E-commerce at global negotiation

E-commerce at global negotiation

By Wiwit Wirsatyo

JAKARTA (JP): Major trading nations, led by the United States,
have systematically exercised a sort of neomercantilist strategy
by introducing electronic-commerce (E-commerce) into global
trading arrangements to enhance their own wealth, power and
market access at the expense of others.

For example, they offered to devise a regulatory framework for
E-commerce during the second ministerial conference of the World
Trade Organization (WTO) in Geneva in May 1998.

Delegates at the conference issued a declaration on the
establishment of a working plan for E-commerce and emphasized the
need for further discussions of the issue in other international
forums, including the Organization for Economic Cooperation and
Development (OECD), the Asia-Pacific Economic Cooperation forum
and the Free Trade Area of the Americas (FTAA) forum.

In general, E-commerce is defined as transactions or business
activities, particularly the sale and supply of goods and
services, using electronic and digital information mediums, such
as the Internet and the World Wide Web. E-commerce operates
across different technologies and embraces a wide range of forms,
including electronic banking, trading, data interchange, mail (E-
mail), cataloging, facsimile, video conferencing and all forms of
messages between enterprises.

Worldwide E-commerce transactions are projected to reach some
US$300 billion by the millennium; all to the advantage of major
trading nations. As a point of illustration, about 70 percent of
Internet websites are located in the United States; another 8
percent are located in Canada, 14 percent in Europe, 4 percent in
the Asia-Pacific region and 2.3 percent in Latin America and
Africa.

To date, the nuances of E-commerce often are perceived as a
key to bridging the gap between developing and developed
countries. Other issues discussed at the WTO often have pitted
developing countries against developed countries in protracted
and often stormy negotiations.

Developing countries are worried because they are not as
technologically advanced as developed nations, so their
bargaining power will be diminished. They also are worried E-
commerce will make them consumers rather than producers by
encouraging them to import more than they export. In the long
run, this would create considerable pressure on their balance of
payments.

Some developing nations also fear E-commerce will lead to the
erosion of their local and national languages and cultures. They
may be tempted to impose local content requirements on Internet
services. This is an almost impossible measure to implement, but
has political appeal in countries wishing to protect their local
languages and cultures. Strong nationalistic feelings
consequently may have the effect of prolonging negotiations.

Several international organizations, including the OECD and
the FTAA, have said developing countries need to promote the use
of E-commerce. They plan to assist these countries by providing
training and educational programs.

From a negotiating perspective, the WTO's work on E-commerce
heralds a multifaceted approach to global trade negotiations.
Even though it is difficult and premature to forecast the outcome
of the WTO negotiations, some common themes are clear with regard
to the establishment of universally acceptable standards and
commercial codes for E-commerce. This approach seems to be
favored by governments and the private sector, and the WTO is
likely to give considerable weight to a proposal which provides
the flexibility to adapt to rapid changes in the development of
E-commerce.

Negotiations are expected to involve not only the application
of the General Agreement on Tariffs and Trade and the General
Agreement on Trade in Services on the supply of goods and
services by electronic means, but also the application of other
multilateral agreements, especially those relating to
intellectual property, telecommunications and government
procurement.

This may lead to the WTO becoming the preeminent body in the
international regulatory regime of E-commerce.

In this context, several crucial topics need to be discussed
at various forums, particularly at the WTO's forthcoming third
ministerial conference in Seattle in November 1999. The topics
which need to be addressed include the following:

* Market access: Merchandise purchased electronically but
delivered physically may be subject to existing WTO rules on
trade in goods. Nevertheless, this may not be the case for
products which are delivered as digitalized information, such as
software programs downloaded over the Internet.

* Customs rules: One significant conclusion from the WTO's second
ministerial conference was the agreement by WTO members not to
impose customs duties on electronic transmissions. Major trading
nations had sought a permanent ban on E-commerce duties.

* Taxation: Tax regulations should provide transparency,
predictability and certainty. Yet certain issues remain unsolved,
including whether the taxation of goods and services provided
electronically should be treated the same as for products
purchased off-line. There also is a need to establish tax
avoidance and evasion policies because of the anonymity of the
Internet. However, these policies must take into consideration
traditional territorial concepts of taxation, including residence
and sources of income.

* Electronic payment: A key issue is whether government
regulation is needed to ensure the viability of electronic
systems of payment in order to protect consumers and facilitate
law enforcement. Or, conversely, should the private sector take
the lead and be allowed to self-regulate. For example, the
Electronic Commerce Promotion Council of Japan has been active in
analyzing the potential threats to and security requirements of
smart-card money systems.

* Intellectual property: One of the primary concerns in the
intellectual property area is associated with the downloading of
information from the Internet. The lack of enforcement of
intellectual property rights around the world has been a
particular concern of the United States, which has exercised the
extraterritorial clause of Section 301 of the Trade Act of 1974,
WTO consultations and dispute resolution procedures to ensure
compliance with the WTO's Agreement on Trade-Related Aspects of
Intellectual Property Rights.

Enforcement issues are exacerbated by the unregulated use of
the Internet. Furthermore, the two World Intellectual Property
Organization treaties on the protection of copyright issues in
the digital age, adopted in December 1996, are implemented only
by some countries. Moreover, the two treaties do not address
issues of online service provider liability, leaving these to be
addressed by domestic legislation.

* Tariff treatment: On July 1, 1997, the WTO's Information
Technology Agreement came into force, involving 43 countries and
representing over 90 percent of the world trade in information
technology (IT) products. The organization agreed to reduce
tariffs on IT products to zero by 2000.

IT products, such as semiconductors and printed circuit
boards, are covered by the tariff reduction, but items such as
computer-based scientific and analytical equipment and global
positioning systems are not covered. In addition, there is no
provision for various types of inputs and manufacturing equipment
for information technology products, such as those designed for
the production of printed circuit boards.

In this connection, developing countries should play a
constructive role by adopting specific strategic approaches to
equipoise the uneven interests of international society.

In addition, developing countries have to close ranks in two
important ways. First, they should have a solid political
determination to work together in pursuit of their interests.
Second, they should identify the points of their current
strengths and utilize them to get concessions in negotiations.

For developing countries to participate effectively in
negotiations it is not enough that they fulfill the requirements
for legislation. They should be able to formulate integrated
positions and carry out sustained educational programs to ensure
their officials and businesspeople are equipped with sufficient
knowledge and skills to apply the new rules, to tap new trading
opportunities and to defend national trading interests.

In the same vein, because we believe E-commerce can serve as a
trade facilitator leading to economic growth, major trading
nations should earnestly extend their facilities and technical
assistance to developing nations to promote an understanding
among business networks and to enhance the capacity and
development of human resources.

In light of the aforementioned realities, a set of
anticipative steps need to be taken by Indonesia to further
socialize the optimum benefits and mitigate the disadvantages of
E-commerce. Eventually, the national competitiveness of both
public and private sectors will be further modernized. These
endeavors require a synergistic approach led by a competent chief
negotiator and supported by a qualified multidisciplinary team.
Their task should be to pursue a balanced multilateral framework
and improve the environment for E-commerce development based on
the principles of mutually beneficial, genuine partnership and
equitably shared responsibility.

The writer is an international economics law observer. He
holds a master of law degree from the University of London.