TWN Info Service on WTO and Trade Issues (Jan19/12)
31 January 2019
Third World Network

What are trade rules on e-commerce supposed to do?

Published in SUNS #8834 dated 29 January 2019

Geneva, 28 Jan (Chakravarthi Raghavan*) – The attempts of the major industrialized countries and their supporters in the developing world to negotiate “trade-related e-commerce rules” at the World Trade Organisation has not only aroused opposition among the majority of its Members, but has also aroused doubts even among avowed free traders on what it would achieve and whether it would help revive the authority and function of the WTO.

On the face of it, whether it be multilateral framework of rules or plurilateral conditional one among signatories and adherents, judging by utterances of sponsors and explanations (the EU’s press statement is the clearest so far) suggest that at the minimum it involves changes in the agreements on trade in goods, services and perhaps intellectual property to ensure that e-com transactions are not subject to any kind of tariffs or levies.

It is clear that such changes cannot be effected by merely annexing any such agreement to the already annexed agreements on trade in goods, services or intellectual property. It can only be done through amendments following the processes, procedures and requirements of the Marrakesh Treaty (Art. X). A subsequent article will focus on some of these questions.

In his post reproduced below, Prof Simon Lester, a US trade academic and avowed “free trader”, in a post at the International Economic Law and Policy (IELP) blog, has raised questions and doubts about what the much hyped “intention to negotiate” statement that came out of Davos last week would the signatories hope to and in fact achieve.

Prof Lester suggests that the only substantial thing appears to be one for no tax or levy on goods or services traded internationally via e-commerce.

Citing in full the four-para statement of “intention to commence” negotiations, issued by the signatories (48 countries plus the EU and its 28 members, counted as one), following a brief breakfast meeting on the sidelines of the Davos meeting of the World Economic Forum, Prof Lester says:

“[It] seems like a pretty tentative and vague announcement, but nevertheless, global trade rules on e-commerce would be a good thing, right?

I assume they could be. On the other hand, based on what I’ve seen so far of these e-commerce rules that exist, I’m not really sure what some of them are supposed to do. Which government actions are they designed to address, and will they be effective at doing so?

The EU press release on this gives the following details: “WTO rules on e-commerce will aim to enhance opportunities and address challenges of e-commerce in both developed and developing countries. The negotiations should result in a multilateral legal framework that consumers and businesses, especially smaller ones, could rely on to make it easier and safer to buy, sell and do business online. The new rules would for instance:

— improve consumers’ trust in the on-line environment and combat spam;

— tackle barriers that prevent cross-border sales;

— guarantee validity of e-contracts and e-signatures;

— permanently ban customs duties on electronic transmissions;

— address forced data localisation requirements and forced disclosure of source code.

The ban on customs duties is pretty straightforward, but much of the rest is hard to follow.

The TPP e-commerce chapter is supposed to do a lot of these same things, so perhaps that’s a good place to start in deciphering all this. But when I read the TPP rules, I’m often left with more questions than answers.

Article 14.7 deals with online consumer protection and Article 14.14 addresses spam. These obligations are not about reducing trade barriers, but rather about encouraging governments to adopt particular domestic policies. Will the obligations have an impact on governments’ efforts in these areas? From what I can tell, we have not been making much progress on either of these. Are international rules going to move us forward?

As for the “tackle barriers,” “forced data localisation,” and “forced disclosure of source code,” these look like more traditional trade obligations, which are designed to constrain governments’ ability to regulate in ways that interfere with trade. But when you consider the full scope of the TPP obligations and exceptions, will they do so? Take a look at the obligation/exception in Article 14.13 along with the exceptions in Chapter 29:

Article 14.13: Location of Computing Facilities

1. The Parties recognise that each Party may have its own regulatory requirements regarding the use of computing facilities, including requirements that seek to ensure the security and confidentiality of communications.

2. No Party shall require a covered person to use or locate computing facilities in that Party’s territory as a condition for conducting business in that territory.

3. Nothing in this Article shall prevent a Party from adopting or maintaining measures inconsistent with paragraph 2 to achieve a legitimate public policy objective, provided that the measure:

(a) is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; and

(b) does not impose restrictions on the use or location of computing facilities greater than are required to achieve the objective.


Article 29.1

3. For the purposes of Chapter 10 (Cross-Border Trade in Services), Chapter 12 (Temporary Entry for Business Persons), Chapter 13 (Telecommunications), Chapter 14 (Electronic Commerce) and Chapter 17 (State-Owned Enterprises an d Designated Monopolies), paragraphs (a), (b) and (c) of Article XIV of GATS are incorporated into and made part of this Agreement, mutatis mutandis. …

Taking all that into account, what exactly is the impact of these provisions on the “forced data localisation requirements” that exist in the real world? And more generally, what are the government actions that all of these rules are intended to act as a check on? What’s an example of an existing measure in a particular country that trade rules on e-commerce, such as the TPP ones, would address ? I don’t feel like I have a good sense of this at all.

Part of the problem is that governments don’t agree on what the international rules should be and which government actions are acceptable. In that situation, I’m not sure how you come up with an international regime. Governments who engage in particular practices will not want to sign on to rules that prohibit those practices.

You can try to keep the rules vague so that people aren’t sure exactly what is covered, but given the experience with the WTO system, many people now realize the implications of signing on to such rules.

Perhaps we will have to wait for dispute settlement to resolve some of this uncertainty. But are disputes really coming? I have not heard of any in the works.

On the other hand, maybe the idea is not to replicate the system that applies to goods and services trade. Maybe it is not so much about obligations and enforcement. Instead, perhaps it is more about creating a forum to discuss these issues. If that’s the case, I see some value here. But if that’s what we are doing, binding obligations may be less valuable [than] a permanent forum that focuses on discussion.”

[The post can be found at:]

In a comment on Lester’s post, Prof. Sungjoon Cho, another trade law academic said: “What a timely post, Simon! You are absolutely right. I do not see even a vague notion of consensus or convergence among WTO members as to what is the “best practice” in those contested issues. Indeed, I see a bit of dejavu from the Uruguay Round here, in particular within the context of the North-South tension. Developed countries such as the United States, the European Union and Japan are spearheading this new initiative, while developing countries such as China and India seem to be lukewarm about the initiative. China joined the initiative with the reservation that developing countries’ concerns must be reflected. India argued that the Doha Development Round must be addressed before starting a new set of negotiations in the WTO. The bottom line is: would this new initiative somehow help the WTO regain its vitality?”

[* Chakravarthi Raghavan is the Editor Emeritus of the SUNS.]