made through the Internet. Most developing countries do not yet possess a widely skilled workforce. Many entities in developing countries may experience a significant shortage of well-educated, computer-literate personnel; in addition, there is likely to be a high turnover of information technology staff. It might therefore be desirable to facilitate the movement of natural persons so that companies experiencing shortages can hire foreign personnel with the necessary skills. Access to technology may be a key issue for the development of electronic commerce in developing countries. A developing country, which encourages electronic commerce and with a climate conducive to investment is likely to attract foreign investment in other sectors too, besides information technology. In addition, it is possible that developed country companies that see market opportunities in developing countries will transfer some technology in order to be able to explore those market opportunities. However, the CTD in its report does not attempt to give an exhaustive or in-depth coverage of issues relating to electronic commerce. But it aims to set out some aspects of electronic commerce in order to help the members to understand how developing countries' trade and economic development may benefit from or be affected by it? And what will be required for them to participate in electronic commerce and to share in the benefits it can offer? A number of issues related to electronic commerce require in depth study for developing an appropriate framework for increased participation of developing and least developed countries in electronic commerce. Conclusion This discussion has brought out many contrarieties in the existing multilateral trading framework, which requires suitable adaptive measures in view of the electronic transactions. In most provisions, the relevant Committees have observed more work is required for understanding the underlying issues. In fact, the work programme has also brought into focus the weakness in trade in services if delivered electronically vis-à-vis national commitments annexed in the national schedules. The advent of electronic commerce has thrown these challenges before the WTO, which essentially framed rules based on traditional business methods. However, there are other issues that deal with cyberspace and new business methods. In future, these issues will require an international initiative to allow frictionless business transaction. Which other international organisation is equipped to deal with such issues related to global market in cyberspace, other than the WTO. Thus, some issues that need to be resolved at the WTO include global information infrastructure, operational framework and technical standards, legal framework and financial matters. In many ways these issues have already been dealt at the WTO, for example GII received a boost with the ITA and ATS. But specifically issues like allocation of domain name also is an integral part of the GII, which is still more US centric. Such issues need to be resolved under a multilateral framework to safeguard the long term interest of global network. Besides, other issues related to commerce like legal framework, dispute resolution, etc., also require harmonisation on a global level to build consumer (user) confidence and trust. On the other side, electronic transactions are replacing conventional government procurement and approval practices. Each subject has a direct implication on each member country, especially medium and low developed economies. Streamlining these issues at the WTO will not let the balance tilt in favour of few countries but evenly place all members in the operation of global electronic commerce. Most of these issues are directly or indirectly having an impact on the newly established multilateral trading system. The major challenge before the WTO is whether to amend the existing agreements to accommodate Internet commerce or develop a separate understanding on electronic commerce without disturbing the conventional trading rules. Conclusion of Uruguay Round and drafting the Final Act took eight long years, any further changes to include electronic transactions will complicate matters further. In some cases, the WTO will be making amendments in the existing provisions. But in view of the emergent issues in Internet commerce, it will be appropriate to have a separate understanding on electronic commerce so as to confront the new challenges of convergent technologies. Since the WTO frames rules on commerce, it is imperative to bring Internet commerce within the purview of the WTO rather than overawed by the current happenings at few places.
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