E-Commerce at the WTO: The Need for a New Agreement

James Schwab
Vol. 40 Associate Editor

Electronic commerce (e-commerce) is changing the global economy, creating new opportunities and challenges.  However, many of the rules governing the global economy, including the agreements of the World Trade Organization (WTO), were drafted decades before digital trade was an important part of global trade. Many members of the WTO argue that the WTO needs to update its rules to reflect the new realities of the global economy.  With this goal in mind, 76 WTO member states, representing over 90 percent of world trade, have agreed to launch negotiations on trade-related aspects of e-commerce with the goal of creating a new WTO agreement.  While non-participating states argue that these negotiations are unnecessary and detrimental to developing country interests, the WTO e-commerce negotiations are appropriate because of the limited effectiveness of the WTO’s 1998 work programme on e-commerce and ambiguities in how existing WTO agreements apply to digital goods and services. E-commerce negotiations are necessary in part because of the ineffectiveness of the 1998 work programme on e-commerce.  The work programme sought to update WTO rules and agreements in line with changing technologies, and it called for the examination of “all trade-related issues relating to global electronic commerce.”[1]  However, despite this broad goal, the 1998 work programme has not kept pace with developments in e-commerce,[2] and WTO members have not used the work programme to reach consensus on how to incorporate e-commerce issues into existing WTO agreements.[3]  Instead, the work programme’s principal success has been creating and maintaining a moratorium on imposing duties on foreign electronic transmissions.  However, even the moratorium should not be recognized as a success story, as it is not permanent and is largely symbolic.[4] WTO negotiations towards an e-commerce agreement may also be beneficial because of the ambiguities in applying existing WTO agreements to e-commerce.  The General Agreement on Trade in Services (GATS) is structured around four possible modes of delivery for services, all of which predate the internet and none of which fully encompass modern e-commerce.[5]  Additionally, GATS schedule classifications are based on the Central Product Classification (CPC) system, which was created in 1991 and does not include internet services.[6]  Instead, Member states have to fit internet services within the existing options, even though this may create unclear results. For example, many Member states have implemented data localization policies that require the physical storage of data within their national borders.  Within GATS schedules, it is unclear whether such policies regulate “data processing services,” “database services,” or “online information and database retrieval.”[7]  As Members treat these classifications differently,[8] the placement of online data services within these schedule classifications is very important for the relevant member states and businesses. While the classification of digital localization policies has not been specifically challenged before a WTO Panel, the WTO dispute settlement system has had to resolve other ambiguities to fit digital goods and services into existing WTO agreements.  The Panel in US-Gambling confirmed that GATS market access requirements, which bar members from creating barriers for foreign firms, apply to digital means of delivery in addition to traditional means.[9]  Members may therefore violate their GATS commitments by prohibiting some forms of online services, as the US did by prohibiting online gambling services.[10]  This can be the case even if members made their GATS commitments before the e-commerce technology was even in existence. The fact that WTO Panels have managed to fit e-commerce regulations into existing agreements and provisions is good for WTO members, as it provides a degree of certainty about whether or not different forms of digital regulations are permissible under WTO rules.  However, given the increasing importance of e-commerce in the global economy, the remaining areas of ambiguity, and the unclear role of WTO Panel and Appellate Body precedent,[11] it is in the interest of WTO Members to negotiate a new agreement focused on e-commerce issues.

[1] General Council, Work Programme on Electronic Commerce, WTO Doc. WT/L/274 (Dec. 30, 1998). [2] Mirra Burri, The Governance of Data and Data Flows in Trade Agreements: The Pitfalls of Legal Adaptation, 51 U.C., Davis L. Rev. 65, 98 (2017). [3] Susannah Hodson, Applying WTO and FTA Disciplines to Data Localization Measures, World Trade Rev., Sept. 2018, at 1, 6. [4] Hosuk Lee-Makiyama, Cross-Border Data Flows in the Post-Bali Agenda, in Building on Bali: A Work Programme for the WTO 163, 163 (Simon J. Evenett & Alejandro Jara, eds., 2013) (ebook). [5] Id. at 164 (“As neither the internet nor data flows are always a ‘sector’ or a mode of delivery, current GATS architecture represents a systemic problem”). [6] Hodson, supra note 3, at 10-11. [7] Id. at 12. [8] Hodson, supra note 3, at 12; Mirra Burri, supra note 2, at 85. [9] Panel Report, United States – Measures Affecting the Cross-Border Supply of Gambing and Betting Services, ¶ 6.287 WTO Doc. WT/DS285/R (adopted Nov. 10, 2004) (“We are of the view that when a Member inscribes the word “None” in the market access column of its schedule for mode 1, it commits itself not to maintain measures which prohibit the use of one, several or all means of delivery under mode 1 in a committed sector or sub-sector”). [10] Hodson, supra note 3, at 13. [11] Compare Dana T. Blackmore, Eradicating the Long Standing Existence of a No-Precedent Rule in International Trade Law – Looking Toward Stare Decisis in WTO Dispute Settlement, 29 N.C. J. Int’l L. & Com. Reg. 487 (2003) (arguing that the WTO’s failure to use a formal doctrine of stare decisis is an issue that needs to be remedied) with Anne Scully-Hill & Hans Mahncke, The Emergence of the Doctrine of Stare Decisis in the World Trade Organization Dispute Settlement System, 36 Legal Issues of Econ. Integration 133 (2009) (finding that the WTO’s dispute settlement system demonstrates some of the key characteristics of the doctrine of stare decisis). The views expressed in this post represent the views of the post’s author only.